What is response and supply planning?
Response and supply planning is a component of supply chain planning that helps businesses navigate operational challenges and achieve greater efficiency, accuracy, and speed. The practice of response and supply planning has been evolving steadily for several decades, however, the pandemic served to shine a bright light on many of the existing weaknesses and vulnerabilities in modern supply chains. It also accelerated the speed of business and digital transformation – in a climate with tighter business margins and increased consumer expectations. The best supply chain planning systems are powered with artificial intelligence (AI) and machine learning technologies to deliver greater predictive and analytical capacity, to help businesses meet the urgent need for greater resilience and agility.
Response and supply planning definition
Response and supply planning supports adaptable supply chain management through advanced analytical methods and efficient capacity utilization.
This results in a greater ability to fulfill customer needs and an enhanced capacity to adapt and react quickly to changes and fluctuations in supply and demand.
The importance of supply planning in today’s business climate
Supply shocks and disruptions have defined the supply chain space in the past few years, from political and trade upheavals to natural disasters and, of course, pandemics. Further complexity has come in the form of rapidly changing consumer expectations. Modern shoppers want the ability to customize and personalize their shopping and product experiences quickly and easily. Furthermore, the Amazon Effect sees ever-increasing demand for fulfilment and delivery speeds. And as McKinsey points out, modern businesses have to take urgent steps to compete in a climate where risk, consumer demand, and competition are changing and growing at an unprecedented pace.
This means that if businesses hope to compete, their supply chains must continuously evolve, allowing them to curate, manage, and analyze data and information quickly and accurately. Data is knowledge and knowledge is power – it empowers businesses to assess internal and external variables and to make the informed strategic, tactical, and operational decisions that will help them to grow and thrive.
Challenges and trends in response and supply planning
Businesses have long been dealing with the age-old challenge of balancing supply with demand. And as time goes on, trends and challenges emerge that reflect the growing sophistication of consumer demands and behaviors, and the fast pace of technological development.
- Increased risk and volatility: A recent article in Harvard Business Review reflects the popular sentiment regarding global supply chain operations, stating that “the economic turmoil caused by the pandemic has exposed many vulnerabilities in supply chains and raised doubts about globalization.” It also goes on to remind us that rather than backing down, the trend is for the best managers “to take a fresh look at their supply networks, take steps to understand their vulnerabilities, and then take actions to improve robustness.”
- More complex supply chains: As we see all around us, market and industry complexity is increasing at an exponential pace. This can be viewed as a challenge as it relates to a need for urgent business change. But this trend also presents an opportunity for companies to explore new tools and systems to better analyze and predict response and supply scenarios – giving themselves better visibility and a meaningful competitive edge.
- Integrated processes: As supply chain systems evolve, technologies like cloud connectivity, fast databases, and systems powered by AI and machine learning are increasingly necessary to integrate business planning and supply chain activities across the company and to manage and analyze complex Big Data. Gartner predicts that within the next couple of years, “50% of supply chain organizations will invest in applications that support artificial intelligence and advanced analytics capabilities.”
- Smashing silos between planning and execution: The strongest businesses are seeking new ways to open up their communication and operational channels. Resilience depends upon the ability to make informed decisions with speed and confidence. This means detecting and analyzing issues and executing the best possible solutions, regardless of where they originate – inside or outside the company. As Supply Chain Brain puts it, “planning and execution crosses silos and is continuous in nature.”
Three stages on the response and supply planning journey
The response and supply planning process aims to increase visibility and streamline operations from one end of the supply chain to the other – from the raw materials supplier to the customer’s front door.
- Strategic supply planning – long-term: In this stage, the focus is on recognizing risks and opportunities that may arise in the coming quarters or years. Long-term supply planning specialists work to integrate intel and data from processes and subject specialists across the entire business – including forecasting, logistics, manufacturing, sales, marketing, and more. Analysis of these complex data sets helps to develop simulations and scenarios, to test theories, and to develop future contingency plans for a variety of possible situations.
- Operational supply planning – mid-term: Mid-term planning is where strategy meets execution. At this stage, businesses must look at things like inventory plans, supply channels, and logistics capacity – and assess their state in that current moment. They must establish benchmarks and targets to help them see what is and isn’t working today and respond fast with troubleshooting scenarios and plans. At this point, strategies turn into orders and workflows, inventory gets positioned, and demand categories get prioritized.
- Response planning – short-term, customer-focused: Response planning reflects the fact that ultimately, the customer sets the demand – and it’s that demand that must be responded to, as immediately and accurately as possible. In this stage, strategies and operations are molded to fit in with the customers’ demands as they change. For example, if tomorrow’s demand is outstripping today’s supply at a certain location, fast solutions need to be figured out and implemented overnight. Strong data analytics are important at this stage because it’s often a hair’s breadth of margin between profit and loss, so priorities have to be established and respected.
