Setting Up a Planning Governance Model
Published: March 9, 2023
Supply chain has become a top-of-mind topic for supply chain executives across many industries. The COVID-19 pandemic has proven how supply chain transparency, predictability, and reliability have become paramount for the continued success of a business.
While supply chain constraints have reached a critical point across industries, this may also be an opportune time for supply chain leaders to accelerate the maturity of their supply chain through next-generation planning solutions.
Next-generation planning systems can meet today’s need for transparency, predictability, and reliability, while also offering functionality and advanced algorithms that weren’t available just a few years ago. Additionally, next-generation planning systems are inherently flexible and solutions are scalable, customizable, and can be implemented quickly.
Many supply chain leaders may be thinking about implementing or expanding the existing installation of a next-generation planning system. However, there are four things to keep in mind to ensure effective implementation.
Emphasize robust governance practices
While next-generation planning systems offer flexibility, scalability, and customization, there are potential drawbacks. Next-generation planning systems support complex supply chain networks, however their flexibility and scalability put a lot of requirements on the environment in which they operate. As a result, there is a greater need for strong process control, data quality control, and organizational capabilities.
This requires robust governance from the start, beginning in the implementation phase. Many organizations have experience in governing ERP implementations and other complex applications, often by applying the traditional People, Process, and Technology (PPT) framework.
However, the focus on governance should go beyond implementation and instead evolve into a system life cycle management.
Critically, the PPT framework needs to evolve by including Data and Policy aspects (PPT&DT).
Think about the supply chain ecosystem holistically
Until recently the traditional PPT model sufficed–especially during the all-encompassing ERP era. But now, best-of-breed solutions per functional process area providing robust dedicated technology solutions, while leveraging ERP as a transactional backbone are the way to go.
In this context a traditional PPT framework is no longer sufficient because some significant challenges need to be addressed, such as:
- A heterogenous system landscape of best of breed systems that requires many complex interfaces,
- The benefit of having many ‘own’ specialized systems will drive less desire for process harmonization by functional process owners,
- New organizational capabilities that can manage and control the new diverse landscape are now in high demand (i.e., system architects, etc.),
- Numerous systems mean more and different data structures that aren’t necessarily synced and consistent.
Companies need to start looking at their system and application environment more holistically. Additionally, companies need to view their supply chain environment as an integrated ecosystem that includes a physical distribution network, a planning network, a manufacturing network, a financial network, and a product development network.
Modern ecosystems encompass much more than systems and applications. They also include:
- An organizational model that supports the ecosystem,
- Expertise and knowledge to secure organizational capabilities,
- Process design and control to ensure flawless execution of supply chain activities,
- Management of IT operations and technology,
- Structured data management and stewardship to ensure consistency and quality of data,
- Strong set of policies to govern any network changes,
- Robust data and analytics capabilities that goes beyond traditional reports.
Governance of the ecosystem
Companies should look at their operations as a platform and manage it as an ecosystem.
By doing so, companies will be able to quickly sense and respond to customer demand as well as proactively manage and control any disruption or change in the network. Additionally, robust network design capabilities will allow for the most optimal flow of products and capital with the intended outcome. Strong data analytics capabilities are needed to provide meaningful insights and allow for optimal service levels and maximized efficiency.
A best-in-class governance model is integrally part of the ecosystem. It should ensure that all relevant (and less obvious) stakeholders feel included in identifying relevant changes and initiatives in the ecosystem. This also requires involvement in decision-making ensuring that intended outcomes are secured. This best-in-class approach means involvement and input from all functions including sales, supply chain planning, physical distribution management, finance, tax, regulatory affairs, production, and IT.
Consequently, a robust governance process will cover all relevant initiatives, including:
- Growth initiatives (autonomous growth, regional expansion, M&A etc.),
- New business development (new product introductions, new service models, new channels, etc.),
- Compliance initiatives (tax, legal, regulatory, etc.),
- Cost savings initiatives (manufacturing distribution, suppliers, etc.),
- Business continuity initiatives (safety stock, redundancy, etc.),
A good governance model will help to convert business ideas into actionable initiatives. It will allow for well-informed decisions based on the right priorities. Moreover, execution of initiatives will be better managed. Most importantly, it creates a common understanding of initiatives’ impact and value creation with all stakeholders.
Governance should be anchored in pragmatic, well described processes that are simple to execute and are aligned to clear roles and responsibilities for all involved.
Companies should always be very upfront about ensuring all decisions are aligned with the business strategy and evaluate relevant decision-making criteria regularly.
The power of outcome-driven data analytics
The success of an ecosystem approach, combined with a strong governance process is only possible when the right information is available. Therefore, a different approach to data analytics is also needed. Companies need to move away from building reports and dashboards based on initial user input and lagging indicators. Instead, companies should move towards outcome-driven analytics and insight. This requires a full understanding of business process flow and how it translates into an analytics architecture. Additionally, process mining could be a powerful tool in understanding the true performance of business processes.
In summary, there is currently a massive opportunity for companies and supply chain leaders to accelerate their supply chain maturity. This endeavor will require a shift in thinking about governance practices and business decision-making. Next-generation supply chain solutions will play an influential role in helping businesses build a successful path forward in creating stronger supply chain ecosystems.