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Thought leadership :SCS09
Extend your vision
Supply chain professionals strive to improve visibility, flexibility and
collaboration but how do you bring all the elements into alignment? The
Extended Supply Chain conference will be tackling the issue when it
takes place on 24th – 25th March at the Sofitel, London Heathrow.
integration
It’s not often that someone tells you: “we now have
all the answers”. It is, after all, quite an extravagant
statement. But Dr John Gattorna is one of the few
people who can make that claim without risking
guffaws of derisive laughter.
The question, of course, is what do we need to
understand about the way supply chains work to
predict how they will respond to changing conditions?
Gattorna has been looking for answers for more than
25 years and has established an international
reputation in the process. And with his latest book
“Dynamic Supply Chain Alignment” he reckons that
solutions are now available for the key issues.
He will be explaining the thinking when he makes
the keynote speech at Extended Supply Chain 2010,
which is entitled: “Dynamic alignment: a new business
Taking planning a stage further
Oliver Wight will be running two
workshop sessions focusing on the
theme of integrated business planning
(IBP) presented by managing partners
Liam Harrington and Lloyd Snowden.
Oliver Wight originated the
concept of sales and operations
planning (S&OP) more than 25 years
ago and has been building on that to
develop IBP.
Integrated business planning brings
a truly strategic perspective and
integration is what distinguishes it
from its predecessor. If S&OP is a
process designed for supply
management to plan the factory (or
factories), then IBP is designed for the
executive team to plan the entire
business – and in a fully integrated way.
Liam Harrington says: “In a classical
S&OP environment, it’s possible for
finance to put a value on something
(the sales value of the forecast, for
instance) but then for the sales
department to come up with a
completely different set of numbers,
when asked for a financial
commitment on how much they are
going to sell. In an IBP environment it
isn’t possible for that to happen
because, by definition, all the business
plans are integrated.
“With S&OP,” he says,“people
classically think of forecasting and
then they compare that forecast to
supply. In general, supply people are
fully engaged with the process but
demand people less so, which means
marketing plans and sales plans – in
terms of, say, increased distribution,
sales activities, sales resource – are not
integrated into the process. But with
IBP they are.”
Risk management is an example of
where new demands have
necessitated change. Risk
management is a big issue for
companies these days, not least in the
service sector, banking in particular,
and both IT and business processes
have had to develop quickly to meet
the challenge. Being able to simulate
currency, interest rate, commodity
price and energy cost variation, are
just some of the simulations that need
to be included in the process – and
therefore, the risks inherent in those
things, properly managed.
model for designing and operating enterprise supply
chains in the new millennium”.
The thesis is that existing business models used in
enterprise supply chains have outlived their usefulness,
especially with the onslaught of more demanding
customers and an increasingly volatile marketplace in
these uncertain times. There is no silver bullet, but there
is a model which is increasingly being applied
successfully by global corporations – dynamic alignment.
“Back in 1989-90,” Gattorna says, “people talked
about logistics – it was all very physical – and I was
thinking that there was nothing very conceptual about
it. There was no basis for predicting the future.”
There is a big shift in thinking between logistics and
supply chain, says Gattorna. “Supply chain is all
about relationships. What runs supply chains is
There is a big shift
in thinking
between logistics
and supply chain.
Supply chain is all
about relationships.
What runs supply
chains is people,
not technology.
Dr John Gattorna
people, not technology.
“This also gets you into the field of culture,” says
Gattorna. “The fact is that some 40 per cent of the activity
in the supply chain is human decision making.”
He points out that this was in stark contrast to other
fields of management where the conceptual basis had
been developed to enable analysis and prediction.
“We decided to break away and start again at base
zero,” he says. “We looked at the various elements in a
business – marketing, IT, consumer behaviour and so
on,” he adds. It was through this process that the
concept of the “strategic alignment of the business”
was developed.
The idea of strategic alignment is that if enterprises
wish to produce sustained operational and financial
performance, they must align their strategies, cultural
capabilities, and leadership styles with customers.
Gattorna’s first book on the issue, “Strategic Supply
Chain Alignment”, came out in 1998 and in it he
brought together contributions from a host of leading
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