Customer demand in today’s consumer-driven, omni-channel marketplace is more volatile than ever. Yet the majority of manufacturers are still using outdated production planning methods, such as spreadsheets and plant by plant scheduling, to make critical planning decisions. That is one of the key findings in the recently released JDA Vision 2015 Supply Chain Market Study. The study is based on a global executive survey, with responses coming from 17 countries across many industries. An important take-away from the production planning and scheduling section of this report is that these methods are not well aligned with executives’ stated strategies. This will limit corporate effectiveness and profitability.
The challenges of volatility and global complexity were major themes of the survey results. To deal with these complexities and better respond to demand volatility while balancing customer services levels and supply chain costs, more than 8 in 10 responding companies, and all respondents over $5 billion in revenue, are turning to segmentation strategies. By segmenting their customer base and products, they can align them with the production planning strategy that best fits each segment’s volume and service needs – such as make to order vs. make to stock. By aligning the segments to the best production planning and supply chain strategies, companies can reduce cycle times, lower inventory levels, improve margins and provide differentiated levels of service.
Executives must now make production decisions on how best to leverage vast production networks and large capital investments for growth and profitability, and yet not sacrifice agility. Unfortunately, the survey shows the majority of companies are using spreadsheets (62 percent) and plant-by-plant scheduling (63 percent) to make these decisions. It is highly unlikely these outdated methods will produce optimal results.
The number one challenge identified by respondents in the survey was “the amount of re-planning required to respond to volatile market demand.” Closely aligned with this, and no doubt in large part due to the use of spreadsheets for planning, was the second greatest challenge identified—“the disconnect between S&OP decisions and detailed plans.” In other words, executives are making decisions on how to respond to volatile customer demand, but it is hard to implement these decisions when production planning and scheduling are being performed individually by each plant with spreadsheets. Thus, the planning process is not aligned with corporate strategy, which will undoubtedly impact profitability.
The survey also shows that executives are aware of these difficulties and are taking steps in 2015 to resolve them. Respondents indicated that their companies plan on launching an S&OP initiative this year. This should lead to better alignment with corporate strategies and more efficient production plans.
The other main initiative planned is “increasing agility in production planning processes.” This will help companies to more quickly react to demand volatility to better align production with actual demand. Better aligning supply and demand is the key to improved margins and profitability.
To learn more about the production planning and scheduling issues addressed in the report, access the full report.
To hear David Johnston, JDA SVP manufacturing strategy, discuss key production planning issues and how JDA can help, watch this brief video.
For a look at the key charts and graphs outlining the findings of the report, access the infographic.