Merging Supply Chain Planning and Execution
Trevor Miles, vice president, thought leadership, Kinaxis
For many years supply chain management (SCM) has been separated out into two distinct practices of supply chain planning and supply chain execution, with the bulk of the 1990’s and 2000’s being spent on planning. And yet a study by Terra Technologies and anecdotal evidence indicate that demand forecast accuracy by item and customer is seldom above 75%, often as low 50%. From this we can deduce that the supply plan is at best 50% correct. Therefore, is the next breakthrough in operations performance going to come from planning better or learning to respond profitably to real demand? If we start from the perspective that the demand forecast will always have significant error, then the capabilities to develop are those that compress the ‘time to detect’ and the ‘time to correct’. These are the essential elements of supply chain response management: Know sooner, act faster and respond with confidence.