Last month, we shared some insights about how the past two years have highlighted that having a robust supply chain strategy can make or break a business.
The first step to supply chain resilience is ensuring that a comprehensive supply chain strategy for the business is in place, which was laid out in detail in the first part of this series. In this second part of the series, we will dive into why regular supply chain strategy reviews are crucial, and tips for businesses to get it right.
The bottom line is that businesses should not simply create a strategy and live by it for six or seven years. As supply chain consultants here at TMX, we cannot stress enough how important it is to constantly evaluate your supply chain strategy against KPIs, data, and any other changes in the market, and adjust your strategy accordingly.
With this in mind, planning is key. As we have witnessed over the past two years, adequate planning ensures we expect the unexpected. We’ve seen that failing to plan ahead affects the bottom line and can also negatively impact customer retention and brand loyalty. The bottle necks in supply chains over the past year have shown us how when a product is unavailable, businesses not only lose a sale opportunity, but also risk losing the customer for good, especially if they are won over by a competitor.
Although businesses will hopefully not encounter a new crisis every month, we recommend holding monthly contingency planning meetings. This instils the habit of anticipating external challenges, and helps businesses adapt accordingly to ride them out with minimal disruption. These planning sessions are part of what we refer to as Integrated Business Planning (IBP).
IBP is a high-level process that assesses people, processes, and systems. With regular collation of data and regular meetings with a cross-section of the team, IBP enables a business to predict and maximise profitability, customer service levels, and cash flow.
How to get started on your Integrated Business Strategy
IBP should bring together executives from across the entire business marketing, sales, finance, operations, supply chain and C-suite – to ensure the strategy aligns with every team’s own set of objectives and timelines.
Themed planning sessions should be scheduled monthly, ideally with weekly check-ins, to make sure the business is consistently benchmarking its KPIs against what is happening within and outside the organisation.
At each IBP meeting, the cross-section of team members who are present should discuss what they see happening in the market, and how that compares to what is happening within the business. Some thought starters include: What opportunities do external factors present for the business? What threats do they pose? How is the organisation positioned to take advantage any opportunities or ride out the next challenge?
Here are some pointers on how to structure your planning sessions:
- Identify your unconstrained demand. What would the market buy from you if you had it readily available?
- Identify your real-world constraints. Do you have time to remove any of these constraints? Are the costs of removing them worth the benefits?
- If you can’t remove the constraints, decide if you want to engage an allocation strategy. For example, you can look at prioritising your top-tier clients as a short-term solution.
- Set business benchmarks if you accept the constrained demand. Consider what your revenue, costs, profits, cashflow, customer service levels look like.
- Create ‘performance guide rails’, or your worst, best, and most realistic case scenarios.
- Decide if these scenarios are acceptable to the leadership team. If so, lock in your strategy; if not, return to step three until your strategy is suitable.
Fluidity with the business
When it comes to IBP, we find businesses get better at anticipating and understanding crises or challenges with time, but to get there, they generally have to go through the following phases.
First there is the reactive phase, where a business is unaware about a looming crisis or what has triggered it when it occurs.
Then there is the diagnostic phase, where the business doesn’t know about the crisis or issue until it hits, but does understand why it occurred. After which there is the predictive phase, where the business can anticipate the issue before it happens but is still unable to determine what has triggered it.
The phase we all want to reach is the prescriptive phase, where the business knows about the crisis before it happens and understands the cause, and therefore knows exactly which measures to take to maximise the up-sides and minimise losses.
Digitisation can help with planning and crisis management
As well as bringing together a cross-section of executives, businesses are also increasingly giving artificial intelligence a seat at the IBP table. Algo is one example of a supply chain intelligence platform that was built to help suppliers and retailers plan out more efficient supply chain operations.
The platform’s algorithm allows businesses to anticipate outcomes and reach decisions quicker, spending less time on administrative tasks like gathering data. The AI technologies also help achieve more integrated workflows by unifying and syncing data, teams, and business processes.
Leaving the data analytics to a program allows leaders to shift their focus to other things like scaling their business operations or looking out for any crises looming on the horizon.
Reaping the long-term benefits of strategic planning
Here at TMX, we see that having organised and routine supply chain planning sessions is imperative to business success, positively impacting sales, optimising inventory, and manufacturing, and riding out any volatility.
In the long run, the most important reason for organisations to have a solid but fluid supply chain strategy is so that each department is aligned on its goals and KPIs and knows how to flex in the face of any storm that comes its way.
TMX consultants work with businesses in the development and implementation of IBP and end-to-end supply chain strategies. Get in touch to find out more about how we can help your business plan for the unexpected.