2. 1
For decades, supply chain leaders have sought the
perfect forecast: the ability to predict supply and
demand with 100 percent certainty, which would
let them build the leanest possible supply chain.
But this perfect forecast has proven as elusive as
the “Holy Grail”. The reason is simple: the world is
an inherently unpredictable place.
In recent years, we’ve witnessed a rising tide of
volatility, which makes forecasting even more
complex and even less reliable. A lean and
responsive supply chain, then, must be one that
balances the ability to predict with the ability to
react – a supply chain that seamlessly integrates
the ability to sense changing demand with the
agile execution of plans.
3. 2
In the current business environment,
shorter product life cycles, product
customization, changing customer
demands, and upstream supply fluctuations
are contributing to the rise of uncertainty
in the supply chain. In fact, 70 percent
of executives who responded to an
Accenture survey expressed dissatisfaction
with their inability to predict future
performance in today’s new normal
of permanent market volatility and
resulting uncertainty. In addition, more
than 80 percent of our respondents were
worried about the resilience of their
supply chains. They have good reason:
most companies today are struggling
with higher inventories to manage high
variability and dropping customer service
levels. The traditional model of planning
and execution is no longer applicable.
The need to move to a demand-driven
supply chain model is growing day by
day, because of rising uncertainty and
the increased complexity of operating
a global and distributed supply chain.
In the traditional model, the supply chain
plan was usually the best and most timely
data available. Therefore, the optimum
approach to fulfillment was to refer to the
plan and execute. The company that built
the most accurate supply chain plan, and
executed the best on its plan, came out
ahead. For any given date, information
about what actually happened in the
supply chain would be available only
weeks or months later. All anyone could
do was plan, and execute that plan.
Today, because the market is so volatile,
companies must have a different approach.
Planning can’t be the basis for all supply-
chain decisions anymore, because today’s
supply chain is increasingly difficult to
predict. Companies need to monitor the
execution of supply chain plans all the
time and make adjustments to those
plans in real time. Thus, managing today’s
supply chains requires sensing the change,
then re-planning, re-allocating, and
re-prioritizing in real time, and responding
at lightning speed. Unfortunately for many
companies, planning and fulfillment are
still largely disconnected, hierarchical,
serial, and static. This hinders efforts to
reduce the latency in the supply chain.
Accenture has identified
several key elements of a truly
integrated capability that will
help organizations formulate and
implement an effective strategy.
By creating supply chains that can
sense and respond in real time,
an organization will be able to
better navigate the increasingly
volatile and unpredictable
environment of the future.
Quite simply, having a Sense and Respond capability means:
• One plan which the global enterprise
is executing - tailored to distinctive
supply/demand characteristics,
responsive to evolving demand signals
by planning only as far in advance
as required, and synchronized with
fulfillment by continually planning and
re-planning based on real-time data.
• Well-coordinated execution at all
points up and down the supply chain
that can dynamically respond to
changes and conditions more quickly
than traditional supply chains.
• Supported by applications that can
enable instant or real-time, accurate
visibility inside the company, as
well as outside its four walls.
• Leveraging flexible and adaptable
operating models that can seize
opportunities based on real demand,
not just perceived demand.
What is a Sense and Respond Capability?
The Traditional Model is Not Working
4. 3
Scenario 1 –
Inbound Shipments
Without Sense and Respond.
A large high-tech company with operations
headquartered in the U.S. has a majority
of its suppliers based out of South Asia.
A recent weather incident in South Asia
has left one supplier unable to ship
microchips for two weeks. Lacking visibility
into delayed inbound shipments, and
having no other source of microchips,
such a disruption at a supplier can
result in cancelled orders and direct
impact of millions to topline sales.
With Sense and Respond.
On the other hand, with a sense and
respond capability, the team responsible
for planning would be connected in
real-time with the team responsible
for scheduling the inbound delivery of
supplied components. With real time
status of production at the microchip
supplier, the team is able to anticipate
the potential disruption to its production.
The planning team then runs simulations
to see the impact on key metrics and its
customers’ orders. Multiple scenarios are
then modeled to minimize revenues at
risk. This company eventually executes the
identified optimal scenario, which includes
re-allocating inventories, and immediately
placing orders to other suppliers with short
lead time. As a result, the impact of the
disruption at a key supplier is minimized.
