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Volume 1    Issue 3    October 2003


Running with Collaborative Operations Planning
By William Green, Vice President of Solutions, Adexa

The fall of 2003 brings predictions that an upturn in the economy is just around the corner.  The stock market is rising, as companies are seeing some signs that business is starting to come back to life.  There is still a lot of uncertainty in how strong the recovery will be; yet companies want to believe that the recovery is for real.  The memories of excess inventories from the slow down in the economy in 2001 is still fresh in peoples minds, and the current dominant management focus is around making sure that costs are kept in line and risk is kept to a minimum to protect profitability.  Although demand seems to be more predictable, nobody wants to get caught making the same mistake they made in 2001 with extra inventory.   By doing this companies risk missing out on opportunistic demand on the upside, or not taking advantage of the cheap prices suppliers and contractors are offering.  There is a delicate balance between supply and demand and a mistake can cost a company valuable resources and cash. 

The battle has changed since the last time capacity and material constraints were on the minds of operations managers, with more and more outsourcing taking place and product lifecycles being very short.  In addition to the problems of not exceeding capacity and material constraints, financial targets are tighter then ever before, imposing new constraints on what once would have qualified as a good operations plan.  It is not just satisfactory to balance supply and demand anymore. The operation must do this while not exceeding variable cost goals and working capital limits. 

Like generals over the centuries, many managers are faced with fighting the battle to keep their operations profitable with tactics and tools that are suited to the last war.  In the latest battle to squeeze the most profit out of an enterprise, there is a need to link the operations plan very closely with the financial plan in order to meet earnings expectations.  Every part of the extended enterprise will need to participate in the operations plan.  Suppliers, contractors and customers can no longer be included as an add-on to the process, passing files back and forth once per month.  They need to be included in a way that allows them to participate in an immediate and responsive dialog on supply and demand, which means that secure data and access through the internet, is not just a plus, but a must.  Agreements with contract manufacturers and suppliers, which include minimum volumes and maximum volumes at a favorable price, make intelligent planning all the more important.  As demand from customers picks up, an enterprise must quickly decide if it can meet the demand, and at what incremental cost.  Intelligent planning logic will help decide what capacities to use, what quantities of material requirements should be sourced to which suppliers, and how product will be allocated in order to satisfy hard customer commitments and get the most profit out of potential sales.  Finally, a company needs to be able to measure the performance of its operation in order to be able to understand when plans need to be changed and updated.  These are the requirements of an operations planning system of today. 

The Adexa Collaborative Planning (COP) module is the latest offering by Adexa on its collaborative platform.  When implemented with the Adexa Collaborative Demand Planning (CDP) module, it allows a company to put in place a world class Sales and Operations Planning process.   Adexa's COP system offers key features that are needed to meet the requirements of the difficult planning environment that a company faces today.  The system has been built to have both Demand and Supply planners in one system (There is a difference between integrated systems and one system).  It is built with participation and communication of many stakeholders as a core capability of the platform.  The system allows secure access to data over the internet so that all parties can actively participate in the planning process.  In order to figure out the question of what to make and who to sell it to, it uses Adexa's intelligent planning logic that considers costs, constraints and the capabilities of the supply chain.   It has allocation planning logic that will consider the commitments in current agreements, and upside opportunities.  It has sourcing logic that will consider price, current minimum volume commitments and alternatives.  In order to be able to identify when things are not going to plan, it offers the ability to monitor, alert, and report on what is happening in the operations plan.   This covers the critical planning needs of creation, communication, and monitoring of plans that are required for operational success.   It is quite different from the enterprise systems conceived in the 90's and touched up over the past couple of years, and are still commonly used today. 

One and a half million years ago our ancestor Homo ergaster walked the earth trying to survive in his competitive world.  He (she) was more intelligent and better equipped for this struggle than his (her) predecessor Homo habilis.  Homo ergaster had a better brain, could communicate with primitive words, but had to eat whatever it could scavage, kill or find because of their inability to plan and execute against the plan. Homo ergaster was not intelligent enough to understand what was going on in nature so that they could plan ahead and then communicate with their partners in order to build a roof out of sticks ahead of time and stay dry when it rained.  Homo ergaster went extinct about 1.2 million years ago. 

To me, there is a direct parallel that can be drawn between the evolution of humans and the evolution of planning systems.  Adexa planning systems are inherently built to understand what is going on in the world around them, have the ability to plan intelligently, and have the capability to communicate what needs to be done with a community of partners.  There are other planning systems out there that are just no longer capable to survive in the more complicated world.  Who would you want to have planning your supply chain Homo ergaster or Homo sapien?  

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