Preview – Most IBP cycles around the world are based on a 20-year-old process definition supported by 20-year-old planning concepts. This traditional IBP is not set up for a fast-changing world, where speed of decision making confers a competitive advantage. Intelligent automation will change this. In this series of blogs, I will discuss the transition of traditional IBP towards a more intelligent IBP. Here, you can read the Rise of Autonomous , Unshackle the planners and Closing the Decisions Gaps. In this blog: a new role for supply chain planners.
Similar to the continuous automation of physical assets in the supply chain over the last 100 years, we’ve now reached the era where the knowledge worker will be augmented or automated by a machine. Planners, schedulers, and forecasters will not escape this evolution. New systems of intelligence will support us with planning & forecasting process automation, analytics automation, and decision automation.
The new evolutionary challenge for IBP, and more specific for supply chain leaders, is to close the traditional IBP decision gaps. These are a lack of strategic decision making in general and a lack of decision responsiveness, especially during disruptive circumstances. Besides adapting new technology, this requires new roles and skillsets for planners, it also requires redesigning the traditional IBP team and give them new incentives.
THE TRADITIONAL FOCUS ON INFORMATION, NOT DECISIONS
In the evolution of IBP, there has been a lot of focus on the sequential planning process, meeting schedule, and planning capability. But it is good to remember that the early pioneers always designed S&OP, the predecessor of IBP, as an executive decision-making forum. Palmatier and Crum (2002), Coldrick, Ling, and Turner (2003) and Bob Stahl (2009) all assert that S&OP is first and foremost an executive decision-making process.
Decisions and decision practices are important, as decision effectiveness and financial results correlate at a 95% confidence level or higher. Which leaves Blenko and colleagues to conclude that “ultimately, a company’s value is just the sum of the decisions it makes and executes.“
According to a McKinsey survey, we spend on average 37 percent of our time making decisions, and more than half of this time is thought to be spent ineffectively. For middle management, ineffective decision-making reaches 68 percent.
In our 2021 Foresight article, Hein Regeer and I call out many limitations of traditional IBP — particularly, its information and process focus, rather than a decisions focus. Many IBP meetings take on an “information sharing” character, which is largely because planners spend up to 50% of their time on an information role, like gathering and cleansing data and analyzing and creating insights — even before making or facilitating a decision.
At the core, the IBP process must facilitate executive decision making. Any planning, forecasting, analytics, simulations, and insights must facilitate high quality, timely decisions.
COVID exposed the inability of companies to make rapid strategic choices, such as in days or weeks – impactful decisions such as closing a factory, entering or exiting a product category, or reallocating limited resources in their supply chain. Some companies could increase their IBP decision clock speed, but some actively bypassed IBP by installing executive-led COVID war rooms to more rapidly implement strategic decisions. Hereby acknowledging that the existing IBP planning and decision-making processes are not fit for purpose.
THE POTENTIAL OF NEW TECHNOLOGIES
The evolution of supply-chain planning went through Wave 1 ERP-systems, then Wave 2 APS-systems, and now we have arrived in the third wave of integrated supply-chain planning software. This new wave of technologies will provide intelligent automation that replaces the human planning process as well as cognitive automation that augments a planner’s decision making with predictions, insights, and recommendations.
According to the book Intelligent Automation, 42% of work can be automated, 32% of work can be augmented, and 26% of work can be eliminated. 84% of the workforce will be impacted by these advances. Supply chain planners and IBP teams will not escape this evolution.
According to McKinsey global institute, collecting data and processing data represent respectively 17% and 16% of time spend in all US occupations. These two activities have the highest potential to automate, only superseded by predictable physical activities. On top of this, there is significant potential in planning automation, as only 7% of companies have started to adopt autonomous end-to-end planning.
In our 2021 Foresight article, Hein Regeer and I suggest a new set of IBP concepts and assumptions. Based on human and machine decisions making and incremental levels of automation, we envisioned a future intelligent IBP, where many of the information, planning and decisions tasks are automated.
An intelligent IBP would result in more automated and augmented decisions, as highlighted by the potential in the decision scheme in Figure 1. Short term decisions have high levels of automation potential and mid- to long term decisions have high levels of augmentation potential. Both save time for the planner and increase responsiveness in IBP decision making.
