The One Strategy That Determines if Your Planning Capabilities Could be World Class

Is your planning strategy costing your company money? #Itstheorganization…

There are a lot of factors that determine if a supply chain organization’s planning capabilities are world class. However, there is only strategy that makes or breaks that opportunity – centralizing planning organizations. The lack of centralization – whether it be demand, supply, manufacturing or transportation planning, severely hinders the ability to define, deploy and execute best practices, develop deep planning expertise and system knowledge and engage in continuous improvement that world class planning organizations do to consistently create the best performing plans.

Source: Supply Chain in 5 and Chat GTP

Many organizations – especially those with distributed business units/operations and P&Ls struggle with this concept. There are a lot of reasons thrown around why it can’t be done (we’re so different, planners need to directly report to division/local leaders, etc.) that are nothing more than misguided opinions, legacy organization predisposition or can be addressed through creative reporting structures.

There are several reasons that will be discussed here that address why centralized planning is essential, but the most important one is that all forms of planning are empirical science. World class planning combines unique business knowledge and operational experience with scientific planning processes that are enabled by technology and a strong understanding of how to use it. Without explicit guidance and expertise, expecting planners to have equal and deep knowledge of all of these areas consistently execute at the highest level and engage in improvement activities at the same time is folly and most likely costing your company through missed opportunities to reduce costs, capture revenue or improve service.

Here’s how centralized planning delivers the best business results year over year

Develop, disseminate, and enforce best practices

While I am talking about planning being an empirical science, most planners treat it as an art form and that is why there is wide performance variation across planners. Planning is not as simple as gathering data, pressing the optimization button, and getting the answer. There are a lot of pre and post – optimization processing and analysis that goes on. The best planners have defined processes and analytics. A centralized planning team can take all of those best planner processes and practices, combine and roll them out so each planner uses the processes and thinking that consistently produces the best results.

Measure planner performance and take corrective action

In one sense we are talking about measuring planner to planner business performance, but by putting in place planner focused metrics, we can determine why one planner does a better job than others or the opposite, which planner consistently delivers the worst results. For example, identifying which planners consistently deliver the lowest manufacturing capacity utilization or other planners that have the worst on-time delivery performance and dig into their actions and thought processes to get better results that make the company more money and happier customers. This cannot be done when planners are buried inside organizations – the non-planners in that business unit may have no idea that the results could be much better or how to get them.

Reduce the number of planners required and increase organizational resiliency

There is a really good chance that if planners are spread across the organization there are too many of them. For example, I have seen organizations that have had transportation planners at each distribution center go through a centralization process and reduce the number of planners by over 75% and delivery superior results. Through a combination of best planning practices and modern planning applications, planners can manage significantly larger sets of resources than thought possible in the past.

Another point that does not get adequately address is that planning resiliency gets much better. What happens when the one planner in the division or the DC quits or is out on leave? Who does the work and how long does it take to replace them and for them to be equally impactful? This is a huge issue in transportation planning, for example, where turnover can be quite high. Centralization insulates the organization from this situation by having multiple skilled people who can jump in to fill the gap.

Create continuous improvement programs that improves business performance

Planning knowledge and performance is a journey and centralized planning organizations are much better at establishing continuous improvement programs that deliver improved business performance for years to come. It’s hard for local planners to separate out time to engage in continuous improvement programs, yet planning is one of the best places for them. The best planners are constantly trying new things and learning how to get better results. Solution providers are enhancing their product’s capabilities and understanding how to best use their solutions. Who takes all of that knowledge and creates better practices and deploys them to reduce forecast errors that reduce stockouts, make transportation and warehousing more efficient for example? Not a bunch of disparate planners.

Be flexible with the organizational structure

As you can see, planning centralization has so many business benefits, but what usually stops centralization of planning in its tracks is the fear of losing control. Organization structure and performance metrics can be put in place to dedicate individuals or sets of resources to consistently work with specific business units and get rewarded for the benefits they deliver to that business. Not everyone needs to be in the same location, they can reside with the business they service but still report to the centralized team. Reporting can be structured to show how the centralized planning organization delivers improved operational results. Probably the easiest return to measure would be eliminating the need for so many planners. This one will most likely get the attention of the CFO, who can help navigate traditional organizational fears related to centralization.

From my experience, centralization of planning organizations is a foundational strategy on the path to world class planning and supply chain performance. It creates the critical mass, culture and expertise to deliver superior results today and even better ones in the future.