Understanding New Supply Chain Concepts

new supply chain conceptsThe Executive Interviews conducted at the virtual ARC Industry Forum elicited interesting perspectives on the digital transformation journey in a post-COVID world. In a freewheeling interview, Patrick Van Hull, Industry Thought Leader with Kinaxis and Steve Banker, VP, Supply Chain Service at ARC Advisory Group, discussed the changing vocabulary in supply chain management and the concepts attached to them, the distinction between various terms, the impact of COVID on supply chains, and concurrent planning. This blog captures the salient points of their conversation on new supply chain concepts. It can also be viewed on YouTube.

Difference Between S&OP and IBP

“Many involved in the supply chain are familiar with the term sales and operations planning (S&OP), so using that as the starting place could you describe the difference between S&OP and integrated business planning (IBP),” asked Steve. Patrick responded that the answer to that would depend on who you ask! If you ask somebody who’s failed at implementing S&OP, they might try it again and call it IBP. There are instances where it’s just a matter of semantics and the terms mean the same; but in some other instances there are distinguishing levels of maturity. In simple terms, at the core both of these are about demand and supply reconciliation. Historically, this has been a sequential process – demand review – supply review – mid-management meeting – executive level. From the standpoint of the maturity level it is being able to integrate your business decisions into your supply chain behavior.  Patrick explained that we are at a point in time where the supply chain can add value and drive overall business success. When you integrate the supply chain into business decision making, pertinent decisions can be taken that help shape the direction of the business going forward. During COVID times many supply chains were using S&OP and IBP types of processes to accelerate the learning curve and act quickly.

Transitioning to a Newer Term

Explaining the transition from the term S&OP to sales and operations execution (S&OE), Patrick said that it’s not a full-blown planning cycle, it’s about how you connect with the orders you have in hand – for example, available supply, what is arriving shortly, and connecting those to fulfill customer requirement. Also, it’s an opportunity to look at and do things in a shorter time horizon and tie back into the overall strategic business direction. “So, it’s not a disconnected process from those other types of processes, it’s focused on the here and now, but it does dovetail into the others very nicely.”

Concurrent Planning

Kinaxis is known for concurrent planning along with a few other supply chain planning vendors. Concurrent planning and sales and operation as execution go together pretty well, commented Steve.

The single version of truth is a great theory and many companies struggle to implement it as the data is obsolete and there is only one person presenting his version of the truth, and that is accepted, opined Patrick. Whereas concurrent planning is a dynamic, real-time process. It is about being able to pull together all of the stakeholders on the same platform, look at the same data, be there at the same time, and drive decision-making based on business priorities. Supply chains extend their value creation for the entire business by helping them to make the “best possible decision every possible moment.” He gave concrete examples of how concurrent planning provided real-time information to make optimal decisions during the pandemic.