Figure 1: Demand & supply balancing decisions in an IBP cycle
Time saved with automation can be spent by planners on more advanced scenario planning, P&L sensitivity analysis, and supply chain resilience simulations to prepare and facilitate more strategic decisions. This, hereby, would solve the traditional IBP decision gaps.
A NEW DESIGN FOR THE IBP TEAM
To solve the traditional IBP decision gaps, if circumstances require, decisions in Intelligent IBP have to be able to decouple from the planning horizon and the sequential, predetermined IBP planning process and meeting schedule.
To facilitate responsive strategic decisions in a disruptive state, the IBP team needs to be redesigned and planning roles will need to change. In disruptive circumstances, a business can’t wait for a strategic decision to be made in the executive IBP meeting on a Thursday in the fourth week of the month somewhere between 13.00 and 17.00.
Firstly, to facilitate a quick turnaround of decision in a disruptive state, an IBP decision squad can be formed that solely focuses on critical decisions at hand. This decision squad can be resourced by temporarily reprioritizing the existing IBP team resources to facilitate the decisions.
Alternatively, a company can assign additional resources to a decision squad when disruption criteria are being met. Supply chain thought leader John Gattorna has suggested that companies must learn to manage a business-as-usual situation, supplemented by a further special capability that is able to find innovative solutions, fast, for unexpected disruptions and opportunities (Gattorna & Hills, 2020).
Secondly, the decision squad needs to develop a mindset of speed and responsiveness. Take the example of a manager who sometimes challenges his team to give him a one-day answer for what can be a complex problem. This forces the team to make decisions with imperfect data under imperfect circumstances, prevents analysis paralysis, and drives a mindset of agility.
Thirdly, the decision squad needs to have a clear relation with the execution of a decision. Once a decision has been made, there needs to be a handover to an execution squad, a project team or an operational team that is going to execute the decision. The decision squad needs to keep track of execution status, understand execution impacts and document learnings from the decision-to-execution process.
CHANGING PLANNING ROLES & INCENTIVES
Incremental use of new technology and the need for responsive strategic decisions will change the role of planners. Planning will become more strategic, and more data and science driven. Kuehne Logistics University research on next generation supply chain planning, identified that more holistic strategic roles will emerge for planners.
The increasing need to cover data and science, can be summed up by Shane Azzi, the Chief Supply Chain Officer from Kimberly Clark, who noted, “There’s a real shift happening now between the art and science of the supply chain, and it’s definitely rebalancing more toward the science. That’s clear just from the volume of data we are required to assess and base decisions upon”.
New technological capabilities, ongoing disruptions and ever evolving business realities and needs, will drive changing and emerging roles for planners, not limited to:
Information role: Data gathering, cleansing, manipulating, master data and planning parameter maintenance will be largely automated. This role will shift to having a more architectural overview about what internal and external data sources impact the plan and how they are integrated.
Analytics role: Descriptive and diagnostics analytics will be automated and made available at all times for IBP stakeholders. Planners will be augmented by advanced analytics, to support more timely and strategic decisions. We’ll see the rise of planners as citizen data scientist.
Planning role: Planning processes will be largely digitized and automated. The planning role will shift to use technology to maintain the planning process, with policies, goals, and targets to guide planning automation.
Interpersonal role: Maintaining cross functional and strategic alignment as a planning business partner stays key in a planner’s role. However, rather than aligning input for a monthly plan, the focus will shift to negotiate cross functional policies to guide planning and decision automation.
Decision role: As planners transition out of their information role, the decision role will see a significant rise in scope and importance. The decision role will cover decision preparation, facilitation, quality management and execution feedback.
Automation role: This is a new planning role that will emerge. Both planning process and decisions will be automated where possible. It becomes the planner’s role to find efficiencies and incremental levels of augmentation and automation.
These changing and emerging planning roles will have to be supported by new incentives. IBP planners in traditional IBP are often incentivized by IBP process compliance and planning & forecast accuracy. IBP will require incentives around planning automation and decision responsiveness, quality, value, and execution feedback.
The evolution towards a more responsive and strategic IBP requires organizations to think through these changing roles of planners, the skills required, and their incentives. The IBP team will require a redesign to support a steady and disruptive state with the skills to facilitate timely and high-quality strategic decisions.