Impact-Driven Planning > Continuous, real-time, or event-driven
Is Continuous Supply Chain Planning Continuous? Should it be?
It is not clear what is meant by “continuous planning.” Does it mean planning all the time even if there is no need for it? Or does it mean plan when we need to? But how do we know when “when” is? In addition to continuous planning, there are other approaches which really describe the same concept but are more purpose-driven, such as:
- Real-time planning
- Event-driven Planning
- Impact-driven planning
How real-time is real-time planning. Do we know the status of manufacturing when and if a new plan is needed? We may receive an alert of a late shipment but would it really impact our plan and schedule of production? Maybe not, because we have enough lead-time or there are other issues such as equipment downtime already in progress causing delays regardless of the late shipment.
This brings us to the concept of Impact-driven planning which means for every event, understanding if there is a need to change the plan. This requires a higher level of intelligence and more importantly a “real-time” representation of the supply chain and operations. Given the current status and the intelligence to evaluate the impact, the system can decide if re-planning is needed.
Now the question is what is meant by impact. An impact is measured by the amount of change an event cause in your acceptable range of objectives or KPIs. As mentioned earlier, not every late supply causes lateness in delivery. Not every equipment breakdown impacts equipment utilization issues and causes lateness as there may be other alternative resources.
What is interesting is that, S&OP solutions that claim continuous planning have no idea of what the current representation of operations are. They may receive real-time data from the shippers and/or weather stations but have no idea how it is going to impact the current operations or cause lateness issues this week, this month or this quarter. They are looking at the future 3 months and beyond. In the absence of a real-time digital mirror of your operations, as seen in most S&OP solutions, one is looking at the last snap shot of the operations perhaps a day, or even a week, ago. Imagine looking in the mirror and observing your image as of a week ago or even a few hours ago while you were still in bed!
In the absence of a real-time digital representation, you are left with some “nice” analytics and dashboards that do not really tell the whole story. Hence the planners have to manually and laboriously deal with any issues in the operations and disruptions that are faced daily. So that at some point in the future, the impact of their decisions is conveyed to the S&OP model! Not exactly continuous or real-time planning, right? What good is real-time and continuous planning if the real-time data is not taken into account to change the plans?
We can conclude that a real-time representation of the supply chain and operations is critical and depends on having a true digital mirror. Furthermore, the system must be able to understand the impact of each event and re-plan as needed based on their impact on your objectives.
We plan for a purpose or a set of objectives with some flexibility. Impact driven planning is the ability to revise the plan when those objectives are violated beyond one’s tolerance. For this reason, it is the highest form of planning strategy regardless of events, real-time or continuous planning capability. It is planning when it matters. For more information on how to implement impact-driven planning click Here