Why Planning Needs to be Strategic

It’s a common trap to view the sole purpose of planning as coordinating the flow of goods from suppliers to customers. This is certainly “what” you are doing when planning – but from a strategic perspective, you need to step back and ask yourself “why” you plan.

We all know that planning in supply chain organisations is complex and critical. Most companies have significant resources invested in the planning function, but it is easy to get mired down in detail and forget to ask yourself: “Is my demand and supply chain planning properly supporting business strategy?”

Plan for the whole business

ComActivity often spends time assisting customers with their plannning processes and during workshops, we’ll often ask customers about the purpose of planning.  The most common answer we get is that ‘the objective is to ensure that what we communicate to customers, suppliers and internally is in line with what we actually can achieve.’

While this is certainly a valuable objective, and should be the result of any good supply chain planning, it doesn’t really look at the big picture. It is a response focussed on the “what” of planning – it doesn’t take into consideration “why” we plan.

From a whole business perspective, the planning function needs to play a far more strategic role, to deliver the best possible financial result for the business. That is, from a business perspective, we shouldn’t be planning for the sole purpose of having a good supply chain, we should be planning to get the best financial result for the business as a whole.

This is not done by simply reacting to demand and supply information and trying to balance both sides. It can only be achieved by pro-actively taking part in creating a demand and supply plan that will yield the revenue and profit that is satisfactory to the business.

Planning strategy starts at the top

To achieve this, the high-level strategic decision makers for the business need to embrace the planning process and organization to ensure that planning supports the business strategy. Planning decisions need to be cross-functional and consider overall revenue, costs, and profitability. Decisions can’t just be made at a granular level, to suit a single function. While it may indeed save the purchasing department money by buying a certain material in bulk, will this decision be the right financial one for the manufacturing group? Placing distribution centres in certain locations may make sense in terms of proximity to suppliers, but does the benefit outweigh negatives in other functional business areas? There are often multiple solutions, and the key is to find the optimal one, where all points in the supply chain contribute to the overall business goals.

Achieving this outcome requires involvement from those with a high-level view of the business as a whole. Their key contribution is to reinforce the big-picture perspective and make sure that planners have the right processes and tools at their disposal to make sure they can always plan strategically.

To talk to us more about how you can make sure that your demand and supply chain planning is strategic, send us an email, and we will get right back in touch with you.