Sponsored by: Plex
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Reducing Business Risk for Manufacturing
with Supply Chain Planning
February 2022
Written by: Simon Ellis, Program Vice President, Supply Chain Strategies
Introduction
The supply chain is undergoing a series of seismic shifts. Post-pandemic (said with optimism rather than certainty) demand is both surging and shifting, supply is lagging, logistics is overwhelmed, and prices are climbing. There are shortages everywhere, and the root causes are varied. In some cases, historical capacity is unable to keep up with demand growth; in other cases, there are supply disruptions due to a lack of workers or shipping containers. In many cases, outdated or inefficient supply chain processes are failing to optimize limited available personnel. Sustainability and sustainable operations have reemerged as a critical set of capabilities for this highly disruptive "next normal."
While the impact of COVID-19 cannot be overstated, many manufacturers were struggling with supply chain disruption prior to the pandemic and will struggle with it post-pandemic. In many cases, COVID-19 simply uncovered and amplified underlying supply chain fragility and risk, which will persist and must be addressed now and in a post-COVID world. Whether cyber-intrusions, logistics issues, or political upheavals, disruptions are poised to be a constant reminder of this fragility.
At the heart of the challenge for the supply chain is to better understand and proactively address demand shifts and the flexible, dynamic production capabilities necessary to meet the increasingly volatile demand for goods and services. Indeed, resiliency and the ability to transition to support new business models have emerged as two key elements of the best-in-class supply chain, as noted in the results from IDC's January 2021 Supply Chain Survey. The role of supply chain planning in driving supply chain resiliency is critical (see Figure 1).
AT A GLANCE
KEY STAT
Manufacturers consider supply chain resiliency their number 1 critical gap.
IDC TECHNOLOGY SPOTLIGHT
Reducing Business Risk for Manufacturing with Supply Chain Planning
FIGURE 1: Critical Gaps in the Supply Chain
Q What are the most important gaps that, if not addressed, will materially affect your supply chain?
n = 500
Source: IDC's Supply Chain Survey, January 2021
Almost overnight, COVID-19 drove a broad shift from an experiential economy to a product economy. Demand shifted quickly from holidays and trips to electronic equipment and building materials— and supply/capacity could not keep up. Although the travel economy has partially rebounded, the full extent of a return to normal for manufacturing is unclear, with demand forecasts remaining uncertain. What is increasingly apparent, however, is that manufacturers must be fast, nimble, and dynamic to compete in this new environment. Substandard supply chain planning tools will simply not suffice.
Next-Generation Planning and the Role of Technology
One focus of next-generation planning tools will be to ensure that any constraints that may exist are optimized. In other words, don't "starve" the constraint. If the logistics and transportation constraints are physical drivers, then bringing more assets online won't help. For example, if factory workers are the constraint, then make sure that the supply chain and manufacturing processes are as efficient as possible to maximize limited people resources. In this case, efficiency would be clear work or task instructions, precisely defined roles and output expectations, and processes that are optimized and streamlined to reduce both errors and training requirements for new or replacement workers. At IDC, we see a significant level of variability in the maturity of supply chain planning, overall supply chain orchestration, and data/analytics. Table 1 illustrates some of these differences.
0 5 10 15 20 25
Inadequate pipeline of new products
Lack of deep insight into our customers and consumers
Lack of sufficient collaboration with external suppliers and/or customers
Lack of digital competencies limits the ability to transition the supply chain to new business models
Supply chain resiliency
(% of respondents)
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IDC TECHNOLOGY SPOTLIGHT
Reducing Business Risk for Manufacturing with Supply Chain Planning
TABLE 1: Supply Chain Planning Maturity
Dimension Ad Hoc Opportunistic Repeatable Managed Optimized
(Resistant) (Reactive) (Responsive) (Predictive) (Prescient)
Supply chain orchestration
Supply chain subprocesses are siloed, and high levels of latency exist in decision making.
Decision making remains fragmented, but orchestration with some control tower usage is emerging.
Modest use of control tower orchestration across supply chain subprocesses, but gaps remain and decision-making efficiency is limited.
Supply chain control tower capabilities in place with some remaining silos, or some control extended to limited partners; not integrated with digital twin.
Supply chain control tower capabilities span the breadth of the supply chain, with integrated supply chain digital twin.
Planning resiliency
Heavy reliance on spreadsheets and paper-based processes.
Sporadic adoption of key technologies and point solutions; still significant reliance on spreadsheets and paper-based processes.
Moderate adoption of key technologies and point solutions; some reliance on spreadsheets.
Widespread adoption of key technologies, with migration from point solutions to an integrated supply chain suite.