Scenario 2 -
Replenishments
Without Sense and Respond.
A consumer electronics corporation
having operations across North America
has four distribution centers catering to
thousands of retail stores. A planning team
forecasts demand using historical data, and
replenishes short-lifecycle categories such
as gaming products, music, and consumer
electronics once a week to all major
stores. Without near real-time visibility
of point-of-sale data, the replenishment
is based on pre-defined stocking levels
and re-order quantities. Consequently,
any stores with higher than forecasted
demand results in “out-of-stocks” at the
store level, which leads to lost revenue.
With Sense and Respond.
In contrast, integration of planning
and fulfillment allows for real-time
decisions in dynamically re-planning the
replenishments to stores. The organization’s
planning team projects the demand, and
then recalibrates the forecast in near-
real-time as daily or intraday point-of-
sale data becomes available. Inventory is
re-allocated to stores with higher demand
for the scheduled replenishments.
Scenario 3 -
Maintenance and
Repair Operations
Without Sense and Respond.
A large international energy company
is one of the world’s largest net sellers
of crude oil and largest exporters of gas
to Europe. It is faced with challenges
of inefficient and unreliable delivery of
maintenance and repair parts, as well as
operating supplies. As a result, refinery
and terminal operations suffer from
higher than industry average levels of
unplanned downtime, and operations
frequently has to expedite shipments of
parts, at premium transportation rates,
to get equipment back up and running.
Without sense-and-respond capabilities,
this company is unable to achieve the
predictability, visibility and responsiveness
it needs to maximize upstream and
downstream up-time and productivity.
With Sense and Respond.
On the other hand, it can achieve
significantly improved service levels,
reduced transportation costs and
visibility of supplies by creating a
centralized service cell that plans,
monitors and executes maintenance
and repair operations. Predictive asset
maintenance analytics provides the basis
for planning spare parts inventory levels.
Maintenance and replacement of parts
are scheduled proactively. The service
cell creates an initial replenishment
plan, but when actual demand is
different from forecast, they are able to
optimize the fulfillment point selection
by simultaneously factoring in-transit
inventory, MRO supplies in service centers
and transportation cost, maximizing
uptime and minimizing expediting costs.
To illustrate what a Sense and Respond capability
looks like, consider the following scenarios.
5. 4
Leading companies have embarked on this sense-and-respond
journey, some through point initiatives and others as part of
a grander vision. Accenture has identified the strategies that
are transforming static supply chains into the supply chains
of the future. Those strategies involve three key steps:
1. Getting Control,
2. Creating Adaptable Structures and
3. Agile Execution.
Developing the Competitive Advantage
- Profit, Sales &
Operations Planning
- Collaboration
- Technology
Agile Execution
- Supply chain flexibility
Creating Adaptable
Structures
- Visibility and cross-
enterpise integration
- Advanced analytics
and decision support
Getting ControlDriving Forces
More demanding
customers
Greater competitive
intensity
Shifting channel power
Globalization
Shorter product cycles
Continued merger
activity
Need for better
information
New technologies
Performance
Outcomes
Reduces cost of risk,
enables dynamic
risk management
Cost competitiveness
Flexible customer
response
Enhanced delivery
performance
Shorter order cycles
Increased cash-to-cash
velocity
7. 6
Getting Control
Today, most organizations are running
dispersed supply chains. The single
enterprise with few trading partners
has given way to the multi-dimensional
complex chain-of-value network. As
a result, the challenges of aligning
the different goals and activities of
separate entities in extended supply
chains have amplified in recent times.
Leading companies have started taking
the role of supply chain “orchestrators” –
responsible for collaborating, and aligning
the different components of supply
chain on many levels. This requires a
collaborative peer-to-peer value network
having visibility and control all the way
back to tier 3 (or n) suppliers, contract
manufacturers, service providers as
well as with downstream customers.
Visibility and Cross-Enterprise
Integration
Though Supply Chain visibility has been
consistently sought for most of the last
decade, it remains elusive. But today,
technologies exist that can accept input
from many disparate sources, translate
it into a common format, and provide a
“single source of truth” to all supply chain
partners. Companies have started deploying
multi-tenant cloud-based technologies
that allow supply chain partners to
participate in multiple private networks
through a single connection. Leading
supply chains are further ramping up their
“sense” capabilities by embedding sensors,
RFID and GPS to gain greater visibility
into the location, condition, timing
and accuracy of the events occurring
in their value chains. Whether these
events are changes in projected demand,
a contract manufacturer’s production-
schedule adjustments, or any disruption in
shipment plans, leading companies now
can sense such events in near real time.
