Don’t Allow Recession Fears to Cloud Your Planning Transformation

By Tessa Mahon | October 11, 2022 | 0 Comments

Supply ChainPower of the ProfessionSupply Chain Planning

As talks of recession intensify, I have noticed the topic of planning transformations has gained importance.

Why?

Because there are two directions these conversations tend to take: 1) we are doubling down on our planning transformation and we need to do it fast or 2) we know great planning is important, but we just don’t have the time or the budget. It is the second of these that concerns me.

In the last few years, supply chain planning has been the star pupil through unprecedented volatility and unknowns. Our love for supply chain planning grew strong. As we look to the future, do we still see planning as the business capability worth investing in? Is the value of great planning appreciated enough to get planning transformation onto a recession-ready budget?

Our clients are asking the important questions: Should I still be investing in my transformation? And if so, how? And where can I invest and where can I cut back? The short answer is yes, get planning transformation on the table … but do it in a smart way. There also is a slightly longer answer. So here goes!

The Ask: What are the Expectations on Supply Chain Planning in The Coming Years?

Pre-COVID pandemic, the focus of many organizations was achieving competitive advantage through cost reduction and optimization. As COVID hit, the focus moved towards building resiliency driven by unprecedented change, and we saw this evident across the Top 25 leaders as they looked to absorb and mitigate risks and take on new opportunities. In 2021, we saw a shift in mature organizations towards adaptability and in the ability to be flexible enough to change and shift to new, pressing priorities given rising supply chain constraints.

Beyond 2022, the perfect storm is brewing, with a collision of events — downshifts in demand, inflation, increasing supply constraints, war, increasing energy costs. Organizations need to make decisions on how to spend money and allocate resources, and they also need to be resilient in the face of continuous change, while being adaptable and agile. Bottlenecks must be identified, evaluated and actioned to reduce costs. Inventory optimization and the ability to have stock at the right place in the right time is more critical than ever to maintain and grow market share and manage risk exposure. Cost transparency must provide visibility to opportunities and improvements to maintain profitability.

It’s a big ask!

The pressure is on for supply chain planning. It is at the very core of being able to support this through smarter, faster and more accurate decision-making. Planning must deliver the infrastructure and capability to support efficiency, resiliency and adaptability. Revolutionary concepts like continuous planning are making ground, contesting traditional S&OP processes. The challenge is that many are still at mid-maturity level in their planning processes and must evolve to support the business in the coming years.

As organizations are tightening their belts ahead of a recession, this leaves a dark cloud on planning transformations. The investment in technology continues to be a focus and rightly so. But here’s the thing: good process must underpin this technology effort.

This leads to “The Supply Chain Planning Conundrum” — To Transform or Not to Transform? Leaders are questioning the need to revise planning processes and resources considering the cost pressures of recession. Planning leaders are asking: How do I do all of this with reduced budget? Does a planning transformation business case still make sense?

So, let’s wrap up on the key lessons so far:

  • To be recession ready, you need to support cost reduction and optimization with agility to respond quickly and resilience to recover quickly.
  • Recession readiness needs to be supported by great planning.
  • Great planning for many will involve planning transformation.
  • Planning transformation may not be at the top of priorities unless value can be shown.

Equipping You for The Sell

  1. Reinforce the value of great planning. Companies that performed the best during the onset of the pandemic had begun critical transformations 12 to 18 months prior. Great planning will carry you through the rocky times. To tackle this, consider the questions below:
  • What are the strategic priorities that should be maintained in changing times?
  • How must planning process evolve to support strategy as business dynamic is constantly changing?
  • What is the planning organization of the future?
  1. Be creative. Collaborate with customers, suppliers or even peers to find new solutions to common problems. The approach to planning processes may change. Don’t be afraid to think outside of the box. Our recent maverick research on S&OP and brilliantly written blog from our very own Pia Orup on the end of S&OP as we know it and continuous planning, are worth a read.
  2. Be agile and responsive. Revisit the lessons from this year’s Top 25 leaders to take a renewed approach to your planning transformation. We saw leaders focusing on building capabilities to self-stabilize their supply chains. They flexed resources, restructured transformation teams, pivoted funds to the mission-critical challenges and formalized agile decision making. Planning transformation can be achieved using the same agile methodology, allowing for smaller step investments rather than a Big Bang where a large commitment is made at once. The agile methodology allows for the focusing and refocusing priorities and resources in the areas of most impact through continuous review of challenges and impacts, aligned to organizational strategy. Importantly, it is based on continuous collaboration, allowing planning leaders to keep their finger on the pulse of what is important to stakeholders, ensuring that change will provide value. Tackling transformation in smaller chunks, sprints that can quickly deliver the basic level of capability at crucial times and work to refine these rather than trying to achieve planning perfection all at once.
  3. Implement and develop a well-aligned steering committee to support agile project methodology. Design your steering committee such that it is empowered to make decisions on the key planning priorities and the allocation of budget and resources to these in response to change and volatility.

 

Tessa Mahon
Director Analyst
Gartner Supply Chain
tessa.mahon@gartner.com

 

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