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19 Jan 2021

Effectively closing the loop between planning and execution

Solving a classic business conundrum

Synchronising planning and execution is a never-ending struggle in companies with complex supply chains. The typical tendency is to be overly reactive to execution issues without closing the loop with planning. This can lead to neither capability providing the expected value. In this article we explore distinct planning and execution capabilities and what it takes to synchronise them.

Do you know when to step away from ‘execution mode’ and revisit your planning assumptions? Conversely, how do your predictions inform the execution of single tasks, and how do you capitalise on lessons learned? As a supply chain professional, you know answering these questions is not a trivial endeavour. And while many people understand the difference between planning and execution on paper, when it comes to separating the two operationally the story is very different.

Many companies still fail to distinguish Sales & Operations Execution (S&OE) from Sales & Operations Planning (S&OP) and therefore reap little value from both capabilities. A classic example is that all too often operational issues are the focus of S&OP meetings – instead of the end-to-end optimisation of profitability, working capital and asset efficiency.

This scenario is even more prevalent in Engineer-to-Order (ETO) and Configure-to-Order (CTO) supply chains which are predominantly execution-oriented due to their inherent complexity and the specificity of individual orders. When it comes to companies managing large installation projects for example, complexity arises from many issues, including:

  • Myriad product design or customisation options
  • Vast, multi-tier networks of suppliers and contractors
  • Dynamic order execution
  • Long lead times
  • Cross-functional involvement in each customer order

How, then, can leaders of these complex supply chains establish strong planning and execution capabilities, while ensuring there is clear delineation in each? How can they maximise the value of S&OP and create an S&OE capability that captures the feedback from actual execution in projects including on site activities and communicates it back to S&OP for revised planning?

Answering these questions successfully can lead to significant opportunities. Achieving the full value potential of distinct S&OP and S&OE capabilities requires correct enablement. Supply chain leaders should start by assessing the readiness of their organisation across the following key enablers:

Ensuring the best allocation of resources and effort per customer-product group is a strategic supply chain capability. A detailed understanding of customers and products, and specifically the effort and reward involved in serving each combination of them, is therefore essential.

Continuity between the corporate strategy and single operational tasks can only be achieved if there is a clear translation between both ‘languages’.

Supply chains with complex portfolios, as well as products with many design and customisation options, can benefit greatly from modularity. For example, several leading companies use “standard reference models” as starting points for customer orders.

A company’s sales force can be a major ally in rationalising the requests of future customers towards more profitable or less complex options. Its influence on the demand signal can be incentivised in alignment with different objectives.

To ensure shared understanding across the organisation of supply chain rules and trade-offs, as well as shared understanding of what is required to fulfil a specific customer order (such as common understanding of the bill of materials), managing data uniformity, accuracy and governance is key.

Minimising total costs is only possible given tangible and detailed cost information. Using the principles of activity-based costing, costs can be analysed and allocated by product, customer, and process.

To calculate optimal supply chain plans while tracking execution in real time, supply chain leaders must choose the right software for their organisations. Usually no single technology covers all of a company’s requirements, so it is common to complement the breadth of advanced planning solutions with the responsiveness of execution management solutions.

Keeping pace with the speed of execution will inevitably make it necessary to adjust your plans. This, undoubtedly, is a crucial step towards creating business value in the longer run. Knowing how and when to do so, however, is equally important, so companies must establish the key enabling building blocks that enable you to synchronise planning with execution.

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Claudia Fojan

Director, Consulting

Peter Vickers

Partner Supply Chain Management

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