Advanced Analytics and
Decision Support
Leading supply chains are leveraging
analytics to make sense of the visibility
data in monitoring key performance
indicators, generating insights, and
integrating the insights further into supply
chain planning in near real-time. With
advanced analytics in place, companies
can, for example, proactively analyze the
potential impact of change in delivery date
on operations, integrate in near real-time
the adjustments in contract manufacturers’
production schedule in supply planning,
and derive insights from social media data
and integrate them into demand planning.
Companies are increasingly
deploying “Supply Chain
Control Towers” for visibility,
predictive analytics and decision-
making, and improving business
performance on a continuous
basis. In a world that is constantly
looking for synergies, the Control
Tower connects different business
units, regions, and legal entities,
and gives companies the flexibility
to plug in new processes and
technologies as the need changes.
8. 7
Area Flexibility Type Are you prepared?
Capacity Volume & Mix Are you able to effectively increase or decrease manufacturing
volumes, mixes and venues in a short time span?
Partners Supply Are you able to find multiple sources for critical products with varying lead
times and define supply contingency measures with preferred suppliers?
Contract Do you have flexible contracts to allow order adjustments at short notice?
Processes Planning Cycles Are you able to adapt changes in your plans based on
real time or near real time information?
Order Fulfillment Are you able to satisfy customer demands using alternate
methods or quickly change the mode of delivery?
People Multi skilling & labor Are you able to train multi-skilled staff and introduce
flexible staffing across departments?
Shared Services/Competence Centers Are you shifting away from single function centers to multi-functional SSCs?
Strategy Insource / outsource models Do you consider flexibility in your decisions on what to insource
and what to outsource? Are your outsourcing contracts structured
to enable ramping up or down volumes on short horizons?
Flexibility points Are you able to identify key flexibility points e.g., where to
buffer inventory and capacity (and how much)?
Capacity
Partners
Processes
People
Strategy
Creating Adaptable
Structures
True sense and respond capabilities require
an adaptable supply chain structure -
building flexibility into the operating
models that allow for adjustments to
changing market conditions. By having
operational flexibility, companies can
quickly respond and recover fast in case
of any engineering change or disruption.
Supply Chain Flexibility
Accenture sees flexibility as a multi-
dimensional construct, which can
best be described as combination
of 5 key pillars or components:
9. 8
Agile Execution
Greater visibility, control and flexibility
into the systems, processes, and people
across the supply and demand chains
are the building blocks to provide you
with seamlessly integrated capabilities.
And, the greatest value comes from
agile execution—leveraging visibility and
flexibility to rapidly respond to frequent
changes that could negatively impact
the business if mismanaged or left
unattended. Agile execution is enabled
by the following key components:
Profit, Sales & Operations
Planning
For most of the companies, PS&OP
remains the primary integration point
between different functions. Unfortunately,
to support the PS&OP process many
companies rely on spreadsheets and
manual data collection, which increases
the lead time in effective decision making.
Outdated operational data may result in
sub-optimum outcomes. In addition, the
typical periodic PS&OP limits effectiveness
because our increasingly interconnected
and interdependent world is changing
more quickly than ever. It therefore makes
sense that PS&OP processes must be
able to accommodate rapid change. The
monthly PS&OP process remains valid,
but it is more important than ever before
to have ad hoc or event-based PS&OP in
order to react to unpredicted events (for
example, significant supply disruptions,
unexpected demand shifts, deviations in
financial targets, etc.). With advanced
tools and much needed supply chain
visibility, responding to such events can be
done in hours and help companies react,
re-plan and take corrective measures to
enhance supply chain performance.
Collaboration
True sense-and-respond capabilities require
collaboration between trading partners in
near real time. It’s all about compressing
the response time through better
collaboration and this “need for speed” is
driving companies to collaborate with their
value chain partners in new and different
ways. By connecting more closely with
customers and suppliers through visibility
platforms and social media, leading
companies are designing, redesigning, and
modifying products in short span of time.
Suppliers, through transparency-in-demand
signals, are now repositioning their
supplies based on dynamic information.
