The supply chain of the future

Today’s Supply Chain Planning (SCP) still lives in the past. This is a provocative statement, but many companies in the industry can attempt a rational analysis and make their own judgment on how capable they really are of improving the planning of the supply and production chain or how much FLEXIBLE they really are.

Planning is still based on an obsolete paradigm encapsulated in the material resource planning algorithm (MRP), which first appeared in the early 1960s. The entire premise of this paradigm is the definition of an accurate plan for the supply chain, which can then be executed. If there are accurate demand plans, bills of materials, delivery times and capacity levels, the upstream supply plans can be accurately calculated.

The basic hypothesis of this mechanism is that if there is an accurate plan, the goals set are achievable. However, there is a variable that can overturn everything: uncertainty. And as the old military saying goes, “no plan survives the first contact with the enemy”.

In the early 2000s supply chain was still quite simple and could rely on more stationary conditions, such as less uncertainty. Fewer SKUs, fewer storage locations along with lower consumer expectations.

Longer decision cycles were allowed.

Today these conditions have been disrupted and the world of the supply chain is more complex and uncertain than ever.

Technological advancement and its application to SCP solutions has led to improvements which, however, being modest and incremental, have not been able to bring great benefits. The problem remains in the planning paradigm “create an accurate forecast then propagate the demand ‘signal’ upstream through the supply chain”

Resilient planning is defined as a set of medium and long-term plans that mitigate uncertainty by ensuring that the right degree of adaptability is integrated, making the activities in the short-term pipeline more likely and easier to execute. A distinctive feature of resilient planning is that the short-term planning algorithm does not always consider the supply chain end-to-end, rather it favors leveraging a single decoupling point and increasing the guarantees of a truly feasible execution.