Supply chain planning in the digital age

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Recently, Madhav Durbha, Vice President of Industry Strategy at Kinaxis was interviewed by SupplyChainBrain on supply chain planning in the digital age. I wanted to share their fascinating conversation with our readers – check out the video interview and transcript below:

Supply chain planning in the digital age

SupplyChainBrain: What are you hearing from your customers about the biggest challenges they are facing right now in supply chain planning? It's fairly simple. It's complexity and volatility are the two themes that I constantly hear from our customers, regardless of the industry, that seems to be the recurring theme. SupplyChainBrain: And talk about what you mean by that, complexity of what exactly? How are supply chains becoming more complex? Think of yourself as a consumer. There is omni-channel you can buy products anywhere, you can order stuff from your mobile phone and then get delivered to your home, and so on. So as a consumer, you have a lot more channels through which you can engage with the manufacturers. Think about personalization of products. You know, "I want something now, and I want it to suit to my taste." That's causing a lot of SKU proliferation amongst the manufacturers and suppliers of these products. Geopolitical factors….. all we need to do is watch the news in terms of all the action that's happening around the world, that's introducing more complexity as well. And then, individual targeted promotions. So all these factors put together, they're increasing the complexity and volatility in terms of supply chains and it's making planning more challenging than ever. SupplyChainBrain: Omni-channel, especially, you referenced that. What are some of the trends there in omni-channel that you see going on with regard to what customers are getting or are demanding today? It's like I said, it's personalization is one. If I want to order a shirt and it's not just my size, it's my name on the shirt, maybe. It's the ability for me to order the product online and then I can go pick up in store, I can go have it delivered to my home, or elsewhere. When you look at this, earlier it used to be that I walk into a store that's the source of the demand, that's where I'm placing the demand, and I'm picking up the product, as well, it's very linear, right? In today's world, with buy anywhere, pick up anywhere kind of paradigm, supply chains are a lot more complex. SupplyChainBrain: You know, it seems like in the past, the biggest dream of supply chain planners was they wanted more information. Now they have the information, but are they making the best use of it? Are they inundated, are they flooded by it, or can they actually turn it into something actionable to create more accurate plans in the supply chain? They are absolutely flooded with lot of information. The data sources and the types of data are exploding, if you look at it. What's limiting them, from a supply chain planning perspective, is that the technologies and the paradigms under which most of the companies are working today, these paradigms have been around for 20 years. These are typically batch-oriented, you do a demand plan, and then you push it over to supply plan. Then you do capacity planning, so on and so forth. In such a very linear cadence-oriented processes, where there are multiple handoffs, there's typically a lot of silos in that and a lot of latency in that. But the need of the hour really is the, like I said, the ability to know sooner and act faster, and they're not able to do that. It's like engaging in modern warfare, using swords and horses. SupplyChainBrain: Well, one other one of the big challenges is SKU proliferation. There's simply more SKUs out there because, as you say, the personalization and the like. Are companies handling that well? How can they decide what SKUs to order, where to stock them, where to ship them? It seems like a tremendous challenge. It is a tremendous challenge if you look at beyond the consumer interactions with the retail channels and so on. If you look back into the supply chain, the number of sourcing options are increasing, outsourcing of manufacturing is on the rise. So we do think some best in class companies handling that fairly well, that kind of complexity. And the way they are doing it is really being able to bring together the data processing people together and connect them all. SupplyChainBrain: Well, now, let's throw in geopolitical and regulatory issues. Talk about those complications and how they're affecting supply chain planning today. Sure, we look at all the talk around the trade agreements between different countries and how that is changing. That is definitely going to impact the flows of the supply of material across the borders. That is one, for sure. You look at some of the terrorist activities and other unpleasant activities that are going on around the world, those could cause disruptions to the flow of materials as well, right? So all these factors need to be considered. And, as information is evolving, changing in real-time, organizations need to have the ability to consume that and being able to respond to that. SupplyChainBrain: You talk about knowing sooner and acting faster, which is a great way of putting it in a very succinct manner, what companies need to be doing. And, yet, as we have discussed here today, they're not all managing to do that, so, we've talked about some of those barriers. Could you kind of sum up for me what are the reasons why the companies are unable to achieve that goal, at least at this point in time? Like I said, they're working under the 20-year old paradigms and the technologies of the past, so what that is doing is they need the ability to respond in real-time, but these systems are inherently batch-oriented. You need to run a plan overnight to come back with an answer tomorrow. We live in the world of Uber. When I punch ...ask for a ride, 5 minutes later the car shows up. That's the world we live in today, and it's exactly the same paradigm that is needed for planning, as well. They're not able to do that, the planners are exporting the plans from these batch engines into Excel spreadsheets and trying to do as much as they can within these Excel spreadsheets, and that is causing lot of Excel proliferation within organizations as well. And inconsistencies and scope of increased manual errors, that's part of the challenge. SupplyChainBrain: Things are happening so fast, you have to wonder whether companies should deemphasize the whole idea of planning and instead switch into an agility mode whereby they're simply responding to current demand. Is that possible to do? Well, theoretically, it sounds like an interesting idea, but the reality is that there are long lead times that companies need to plan for, you know. When they need a product, they get a demand signal, it's not that immediately they're in a position to make it and then distribute it and ship it to the point of consumption. So, planning is extremely relevant, in fact, more so in today's world, as supply chains become more complex and network like, as opposed to simple linear flow of materials. SupplyChainBrain: I'm sure that supply chain planners will be happy to know that they're still gonna be needed in the future. So based on this state of affairs that you've sketched out for us, what's the fix? Based on your experience and your knowledge of this business, what should companies be doing in order to achieve these goals? So it used to be that companies are still, like I said, the current paradigm is do manufacturing planning, distribution planning, demand planning, etc. But in some of the leading companies, there is an emerging practice called, "Conquer and Planning," that we're seeing more and more in practice. So looking at your supply chain end-to-end network, right? Having visibility to your end-to-end network in one place, being able to visualize how your supply chain is performing with all its metrics and KPIs at any point in time, and then being able to layer an intelligence on top of any disruptive events, you know. Or events that are pleasant or unpleasant, for that matter, being able to intelligently respond to those. And the last, but not the least, there is the human element to supply chain planning, right? We are not in a world where supply chain planning is totally touchless, and it's happening in a touch-free environment. The human planners and the human intelligence is very much needed. And for that, these companies are enabling collaborative capabilities. There's social media-like collaboration where you're sharing context, specific information with your colleagues and co-workers, and you're cooperating that supply chain. SupplyChainBrain: On top of which you're able to construct the so-called, what if scenarios, you can work out a lot of possibilities before you commit to one, thereby choosing the best course of action. You're absolutely right. These companies are able to run these what if scenarios in real-time, be able to compare them, and score them, and pick the best possible scenarios to execute against. SupplyChainBrain: It sounds like there's some hope for some improvement we are already starting to see in terms of supply chain planning in the digital age. So, Madhav, I want to thank you so much for guiding us through this world a little, telling us how the state of affairs now and how things might shape up in future. Thank you very much for talking to us. Thank you. Glad to be here.

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