Partner and Director, Supply Chain
Supply chain challenges continue to be top of mind for business leaders and investors. Turbulence driven by recent disruptions, increasingly complex supply chains, and the advancement of data analytics have accelerated the need for a new approach to end-to-end (E2E) planning. Companies often struggle to match decision-making speed with changing dynamics, which in turn drives demand volatility, impacts supply reliability, and increases the need for collaboration across the value chain. (See Exhibit 1.)
Our decision-led approach to end-to-end planning transformation begins and ends with a value-centric focus on key decisions to drive business outcomes. In practice, this means companies must answer five key questions:
Best-in-class companies optimize decision-making by transforming “how the work gets done” through the convergence of process, people, and digital. (See Exhibit 2.)
For companies to succeed, decision-led planning must become the organization’s drumbeat—optimizing decisions across the supply chain and orchestrating activities across functions (finance, R&D, sales and marketing, operations). Technology platforms have enabled better transparency and connectivity across functions and locations; however, these enhancements are often approached as a systems transformation that is too seldom viewed as a business transformation (which needs to yield financial benefits). At the same time, digital and AI-driven algorithms hold amazing promise when it comes to driving insight to patterns and enabling faster optimization of plans but can be overwhelming in terms of the need for talent.
Building excellence in E2E planning is a journey; with higher maturity comes greater reward. In our experience, companies tend to have different starting points based on their specific industry, competitive positioning, and supply chain setup. We typically work with businesses to build their supply chain capabilities ensuring alignment across the value chain and different planning horizons. (See Exhibit 3). The critical question is: “What is needed to enable a sequence of great decisions?”
As an example, we helped a global consumer packaged goods player which had high complexity in their portfolio and supply chain. They needed a decision-led and value-driven approach to improving customize service levels and simultaneously drive cost improvements through better planning and inventory optimization. We undertook a demand planning and an integrated business planning (IBP) transformation, which encompassed:
This resulted in an estimated 15%–30% inventory reduction, 2%–3% logistics and planning cost savings, and an increased revenue 2%–4% across different markets/categories for our client.
With the inevitability of future challenges and disruptions, supply chain planning will remain a critical capability for companies wanting to improve their competitive advantage and build resilience. The following core principles are key:
Organizations that embrace these principles as part of a disciplined and structured approach stand to succeed.
The authors thank BCG colleagues Dustin Burke, Bitan Datta, Andres Garro, and Marcel Sieke for their key contributions to this article.