Why “Sense and Respond” Supply Chain Planning Requires a “Single Model”

By Jeff Bodenstab Joe Shamir12 May 2015

A single underlying model is a key technology enabler to the “sense and respond” strategy advocated by Gartner in our last blog post. Here is why.

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Sense and respond requires connecting functional processes with an immediate flow of coherent information, maximizing the effectiveness of each individual supply chain process and allowing the entire process to be optimized.

Isn’t that what supply chain suites are supposed to do? They don’t. Most “integrated” suites have been purchased over time from different software vendors. These independently acquired products are built on disjointed logic and data models.  They can talk to each other, but not without a translator. They can’t work in a seamless fashion without extensive data translation, inducing latency and therefore an amplified bullwhip effect.

These modules exchange most data via predetermined sequential workflows from one siloed department or functionality to another. Data translation from one module to the next may have worked in less demanding, less dynamic environments, but even then introduced delays and manual changes that interrupted the control logic.

It’s like language translation. Imagine using a computer program to translate text from English to Spanish, then to Italian and finally to Japanese. While the text can be moved from place to another, maintaining the precise meaning requires extensive manual review, editing and latency. And latency is a killer of supply chains.

Let’s see a common example using a supply chain controlled by three independent planning stages; Demand, Inventory and Replenishment. Assume a demand spike occurs. Demand Planning increases the forecast; forecast error grows and hence so does the safety stock. Replenishment Planning integrates the inventory consumed by the spike and adds additional product to cover higher forecasted demand, plus additional safety stock ( ↑ number of days x ↑ forecast). The lack of coordinated control logic creates an overcorrection.

Moving to a “sense and respond” supply chain raises the bar. Systems need to become adaptive not just locally, but across the supply chain. If each module adapts in its own way, and with its own logic, it won’t work. There needs to be a coherent response across the supply chain.

So in summary, a fragmented suite induces the following in a supply chain planning process:

  • Data latency – If the subsystems are designed separately, data redundancy between the system occurs and any data propagation is delayed by the need to align the different data models (typically with long batches).
  • Incoherent data model/logic – The modeling quality deteriorates and the final corrective action (Replenishment Planning) will be incorrect.
  • Manual overreaction – Planners create additional overreaction. A bullwhip occurs even in a single–tier network. Across multi-tier networks, it grows bigger.

A “sense and respond” supply chain needs a single cohesive model. One where all the components, including System of Record (SOR) functions such as demand forecasting, fulfillment and replenishment, and System of Differentiation (SOD) functions like demand sensing and multi-echelon inventory optimization, are all built on a single control logic and “DNA”. They must be perfectly coordinated and synchronized without latency, even communicating the concept of uncertainty across the supply chain, providing downstream demand visibility to upstream resources.

A beauty of this system is its ability to change quickly and dynamically, just as Gartner recommends. The key features of a single model approach are:

  1. A common modeling and data structure logic across all planning stages
  2. An asynchronous workflow that minimizes data latency or fragmentation (the need to access and collect data from different databases) and assures all parts of the supply chain always have the freshest data
  3. Coherent control logic that orchestrates the response to any perturbation
  4. Adaptive capabilities in all stages, requiring no user interaction
  5. Low touch and responsive

Click on the button below for a short executive brief on single model supply chain planning: