Getting ahead of disruptions with integrated planning and execution

Supply chain planners are adept at forecasting, but not so good at reacting to unexpected events. That is the strength of their colleagues in warehousing and transport, but in turn they often forget to forecast. At the company’s customer event in Barcelona in mid-October, software vendor Manhattan showed what can be achieved by integrating planning and execution.

By Marcel te Lindert

Supply chain professionals may like to believe they are good at forecasting. Based on their predictions, they create a detailed plan. ‘But things always turn out differently than we predicted in practice, especially in these volatile times,’ states Kevin Overdulve, Supply Chain Specialist and partner at Deloitte Consulting. ‘Our own research shows that success is 50% determined by how we deal with risks and exceptions. In other words, it’s crucial that we can detect deviations between planning and reality, and know how to handle them.’

No longer needed

Often that capability is limited. It can easily take a few days to download data from the various systems, analyse it and discover where the problem lies: a supplier who delivers late, holdups on a production line, or a customer who orders 20% more than predicted. ‘Then we start calling and emailing because we don’t dare to make a decision on our own. By the time we have a solution, it’s no longer needed,’ says Overdulve. He points out that three quarters of all supply chain data becomes worthless within a few days.

Overdulve advocates linking supply chain planning and execution more. He refers to the planning tools that companies implement to calculate safety stocks. ‘Although the world is changing considerably, crucial settings such as delivery times are often not updated again after implementation. By enriching the planning tools with real-life delivery times, we can keep those settings up to date.’

‘Must’ and ‘may’ products

With Manhattan Active Supply Chain Planning, software vendor Manhattan aims to bridge the gap between planning and execution. Like Manhattan’s warehouse management and transportation management software, this revamped software has been developed on the same platform, which enables far-reaching integration. Take the forecast that is generated using machine learning and translated into concrete order proposals. Integration with the warehouse management system (WMS) allows these to be adjusted right up until the last minute. ‘Imagine a retailer who sees in the morning that sales in their stores are a lot higher than expected. They can easily increase their store replenishment orders, even if order picking has already started in the warehouse,’ says Brian Kinsella (pictured), who is responsible for product management within Manhattan.

An application that goes one step further involves trip planning for store replenishment. The store replenishment orders that serve as input for this are usually seen as a given that cannot be altered. ‘With our software, we look at the exact composition of those orders,’ Kinsella says. ‘We distinguish between the products that absolutely have to be included in the trip to avoid empty shelves, and those that can wait until the next delivery. By first looking only at the ‘must’ products, we can combine store replenishment orders that would otherwise not fit into a single truck. We then fill the remaining space in the truck with the ‘may’ products. This results in more efficient trip planning with fewer kilometres.’

Labour costs

The integration of planning and execution also offers advantages in the warehouse. For example, the forecast can be used to calculate how many employees are needed at any particular time. ‘If a warehouse does not have enough employees to handle all the incoming goods, it leads to long waiting times or extra costs for overtime or temporary workers,’ says Kinsella.

The problem is that companies delay goods deliveries for as long as possible to reduce inventory costs, leading to spikes in the warehouse receiving process. ‘But if you look at transport costs and staff costs in addition to inventory costs, it might make more sense to allow certain goods to be delivered a bit earlier. That leads to a better distribution of the workload in the warehouse receiving process and a reduction in overall costs.’

With its integration of planning and execution software, Manhattan claims to have an alternative to Sales & Operations Execution (S&OE). Many companies have set up this decision-making process in recent years, often with a weekly frequency, to respond to disruptions. ‘But these manual S&OE processes are not in real time and are not integrated,’ claims Manhattan CEO Eddie Capel. ‘They simply take up too much time, and are too far removed from day-to-day operations.’