Planning Under Pressure for Discrete Manufacturers

The Takeaways:

1. Supply chain organizations are looking to incorporate new tools and data analysis methods to better understand and manage risks across multiple tiers of suppliers in response to unprecedented disruptions caused by COVID-19 and semiconductor shortages.

2. To address supply chain visibility, companies are investing in data strategy and planning systems to standardize and synchronize external and internal data. There is a growing focus on optimizing the inbound side of the supply chain, with some of the best companies creating synergies between inbound and outbound operations and using scenario modeling to make better tradeoffs.

3. Scenario planning has become a necessity for supply chain risk management. However, collaboration on decision synchronization and economic incentive alignment are also important dimensions to consider. While the industry is capable of doing scenario planning, putting it into practice requires incentive alignment on the organization’s end to ensure that all parties contribute to optimizing the outcome of the supply chain.

4. To translate scenario planning into operational change, flexibility and options in terms of sourcing and manufacturing decisions are crucial. It’s important to understand different scenarios, insights, and what needs to be modeled and tested to make the best decisions. Forecast accuracy remains a challenge, but getting more information upstream from customers and positioning an understanding of components can help mitigate risks. It’s important to balance servicing the business with inventory objectives and cash flow considerations and to act quickly on opportunities to service the business.

5. To address joint supplier planning, companies are focusing on granularity of data, collaboration models with suppliers, third-party manufacturers, and key customers, and optimizing against multiple dimensions, including cost, service, risk, resilience, and ESG. The ability to shape demand through net revenue management and pricing elasticity is also crucial. There is a need for strong analytical capabilities and insights into what’s in the supply chain to improve forecast accuracy and address actual discrepancies.

6. Holistic, end-to-end supply chain planning requires integrated business planning and breaking down silos across the organization, with everyone involved in the process from procurement to sales to finance. Educating key stakeholders on the value of planning and improving relationships with customers can lead to greater flexibility in shaping demand and finding solutions that meet overall needs in shortage situations.