SAC brings your supply chain to life with visualisations and insights

Many businesses we come across already use SAC for financial planning, but few leverage its capabilities to support supply chain. Through linking SAC to supply chain planning tools, Olivehorse has created solutions to support end-to-end visibility by measuring what matters to bridge the gap between finance and supply chain.

Reconciling the Gaps

A frequent issue we encounter is misalignment between top-down strategic targets from company execs and bottom-up forecasts from supply chain planners. It can be easy to see these two processes as separate worlds with little communication between the business areas.

This can cause large gaps to develop, particularly over the course of a financial year. Planners may work to meet unrealistic targets through discounting or over-forecasting, which drives down margins and increases working capital, ultimately decreasing returns.

Common causes include:

• Financialization: strategic targets are usually financial, whereas bottom-up forecasts are often volumetric. Without financialization, it becomes very difficult to align the two numbers, leaving commercial teams to convert targets to volumes to communicate with planners.
• Communication: supply chain planning and company strategy can exist in silos with little to no communication between the two. These numbers may exist in different systems or just in an Excel sheet, with comparisons only occurring at set points in the year when targets are passed to planners.
• Process: not all companies have a process for target reconciliation. A system supported cycle for reconciling the gap between strategic targets and forecasts is essential for alignment throughout the year.
• Standardisation: a lack of Common Language and Common Metrics with which to communicate supply chain measures to the CFO or the board.
• Assumptions: Lack of Assumptions, risks and opportunities being captured during both the financial plan and the operational supply chain plans makes it difficult to consolidate the two plans.

KPI Monitoring

We often see businesses who do most of their supply chain reporting offline (for example in Excel) or in a tool using static datasets. Generally, this is so they can consolidate data from different sources and easily create customised calculations and data transformations. However, this can lead to multiple versions of the truth with inconsistent metrics, conflicting inaccurate datasets, and no standardised reports.

A solid set of reporting metrics is key to managing a healthy supply chain. In all business areas, these KPIs need to be carefully monitored and managed to drive supply chain improvements. To unlock the full benefits of reporting, it is essential that reports are:

• Accurate: regularly updated data driven from a single source of truth (e.g. the planning system).
• Consistent: Standardised language and metrics using the same calculations and granularities.
• Visible: Reports that can be accessed and shared (with the appropriate permissions) across the business (say goodbye to trying to locate the latest email!)

Outlined below are some of the popular KPIs used in Supply Chain Management, and the strategic benefit that they offer.

Exception Management

Alerts can help you to manage your supply chain by exception in any area, from capacity constraints to plan conformance. This frees up time for planners to focus on the mid to long term horizon, rather than short term firefighting.

In the below example we have used calculation logic to define forecast accuracy alerts, which tell the user when FC accuracy is falling below target for a month, product family, location combination. The user can adjust the accuracy target and review the outputs.

How can SAC help?

We can use SAC to consolidate information from various systems, which means pulling together inputs from your existing tools to create end to end visibility. Through live data connections or data updates, you can ensure that your data is accurate and up to date. Analytics and what-if scenario planning give you visibility of your key performance indicators, helping you to make strategic decisions for the health of your supply chain – for example balancing service level against minimising working capital.

Strategic targets for the long-term horizon can be pushed from SAC into your supply chain planning tool. Plans and actuals can be pulled back into SAC for high level simulations, target reconciliation and visibility.

As specialists in supply chain, Olivehorse have created an end-to-end solution which brings together bottom-up supply chain plans with top-down targets in a tool which is accessible to all business functions. From company execs setting growth targets, to financial teams monitoring performance, to supply chain planners managing forecasts, scenario planning or monitoring inventory levels, SAC facilitates a truly agile supply chain.

In the below example, supply chain data is extracted from SAP IBP into SAC for analysis. When high level targets are finalised, they are integrated back into IBP. A commercial target has been generated using strategic insights from SAC and is compared to a financialised operational target from SAP IBP.

Data driven insights and planning functionality allow the user to make decisions to reconcile the two numbers. The user can redistribute the strategic targets using manual data entry or automated rules, reduce the target number, or plan to close the gap via sales and marketing, NPI or promotions.

When the user is happy with the strategic target, they can push it back to the supply chain planning system at an aggregate level to be converted into volume. This can be disaggregated in the short-term horizon allowing users to plan at the level appropriate to the time horizon and role. In the above example, the strategic target is planned and sent to IBP at a month, product family level, where it is disaggregated to week, SKU.

Conclusion

SAC is not just a tool for financial planning, it can also be leveraged to support supply chain and the Integrated Business Planning Process by linking business functions from strategic targets to supply chain planning through to production and scheduling. Improve end to end visibility of supply chain performance and reconnect your business functions.

Olivehorse Consulting specialises in the delivery of end-to-end supply chain services from Plan-to-Execution covering all planning functions. With decades of experience in delivering these services in some of the world’s largest and fastest moving supply chains, Olivehorse are ideally placed to help you plot and execute your strategic planning journey.

To find out more, please contact us for a free taster session. We will be happy to help you.