This Supply Chain Matters blog commentary is the second in a market education series developed in collaboration with Kinaxis.
In our initial blog commentary of this series, we posed a baseline definition of concurrent supply chain planning, why this capability is becoming ever more important for supporting various needs for more integrated planning processes. Essentially, the clock speed of business has dramatically increased and gone are the days when planning happens in isolation or can sustain itself in rigid sequential timetables. Today’s supply chain environments increasingly require the need to breakdown information silos through enhanced cross-functional collaboration, make faster and more-informed decisions within a context of end-to-end supply chain visibility.
The purpose of this Supply Chain Matters commentary is to amplify some industry specific examples of why concurrent planning has become an important need.
To help in this effort, this author and analyst had the opportunity to speak with Manik Sharma, Vice President, Industry Strategy for Kinaxis. Manik’s background includes many years of working with industry-specific supply chain and other executives on addressing business process challenges. Our conversation touched upon two specific industry verticals along with other industry observations. Specifically, we jointly explored the process, people, advanced technology, and other considerations that are motivating supply chain teams toward more consideration of concurrent planning.
Traditional line-of-business and functional organizational models in the automotive industry have for the most part reflected decentralized business, operational and planning management structures. A legacy of business backbone systems that were internally developed, reflected the unique needs of individual businesses and geographic regions. Over time, many added enhancements were added but again, to support legacy processes including sequential planning. Today, all of that is rapidly changing.
The global recession of 2008-2009 was a crisis for the industry globally, followed by major supply disruptions from natural disasters that occurred in 2011. Lately, higher levels of high-tech electronics have become part of automobile functions, along with technology advancements in alternative-energy powered vehicles leading to the advent of autonomous driving capabilities. Each cycle has provided a catalyst for business change driving cycles for a lot of subsequent learning. The industry continues to address requirements for faster cycles in product innovation, business response to changing customer needs and in internal processes.
One specific example is what is occurring at Ford Motor that Supply Chain Matters highlighted in an October 2016 commentary. The “One Ford” initiative was fostered toward overhauling unaligned management and business processes and to address Ford’s internal tendencies toward regionally-based independence in P&L, product development and product value-chain strategies. The goal was to operate as a single global based company, the emphasis was more toward disparate, top-heavy independent operating division.
Similarly, many auto makers have moved toward collections of common vehicle design platforms globally to address more timely product innovation cycles as well as needs for overall cost efficiencies. Such efforts uncovered needs for more supply chain as well as sales and operations planning (S&OP) horizontal information integration to provide a singular view of supply and demand on a global as well as a regional basis. The goal is often expressed as everyone in the supply chain moving into a single direction.
However, other learning has now come forth, namely a reality that there still exists needs for regionally-based difference in the planning of model variances to satisfy local market needs. For instance, a Ford Focus in Europe, while built on the same product platform architecture, has different model features in Asia, Europe, and North America. Some models are produced regionally, while some models are produced for international markets. Hence, the added need for variation in planning models to accommodate both global and regional decision-making on a continuous basis. A further learning is that with increasingly more high-tech components, auto makers have a higher dependency on high-tech supply chains for synchronizing component needs according to just-in-time planning concepts. High-tech industry supply chains often reflect capacity constrained supply environments requiring higher levels of schedule synchronization and enhanced supplier collaboration.
Pharmaceutical and Life Sciences Industry
This industry has a similar profile of industry change and faster business cycles. Traditionally, drug discovery, development and regulatory approval have been the core mission of the industry. The supply chain was essentially a cost center activity required to distribute products to channels and markets. All is rapidly changing.
In 2012, the industry experienced a period of drug patent cliffs which opened the door for generic drug manufacturers to develop and distribute more generic versions of drugs. A joint movement among patients, legislators, and health insurance providers to cap the growth in the overall cost of drugs provided changes in buying channels, distribution and subsequently in product margins. Waves of industry mergers and acquisitions continue with the goal of added market scale.
Drug companies have broadened their supply chains towards a more globally focused footprint to both leverage localized production opportunities and more regional distribution. New innovative start-ups are introducing new drugs at a faster pace and the industry is on the verge of responding to concepts of personalized medicine, namely drugs specifically tailored for an individual patient’s illness needs.
As industry readers well know, pharmaceutical and life science supply chains are highly regulated and far more complex in the needs to connect markets and channel demand distributors among tiered production and API sourcing. With globalization, added regulatory requirements, product shelf life expiry and other factors add to the complexity and to costs. Sensing actual product demand needs for each channel is a rather dynamic process requiring lots of external and internal collaboration. The supply chain is now looked upon as both a key mechanism for business strategy as well as an opportunity for cost savings.
Planning itself involves managing unique attributes, batch campaign characteristics related to production starts and lot tracking to insure efficiencies. Scenario or what-if planning capabilities have a special meaning in the ability to determine the most optimal plans to meet cost, product margin and end-item demand needs. The notions of integrated supply chain now translates to connecting end-to-end supply chain information and unique planning requirements with constantly changing business needs for cross-functional and cross-business coordination.
The above are just two specific industry examples of how concurrent planning needs and concepts are manifesting themselves in different industry settings.
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