Supply chain planning makes a comeback

Enterprises are learning that the combination of supply chain planning and supply chain execution can lead to better performance inside and outside the four walls of the distribution center.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 3/6/2007

Not so long ago supply chain planning was a dirty word, one you didn’t repeat in mixed company – like in the presence of your boss or your board – if you wanted to keep your job.

That in itself was a turn of events. During the Internet boom, supply chain planning was the hottest application around. Too hot, as it turns out.

“The rhetoric exceeded reality,” is the way Steve Banker, director of supply chain management at ARC Advisory Group, puts it. “Too often, customers had not achieved what they had been led to believe they had achieved.” When the stock market crashed in 2001, so did many leading planning companies.

Today, planning is on a roll, especially among companies with complex supply chains and multiple tiers of distribution or multiple channels of selling. (For more, read Modern’s annual Top 20 SCE suppliers story.)

There are several reasons.

Planning meets execution
First, supply chain execution kept chugging along even as planning faltered. The top supply chain execution vendors always had some planning even if it wasn’t recognized as such. “Transportation management is a solution that includes both planning and execution,” says Banker. “Warehouse slotting, which determines the best way to store inventory based on demand, is a planning tool. And labor management includes a planning component.” The success of those solutions, says Banker, has raised the interest in planning of supply chain execution companies.

Multi-echelon planning delivers results
Properly locating a central distribution center to service a network of regional DCs, or replenish stores, can lead to a competitive advantage. So can making the right call on where and how to allocate inventory to service multiple channels of distribution. “Multi-echelon planning systems that make those kinds of decisions can pay for themselves in less than a year,” says Banker. That compares to two years for a traditional planning system.Multi-echelon planning is still an emerging application, but one with promise.

New tools
As supply chain software companies look at how to integrate planning and execution more tightly, new tools are on the drawing board. “I’ve talked to software vendors that are developing tools that would take information from labor management, warehouse management and transportation management systems for directors of logistics as they go through a budgeting cycle,” says Banker. “They’re not out there yet, but vendors are talking about this.”(For more, read about supply chain planning software.)