Advanced Planning Strategies to Optimize Manufacturing Success
By Lisa Anderson
The world is VUCA-laden (volatility, uncertainty, complexity, ambiguity) and trending to greater volatility as risk heightens, supply chains unravel and short-term priorities remain intact. Although the wars around the globe are showing potential signs of progressing towards peace, a cold war of manufacturing capabilities and natural resources has escalated. Tariffs have created uncertainty and volatility in the markets with worries over quarterly results as supply chains reconfigure. Since concerns create recessions, companies must navigate this precarious environment while preparing to take advantage of the best opportunities of the century. Advanced planning strategies are a place to start!
Advanced Planning Strategies to Create a Win-Win-Win
Navigating a turbulent business environment without falling into the abyss requires robust leadership, a culture of innovation and advanced planning strategies. Advanced planning strategies must steer the business around the storm with predictive and intelligent strategies while maximizing the customer experience, your bottom line and accelerating cash flow. Yet that alone is no longer sufficient. Advanced planning success must also level up capabilities, capacities and choices.
SIOP (Sales Inventory Operations Planning)
Advanced planning strategies start with SIOP (Sales Inventory Operations Planning) as it will create predictable revenue and resilient operations while achieving bottom line results. During times of volatility, SIOP looks ahead at changing customer, capacity and supply chain conditions and surfaces potential down-the-line opportunities and bottlenecks so that the executive team can chart its course instead of reacting to business changes as they occur. You can be the most efficient organization in your industry, but if you are going in the wrong direction, it won’t matter.
For example, an industrial equipment manufacturer wanted to be able to take advantage of substantial growth opportunities but did not want to produce capital-intensive goods ahead of time, which would have created excess cash and cost outlays that would negatively impact business performance. Therefore, even though their product line was engineer-to-order (ETO), they had to create predictive visibility so that they knew how to allocate and invest precious resources ahead of time. By rolling out SIOP, they gained visibility into production configurations while in the market opportunity or quote stage as well as orders waiting for customer approval. Thus, they could see which operations to prioritize for future capital expenditures, offload capabilities and material purchases to ensure profitable growth.
SIOP and Advanced Planning (APS) Strategies
As they rolled out SIOP across sites, they gained additional insights to create customer value and drive operational performance. For example, they could quickly locate additional available production capacity throughout their network as needed to support customer growth. Previously, they would have brought on additional offload suppliers at reduced margins. As the threat of tariffs loomed, they reviewed their internal capabilities and prepared to reallocate production accordingly to mitigate the effects of tariffs while supporting customer needs. Prior to upgrading SIOP, they didn’t have the upfront visibility to maximize profitability.
Advanced planning system capabilities incorporate artificial intelligence features and will also provide real-time monitoring and recommendations for your end-to-end supply chain. For example, when Russia invaded Ukraine, APS could monitor supplies impacted from the region and provide quick insights on potential issues. For an industrial equipment manufacturer that utilized copper from the region. They quickly retrieved the products and quantities that would be required to support the business for the next year to secure supply while identifying additional sources. APS also delivered predictive insights on vessels bound for the Suez Canal during the Houthi rebel attacks, along with cost-efficient re-routing recommendations that maintained customer service levels.
Production and Distribution Planning
In addition, advanced planning capabilities will optimize your distribution network so that you serve customers successfully at the lowest cost. For example, a food products manufacturer could serve regional customers from multiple plants and replenishment points. Their advanced planning system could review forecasts and stock levels, analyze freight costs and recommend the optimal distribution strategy to maximize service, margins and cash flow. Similarly, advanced production planning capabilities will optimize your manufacturing network.
The Bottom Line
“In today’s increasingly volatile and complex global environment, advanced planning strategies have shifted from “nice to have” to a necessity for survival.” Additionally, these strategies and associated advanced technologies can enable your organization to be prepared to take advantage of potential opportunities coming down the pike. Volatility breeds opportunity, and so if you are resilient and well-positioned to pivot when your competition cannot, you will create a large distance between you and the rest of your market.
Lisa Anderson is the founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth,” an e-book on how to better navigate supply chain chaos and ensure profitable, scalable business growth. A complimentary download can be found at www.lma-consultinggroup.com/siop-book/.
