Blog

Integrated planning in high tech: Challenges and opportunities

  • Facebook
  • Twitter
  • Linkedin
  • Email
Explore

September 11, 2015 - 

The high tech industry challenge
Business dynamics in high tech industry is rapidly evolving, with consumers demanding customized or configure-to-order products, and manufacturers expanding their footprint globally to meet the growing demand of emerging markets, that are characterized by high fluctuations in buy & use and unpredictable demand. Shorter product lifecycle of Hi-Tech end products, along with high demand and portfolio variability puts a lot of pressure on manufacturers to build an agile and flexible supply chain. It is a pressure most acutely felt in a marketplace where cut-throat competition already exerts severe pressure on margins.

Key imperatives
To overcome these challenges, high tech companies are focusing on reducing costs, better managing supply chain complexity, and profitably managing trade-offs in planning (forecast accuracy, service levels, and inventory).

The planning challenge
Integrated planning enables a company to rapidly respond to changing market demands and accurately forecast its financial position. Yet, in research conducted by Supply Chain Insights on 92 companies across discrete and process industries, while 80% of respondents said that they had IBP/S&OP processes, only 40% reported having matured S&OP goals (defined as “maximizing opportunity and mitigating risk" or “determining the most profitable plan"), and, still worse, only 13% said that they had matured processes, data, and tools. This research also found that companies with matured S&OP goals in place stand to reap remarkable benefits, such as doubling their organizational agility and achieving 46% better cross-functional alignment, as compared to companies that do not have matured S&OP goals.

At present, several key planning challenges are hampering the ability of high tech companies to respond quickly to changing demand and supply scenarios, and these include:

Process challenges:

  • S&OP — Limited collaboration between sales, product management, and supply chain
  • Collaborative Planning, Forecasting and Replenishment (CPFR) — Limited collaboration with supply chain partners (e.g., channel partners and suppliers)
  • IBP — S&OP plan not aligned with financial plans and objectives
  • Risk assessment — Risk assessment and mitigation is not integrated into the IBP process on the demand and supply side

Data challenges:

  • Misaligned product data structures can lead to multiple, non-integrated plans (e.g., finance would develop operating plans at a product family level, whereas supply chain would plan at the SKU level). Unless product data structures are aligned, and consistent, across the enterprise, there is the risk that plans will not be integrated.
  • Inconsistent data definitions and models can lead to misalignment between plans (e.g., if value-to-volume conversions are based on average selling price (ASP), then all functions across the enterprise must use consistent logic for ASP calculations, in order to ensure alignment between plans).

Organization/People challenges:

  • Setting individual goals doesn't necessarily incentivize people to share information and collaborate.

Technology challenges:

  • Manual-intensive process of reconciling multiple plans
  • Lack of a single, end-to-end integrated planning platform to facilitate cross-functional collaboration
  • Too little visibility into the latest downstream point of sales (POS) data to respond quickly to changes in demand
  • High general and administrative expenses related to planning
  • Low planning frequencies (e.g., monthly, as opposed to weekly) prevent rapid response to changes on the demand and supply side

Author: Mani Iyer - Assistant Vice President, Supply Chain Planning Practice & Solutioning