Enterprisewide standardization on and adoption of technologies and an integrated supply chain suite; systems extend to key trade partners.
Analytics/data management
There are undefined data management processes and zero or limited use of data analytics.
Data management policy is driven at the local level without alignment with the global organization.
Standardized data management policy in place driven by the global organization.
Data management is standardized and measured across the organization.
Data management is standardized, measured, and continuously improved with a focus on learning.
Source: IDC, 2022
The reality is that companies that sit on the less mature side of the supply chain planning median won't be able to see what is happening in their supply chain or operations in time to take proper action with the necessary speed. Companies that still rely heavily on spreadsheets and paper-based processes, or even those with sporadic adoption of key technologies, are unlikely to be able to react well to demand shifts or easily transition the supply chain to new business or demand models.
In recent months, IDC has talked with manufacturers about linking constraint-based capacity planning with demand and supply planning. In other words, how do companies seamlessly link the demand forecast to necessary labor requirements, machine/line capacity, and materials availability in a dynamic, real-time way? Being able to connect supply chain planning through production, and even fulfillment, means understanding potential problems as they occur, not after they occur, and being in a position to be proactive and resilient.
IDC TECHNOLOGY SPOTLIGHT
Reducing Business Risk for Manufacturing with Supply Chain Planning
Connecting supply chain planning to manufacturing/production and to fulfillment is relevant across all segments of manufacturing — whether process manufacturers such as food and beverage companies or discrete manufacturers of complex machinery. It is also applicable to companies that own their own manufacturing operations, outsource manufacturing operations completely, or manage blended operations. Although there are companies either 100% owned or 100% outsourced, the majority are somewhere in the middle. Therefore, manufacturers must be resilient to shifts in demand regardless of where the production facility sits in the supply chain. Tools that can manage across a blended network should be favored over those that cannot.
Although technology is important to this discussion of supply chain planning and the ability to be resilient to demand shifts and surges, solving the business problems must be the priority. Yet, fundamentally, the ability to be a resilient planning organization depends upon the judicious application of technology. For example, in Table 1, the least mature form of supply chain planning has a heavy reliance on spreadsheets and paper-based processes, whereas the most mature form of supply chain planning is characterized by enterprisewide standardization on and adoption of technologies, along with an integrated supply chain suite. Moreover, these systems extend to key trade partners. Companies in this latter category increasingly use extended planning tools in the cloud with modern analytics and relevant artificial intelligence capability.
Benefits
The functional priorities for the supply chain vary by subfunction, but they are ultimately aligned around a few key performance indicators. Table 2 illustrates the central challenges for production, planning, and fulfillment.
TABLE 2: Concerns by Subfunctional Area
Function Concern
Operations/factories Evaluating and balancing operational efficiency, specifically factory utilization against spare capacity
and peak flexibility
Supply chain planning Ensuring supply chain orchestration capability (control tower) aligned with the supply chain digital
twin with transparent sales and operations planning (S&OP) processes and robust scenario simulation tools;
key balancing of demand and supply planning
across the extended enterprise
Supply chain Managing the balance between inventory management/availability
execution/fulfillment and customer service levels; understanding the implications of shipment demand on inventory
and transportation capacity
Source: IDC, 2022
Supply chains need to be fast. Traditional functional or subfunctional silos simply will not suffice in a market where speed is now the critical contributor to success. Modern supply chain planning tools must connect upstream to production and downstream to fulfillment if a supply chain is going to fully shed unnecessary latency and be resilient. Connecting these supply chain pieces together with extended supply chain planning technology will allow the broader whole to be resilient to both internal and external disruptions, collaborative at scale, and predictive/prescient where possible.
IDC TECHNOLOGY SPOTLIGHT
Reducing Business Risk for Manufacturing with Supply Chain Planning
Companies have also cited other advantages of extending supply chain planning to include production and fulfillment such as faster time to market and better visibility into capacity, constraints, and the impact of disruptions. In addition, they have pointed to having visibility into supplier risk, regulatory compliance, sustainability, and the elements that can be controlled and mitigated versus those that cannot and must be quickly reacted to. Advanced planning with external operations partners also allows supply chains to focus on their individual core competency and drive both efficiency and effectiveness. Moreover, new ideas and approaches provide a benefit to extended or open innovation, including improved product quality through access to supplier innovation. This is increasingly the way of the future and requires modern and extended supply chain planning tools.