Better collaboration is permitting
companies to do a better job of lining up
real-time supply with real-time demand.
More and more, successful companies
are orchestrating value chain networks,
integrating inside and outside of the
four walls with the extended enterprise.
This extensive connectivity with all
supply chain partners has enabled the
entirety of their supply chain network to
collaboratively plan and execute decisions.
Old way
Cooperation
New way
Collaboration
- Limited sharing of consumer insights Product Development
- Collaborative customer insights
- Joint product development & introduction
- Joint sourcing
- Limited CPFR Planning
- Integrated planning
- Cross-enterprise inventory optimization
- Joint forecast measurement
- Vendor managed inventory Distribution
- Shared warehouse and transportation
- Collaborating for backhaul opportunities
- Transactional communication (ASNs) Information
- Transparency into the value
chain across enterprises
- EDI Technology - Cloud based computing
- Single point of contact
between companies Relationships - Collaboration between functions
10. 9
Technology
With the proliferation of advanced
technology solutions, tailored closely to
the current needs of global, distributed,
and complex supply chains, technology is
front-and-center in today’s supply chains.
There is a new wave of global supply chain
visibility solutions and advanced analytics
solutions that are fundamentally changing
the way supply chains plan and respond.
Leading solutions such as GTNexus
and Kinaxis are helping to unify supply
chain planning and execution, enabling
rapid response and coordination
across global business networks.
Cloud and “Software as a Service” models
together with leading technologies have
developed into an irresistible force, which
makes application integration efforts
easier. Accenture has partnered with
leading solutions vendors to offer new
capabilities through “as a service” model
to break the barriers created by high initial
investments for new technologies and
the global talent shortage. Companies no
longer need to spend a fortune and wait
years to build or install software systems
in order to get the required capabilities.
GT Nexus cloud-based Supply
Chain Visibility solution provides
a high-resolution look at supply
chain activity, from sourcing to
customer delivery. Trading partners
access a single source of truth
on where inventory is across the
globe—they use it to quickly adapt
their logistics plans to current
demand and combat supply
chain risk due to disruptions
and supply chain complexity.
The world is changing and so is your
supply chain, with every minute and
every second. Change of that magnitude
cannot be ignored. Leaders will be those
who will not let the change disrupt their
supply chains but instead leverage the
vast flow of data through next-generation
technologies that enable integration
of both planning and fulfillment with
true sense-and-respond capabilities.
Kinaxis RapidResponse® fuels
key supply chain management
(SCM) and sales and operations
planning (SOP) processes, as
well as other associated business
functions. As these processes
are brought together under a
single cloud service, companies
achieve a control tower solution
that drives overall orchestration
of an enterprise’s operations.
The end goal is to compress
the time to identify a variety
of plan deviations, and more
importantly, dramatically collapse
the time to make profitable
course corrections in response.
11. 10
Case-in-point: Loblaw
Loblaw Companies Limited, Canada’s
largest food retailer and a leading provider
of drugstore, general merchandise, and
financial products and services, recently
concluded that inadequacies within its
existing supply chain capabilities were
taking a toll on its ability to effectively
serve its customers and deliver value to
shareholders. Inventory levels tended to
be elevated, while its consumer shelf
availability was lower than desired. This
misalignment made it difficult for the
retailer to maintain the service levels and
product freshness its customers desired.
In the course of its work with Loblaw
to address these challenges, Accenture
helped the firm replace its old fulfillment
system—which relied on warehouse
shipment data to plan for demand and
replenish inventories—with a robust
Integrated Planning, Forecasting and
Replenishment (IPFR) solution. The
result was a storage system that was
oriented toward an improved customer
experience, rather than just storing items.
Making it
Happen
The old models of fixed cost and long
implementation time are no longer
applicable in today’s dynamic world.
On-demand implementation approaches
(e.g. “as a service”, gain sharing, pay as
you use) are providing the impetus to kick-
start major transformation programs and
give the required flexibility and elasticity
to do course correction, if required.
Conclusion
In the future, supply chain functions
won’t be sequential with gaps between
plan and operational reality. Instead,
companies will orchestrate their supply-
chain network into functions that can
sense, in real time, the changes in the
business environment and those that
respond, based on the dynamic data flow.
No organization can afford to ignore this
trend, and those that get ahead of it will
find they have an edge in a volatile world.
