Bring Agility and Flexibility to Planning Processes: The Power of Decision-Centric Planning

For many years, we have been used to talking about three-layered, traditional supply chain planning processes:

• Strategic Planning: A quarterly/yearly process done on a very aggregated level of data with a typical horizon of 2 to 5 years.
• Sales and operations planning (S&OP): A monthly process usually done on an aggregated level with a typical horizon of three to 24 months.
• Sales and operations execution (S&OE): A weekly process usually done on a more detailed level with a typical horizon of zero to three months.

These processes are typically performed by different planners in different planning cycles as described above. Their stakeholders are defined, and meeting agendas somewhat fixed to ensure consistency in the processes and the outcomes. These overall processes are in many companies’ DNA by now; they know them and do them (or try to) — some more successfully than others.

At Gartner, we speak to many clients having challenges with this approach to planning. They desperately try to use the processes to enable them to balance demand and supply in their supply chains. We often hear from customers that they want to leverage new technology to do better “scenario planning” to support these processes but many are somehow overlooking the question of: “Are these planning processes (still) the right way for me to make business/planning decisions?”

Decision-Centric Planning (DCP)

We can all agree that times have changed. As we have heard many times before, our supply chain complexities have increased, our customers are more demanding than ever (yours truly included) and the number of disruptions (pandemic, war, natural disasters, etc.) have increased. So how do we upgrade our processes to be able to accommodate this new normal?

We need to start to look at planning through different eyes. We need to stop focusing on aligning on “one number” (as that number changes all the time anyway) and start focusing much more on business rules, priorities, assumptions and possible future outcomes. We need to make decisions the focal center of our attention instead of the processes. We need decision-centric planning:

You may now ask: “Why do we now need ANOTHER process?” Well, in fact: Decision-centric planning is not a new process; it is a concept — an approach — to business decision making.

Being decision-centric means that processes and activities are designed to make the best possible decisions for the business, involving the right decision makers, the right stakeholders, which may vary quite a lot depending on the decision being made. The decision itself thereby becomes the focal point for all the decision-making activities.

DCP should ideally be powered by modern, supply chain planning technology enabling companies to continuously monitor events, estimating the impact of those events and support the decision making around how to respond to these. The assessment of impact is key in decision-centric planning. When an event is detected – which could be a disruption on the demand side (e.g., large, unexpected order) or supply side (e.g., breakdown of a machine) – we need to make an Event Impact Assessment. This assessment will show how large the disruption really is and how broadly we’re affected, thus determining if/how/when you should react.

There may be situations where we will do nothing (e.g., let the variability be absorbed by inventory) and there might be other situations where we need to create new plans to mitigate. Impact-Driven Decision means that we use our business policies, rules and thresholds to determine our reaction: Do we need to do something and when?

When this is decided upon, we need to establish a Decision-Driven Composable Process to enable us to make the right choice for our business. We now don’t have 1-2-3 pre-defined processes to choose from; we have a number of subprocesses, steps and activities that we can assemble and reassemble as it fits with our current situation. Decision makers and stakeholders will vary depending on the impact of the event and corresponding resolution.

DCP will require a rethink of the approach to planning and to the traditional processes and setups that we typically have. We need to become much better at leveraging our increased access to data as well as new modern technologies and advanced algorithms to enable processes to become more flexible and adaptable as things change. By using the concept of DCP, the supply chain is more resistant to volatility or changing conditions because it can adapt and respond faster.

Decision-centric planning is needed — if we want to thrive and grow in the future.

To learn more about decision-centric planning, please see the following Gartner research (subscription required): Maverick* Research: It Is Time to Move Beyond Traditional S&OP — Introducing Decision-Centric Planning.

Pia Orup Lund
Sr Director, Analyst
Gartner Supply Chain
Pia.OrupLund@gartner.com

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