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How should we balance agility with stability of the Supply Chain?
Many leading companies have designed their supply chains for stability. They have found a working mechanism in monthly demand planning and monthly supply planning through the S&OP process.
While it has provided stability, they continue to face the twin issues of stockouts and excess inventory. Their attempt to bring in agility threatens to destabilize the supply chain through frequent changes and possible chaos.
How should they think about adding agility to their supply chain while maintaining stability?
We need to go back to the supply chain design parameters for getting both agility as well as stability. The key balancing lever in this case is the frequency of replanning, which is governed by the frequency of getting fresh demand data.
Most FMCG companies get it daily. Does it mean we should switch from monthly planning to daily planning?
The answer lies in terms of the backend capabilities of flexibility and responsiveness. Changing the frequency of planning must be matched carefully with these capabilities. If the backend is rigid and not yet ready, we should make only step improvements in the frequency.
Companies find it easier to go from monthly to fortnightly to weekly to daily planning in distinct steps. This helps is getting both agility and stability at a pace which can be absorbed by the backend systems without creating chaos.