When we left our account of mid-market manufacturer Superior Thermodynamics (ST), the company was weathering a tremendous escalation of the US-China trade war and faced the following questions:
- How can ST maintain service levels and therefore retain accounts?
- How can ST maintain necessary cash flow?
- How can ST still maximize revenues, however the forecast evolves?
- Given the new and different playing field, how can ST still hit profit goals?
- Here is what they relied upon to get them through.
S&OP Process Supported by Cloud-Based Planning Software
In the end, ST still managed to exceed its profit goals and achieve revenue objectives adjusted for new market realities. Because the company relied on a state-of-the-art DSCP planning system covering the entire S&OP process from demand, production, and inventory through procurement and supply planning, integrated into the corporate global financial plan.
Scenario Planning: Absolutely Critical
Critical to ST’s ability to weather this global market tempest is their system’s facility with scenario planning. ST was able to run and consider dozens of potential outputs for each critical KPI such as lead time, and many more modular scenarios focusing on specific geos, routes, and key accounts, within hours. So many “what ifs” to consider. Once they involved upper management in an S&OP process meeting focusing especially on this new reality and got approval on a new plan, the company made adjustments to their prevailing demand, supply chain, distribution, and procurement plans, including inventory allocation, and ran with it. S&OP-driven scenario planning let ST model these events both ahead of time and in real-time, letting them react quickly both strategically and tactically.
Scenario planning at this level, like all aspects of supply chain planning, requires an exponentially growing volume of data from an expanding range of sources. Advanced analytics supported by machine learning and other artificial intelligence technologies underpins planning and enables the speed, accuracy, and flexibility for making quality decisions in volatile environments. This is a big leap forward from painstakingly built Excel spreadsheets maintained by a small, overworked staff. Data management is one of the modern planning system’s greatest value adds.
Sales and Operations Planning lets you create a viable business plan that’s responsive to a global market shaped unpredictably by the economic policies of its largest players. Global trade turbulence has achieved at least one thing: It has made the S&OP process and supply chain planning priorities in the executive suite again.
Tools for Survival
In their survival kits US Navy SEALs carry fire starters, water purification tablets, and signal mirrors, among other items, that can help them survive shooting wars. A manufacturer’s trade war survival kit should not be without the right decision-making systems.
Every one of the nineteen questions listed throughout the two parts of this article can be addressed with a quality demand and supply chain planning system. Because this was a hypothetical example for a downbeat yet realistic event that could happen in the near future, we can only imagine some of the choices that ST made and how they executed them. But we know the questions that such a company would face. Companies have been facing them for years in similar situations. And we do know that in a global economy in which these events occur more quickly and impact more stakeholders than ever before, being able to address them effectively with data-supported plan updates vetted through advanced analytics is ever more critical.
Demand and supply chain planning software, driving an organization-wide S&OP process supported by top management, is no longer just a nice-to-have in the increasingly unpredictable global marketplace. It can mean the key to survival.
Because the ability to plan for all realistic scenarios, and even the occasional “black swan”, can separate the winners from the losers in the new global business environment.
Stay tuned for a future post on the role of planning software in taking advantage of new opportunities that arise during trade wars.