“What if” analysis and other response and supply planning strategies
Response and supply planning – from short-term to long-term – depends upon having robust data and planning scenarios to work with. Technologies like AI and machine learning can manage and analyze disparate data sets – learning as they go – to help managers test theories and contingencies, within highly relevant and sophisticated testing scenarios.
Constrained planning and unconstrained planning
These are the two overarching categories for supply planning strategies and algorithms. Supply chain managers use unconstrained planning and testing models when they want to explore how they could best deal with more extreme future scenarios. It allows them to cast a wider net over all the potential events and outcomes, regardless of real-world constraints like budget and on-hand inventory.
Constrained planning on the other hand, takes such limitations and “constraints” into account to provide more immediately relevant results based upon the situation at hand. Unconstrained planning is better suited to long-term blue-sky planning scenarios, and constrained planning to shorter-term problem solving and real-time planning strategies.
Response planning helps businesses deal with supply chain issues in the here and now. It typically uses constrained planning models and takes into account data analysis from current supply and early-stage planning outcomes. It then helps to model rules, processes, and protocols with supply chain optimization in mind. It enforces planning priorities, orders, and requests by rapidly allocating resources and automating workflows and tasks to respond as quickly as possible to risk and opportunity.
Scenario planning and “what-if” analysis are two sides of the same coin. Scenario planning is focused on analyzing disparate data sets and using AI and machine learning algorithms to generate scenarios designed to best test certain theories or tolerances, or to create complex scenarios that could potentially exist in real life.
“What-if” algorithms start by using the above scenarios as a foundation for the application of a series (or a single) element to that scenario to see what would happen. However, much like A/B testing in advertising, this process often works best when a single variable at a time is analyzed to ensure a more accurate attribution of causality.
Benefits of supply chain forecasting and better supply planning strategies
Ultimately, the benefit of any business innovation or transformation is measured by its ability to increase profit and efficiency. A 2021 Forbes article reminds: “As quickly as the markets change, nothing beats the ability to sense opportunities and risks and promptly respond to them.” Integrated business planning tools that leverage Big Data and intelligent technologies, can deliver benefits that are more measurable and more readily applicable to specific areas of the supply chain and business.
Here are some common benefits of using integrated planning solutions:
- Deep analysis of complex data sets delivers highly specific results and empowers faster and more confident decision making across the supply chain and business.
- Intelligent planning and response solutions give real-time results that help speed the rollout of new and resilient workflows and processes – from plan to execution.
- Using a single, cloud-based solution increases the visibility and rapid scalability needed to conquer modern strategic, operational, and tactical supply planning challenges.
- Advanced analytics and AI technologies that learn as they go lead to a greatly enhanced capacity for accurate and specific forecasting. At a time where same-day delivery and omnichannel services are expected, this helps give businesses a measurable edge.
- Integrated business planning solutions deliver better visibility into supply and demand planning achievements and ability to demonstrate ROI.
- Faster identification of bottlenecks and materials and resources problems means quicker resolution of those issues.
Supply chain analytics and tools: What to look for in a response and supply planning solution
The best response and supply solutions must be able to handle large volumes of unstructured data from disparate sources – to create visualizations, planning outputs, KPIs, “what-if” scenarios, ROI metrics, and more. The application of advanced analysis helps users identify and address materials and resourcing problems, and then figure out the fastest and most profitable or least costly way of solving them and preventing their recurrence. Core elements of response and supply planning tools within an integrated business planning system should include:
- Multi-level planning: To manage complex, multi-level materials and resource planning, supply chain managers must look to multi-level planning tools that are cloud-integrated across the supply chain and the rest of the business.
- Supply planning: To develop resilient and tactical supply plans, businesses need to have supply planning tools with the power to develop and use both unconstrained and constrained optimization algorithms.
- Rough-cut planning: To handle sudden and often unexpected events, rough-cut planning features should be able to assess real-time capacity and materials constraints simultaneously and support the rapid development of a rough, time-series capacity plan.
- Response management: To create supply plans at the order level requires response management tools that can leverage advanced supply chain analytics and prioritization logic. This helps to ensure that customers receive accurate promising of sales orders and online purchases based upon these modeled constraints.
Next steps to better response and supply planning and supply chain optimization
Supply chain transformation, like all digital transformation initiatives, begins with establishing good communication strategies and breaking down both operational and cultural silos. When teams are included in the change management process early on, companies can benefit not only from increased buy-in, but from the experience and wisdom of different subject specialists across the business. Speak to your software vendor to get rolling with your road map and supply chain transformation journey.
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