Close Relationships Lead to Superior Planning

This is an excerpt of the original article. It was written for the May-June 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2015

As supply chain managers we are challenged year in and year out to figure out new, innovative ways to improve our operations. We have to translate educated guesses about what’s next into new investments in our processes. Such may be the case with robotics, 3D printing and additive manufacturing, and investments in new mobile technologies. However, successful planning, including planning for risk, resiliency, and flexibility, can help prepare you for whatever is next.

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Superior supply chain planning requires excellent insight into customer demand for products and the availability of materials from suppliers. Many organizations look to data collected internally to better understand these factors, but others collaborate with external supply chain partners as well. Collaboration with customers and suppliers can provide organizations with valuable perspectives on the supply chain that can result in benefits for all involved.

To determine the extent to which external collaboration can benefit supply chain planning efforts, APQC looked at data from its Open Standards Benchmarking in supply chain planning.* Participating organizations provided the extent to which their sales and operations planning processes involve external demand collaboration with customers, and the extent to which these processes involve external supply planning collaboration with suppliers. APQC grouped organizations based on the degree to which they engage in each type of external collaboration. The data indicates that organizations with more collaboration with either of these external groups have more accurate forecasts and more efficient planning operations.

Working with Customers Means Getting More
The data indicates that organizations collaborating more with their customers to determine demand more accurately predict the needs of their businesses with fewer staff and for a similar cost as organizations that conduct less collaboration with their customers. Those organizations collaborating more with their customers from some to a very great extent have a lower average monthly national forecast error than organizations that only collaborate with their customers to little or no extent. Those with more collaboration have a median error of 5.2 percent, whereas organizations with less collaboration have a median error of 13 percent. Organizations are clearly seeing benefits from greater collaboration with their customers to better determine demand for products. By getting the customer perspective on the market, organizations are able to more accurately determine how much product they should produce and keep on hand.

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