There has been a lot of debate in recent years about whether supply chain planning and demand planning solutions actually deliver their much-touted benefits. And I think that’s a good thing.
Any time you see an industry accepting the status quo and displaying hostility to new ideas, you have a recipe for stagnation. And stagnation is the opposite of innovation.
One commentator who has kept a close eye on the situation is Lora Cecere. That should be a familiar name to most readers. But in case it’s not: Lora Cecere is the Founder and CEO of a research firm called Supply Chain Insights. She also writes the enterprise software blog Supply Chain Shaman, and she published a book called Bricks Matter in 2012. Lora is one of our discipline’s leading thinkers, and I am a big fan of hers. Additionally, Demand Solutions works with Lora from time to time, and she was even a keynote speaker at our last Global Customer Conference.
In a 2013 post on the blog site for her book, Lora highlighted seven demand management mistakes of the last decade. Here’s an excerpt:
“….[M]ost supply chain professionals are quickly realizing that their supply chain planning solutions have not driven down costs, and have not improved inventories or speed to market. What we have found [is that] companies globally across all industry verticals have actually moved backwards over the course of the last ten years when it comes to growth, operating margin and inventory turns. In some cases they have improved days payable, but this has pushed costs and working capital responsibility backwards in the supply chain, moving the costs to the suppliers.”
As an employee of a supply chain planning solution provider, let me just say this: Ouch.
But let me also thank Lora Cecere for her blunt analysis. We need that if we are going to continue the improvements we’ve achieved in supply chain planning over the past 30 years.
Customers Who Buck the Trend
So, is it all true? Have supply chain planning solutions truly failed to deliver the lofty benefits their vendors have promised?
Yes and no.
Yes, in the sense that Lora’s industry analysis is very thorough. If Lora says she’s taken a broad look at the market and hasn’t seen that supply chain planning solutions consistently deliver benefits, then we trust her analysis and conclusions.
But no, in the sense that Lora’s grim assessment doesn’t gel with what we’ve been seeing at Demand Solutions. Every day, we work with customers that are realizing not just benefits, but dramatic benefits from deploying supply chain planning solutions.
Just the other day, I spoke with a Demand Solutions customer in Latin America that boosted its customer service levels from the low-60s to the mid-80s with no increase in inventory. So my experience and frame of reference are very different from the conclusion noted above by Lora.
In fact, our annual publication, DS Magazine, is full of stories from customers that have used Demand Solutions supply chain planning software to achieve truly noteworthy benefits for their businesses.
In this year’s issue alone:
• Mizuno is using Demand Solutions to work towards a best-in-class supply chain.
• AutomationDirect has taken another step towards 100% customer service levels.
• Grainger boosted its customer service levels by 5-10%.
• Kimberly Clark Professional reduced forecast error by 19%.
• Snack Brands Australia has reduced its safety stock by 20%.
You can read these and other stories in your free copy of DS Magazine.
What Do You Think? Are Supply Chain Planning Benefits Real?
If you’re a supply chain professional who is considering giving up on achieving sizeable benefits from supply chain planning solutions, don’t. You are working in a discipline that has never been more important, and has the potential to deliver more value back to the business than virtually other functional area.
Looking back over my 30 years as a management consultant and software executive, I can’t think of anything that can produce as dramatic a bottom-line benefit for businesses as supply chain planning. How else can you increase revenue and reduce costs simultaneously? If I knew of a better way, I would recommend it.
So the question for me, then, isn’t “Do supply chain planning systems deliver benefits?” but rather, “Why do some implementations deliver value while others don’t?” or “Why don’t the aggregate numbers illustrate the value that we see at the ground-floor level?” I would welcome your thoughts to this question in the space below.