Considering Plex
Plex Systems offers a single-instance, multitenant SaaS platform for manufacturers that includes manufacturing execution, quality management, enterprise resource planning (ERP), supply chain planning (SCP), asset performance management (APM), production monitoring, process automation, and manufacturing analytics capabilities. In September 2021, Rockwell Automation completed its acquisition of Plex, further expanding Plex's reach globally and into new markets. The Plex Smart Manufacturing Platform is designed for configurability, extensibility, and integration, enabling organizations to tailor the system to meet the unique needs of a production line and individual plants while maintaining enterprisewide control and insight.
Customers surveyed in IDC's latest SaaSPath Survey rated Plex's SaaS solution highly in a number of areas, including
data security, value, ease of integration, and frequency of new feature releases, compared with the average scores of other ERP vendors. You can find the full report here.
If producing high-quality products is a high priority for the manufacturer, then Plex can help make supply chain and production processes more precise and efficient. Plex can also improve the speed and accuracy of operations while helping reduce waste and properly balancing raw materials to production needs. The Plex solutions slash the time manufacturers are forced to spend meeting industry requirements, such as audits, often from weeks to mere hours. That, in and of itself, gives manufacturers a degree of control and efficiency that was, until recently, unthinkable.
Plex DemandCaster Supply Chain Planning connects the four walls of an organization to its customers and suppliers to define the who, what, when, where, and how of inventory to best meet sales and service objectives. Manufacturers can improve forecasting accuracy and build consensus by synchronizing data sources across their organization and with any ERP system. Plex's packaged solution is designed for ease of use to simplify the planning process and results in accelerated time to value for rapid implementation.
Plex DemandCaster Supply Chain Planning features closed-loop planning components including forecasting and demand planning, supply planning, optimized material and constrained capacity production leveling, and distribution requirements planning. Additional features include daily scheduling and ordering to optimize a company's supply chain plan, as well as support for sales and operations planning (integrated business planning processes) to connect the business from the moment system implementation is complete.
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IDC TECHNOLOGY SPOTLIGHT
Reducing Business Risk for Manufacturing with Supply Chain Planning
Challenges
Supply chain planning is a crowded market, and it is important for vendors and their offerings to be clearly differentiated to help customers avoid "solution fatigue." As supply chain disruption persists, manufacturing organizations will be under tremendous pressure to become more resilient. But with any digital transformation project, becoming caught in "pilot purgatory" is always a challenge. Plex will need to continue helping its customers manage this complexity while delivering value and support to numerous functional groups/stakeholders across the manufacturing supply chain.
The recent acquisition of Plex by Rockwell Automation provides Plex the opportunity to further grow and expand through Rockwell's large manufacturing footprint and ecosystem. However, ensuring a smooth integration of the two businesses and maintaining commitments in the near term are hurdles that will need to be overcome.
Conclusion
The bumpy road for supply chains over the past two years has reinforced the critical role of supply chain planning in driving supply chain resiliency. Manufacturers that don't have the ability to quickly and proactively replan and recalibrate the supply chain to disruptions both big and small won't be able to meet changing customer requirements. Supply chains need to be fast, and they need to be agile. Traditional functional or subfunctional silos simply will not suffice in a market where speed is now the critical contributor to success and supply volatility and demand volatility are constant companions. Modern supply chain planning tools must connect upstream to production and downstream to fulfillment if a supply chain is going to fully shed unnecessary latency and be truly resilient.
About the Analyst
Simon Ellis, Program Vice President, Supply Chain Strategies
As a program vice president, Simon Ellis is responsible for providing research, analysis and guidance on key business and IT issues for manufacturers. He currently leads the Supply Chain Strategies practices at IDC Manufacturing Insights, one of IDC's industry research companies that address the current market gap by providing fact-based research and analysis on best practices and the use of information technology to assist clients in improving their capabilities in critical process areas.
IDC TECHNOLOGY SPOTLIGHT
Reducing Business Risk for Manufacturing with Supply Chain Planning
MESSAGE FROM THE SPONSOR
More About Plex
Plex Systems, Inc., a Rockwell Automation company, is a leader in cloud-delivered smart manufacturing solutions, empowering the world's manufacturers to make awesome products. Our platform gives manufacturers the ability to connect, automate, track and analyze every aspect of their business to drive transformation. The Plex Smart Manufacturing Platform, a system of record and engagement that serves as the central nervous system of manufacturing operations and is comprised of a broad suite of applications, including Manufacturing Execution Suite (MES), Enterprise Resource Planning (ERP), Quality Management System (QMS), Supply Chain Planning (SCP), Production Monitoring, MES Automation & Orchestration, and Asset Performance Management (APM). This modular approach provides manufacturers with a range of entry points to connect people, systems, machines, and supply chains, enabling them to lead with precision, efficiency, and agility.
Learn more at www.plex.com.
The content in this paper was adapted from existing IDC research published on www.idc.com.
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