Today, brand companies worldwide face challenges to collect, combine and evaluate the full data stream necessary for making a well thought-out demand to resources allocation. Sourcing and supply planners base their allocation decisions on a diverse of Excel spreadsheets, in-house system reports, consensus meeting notes, and email instructions. Most of the work is done manually in a non-systematic way, which means that it is time consuming (therefore expensive), and More importantly, planners make imperfect allocation decisions by not considering all the relevant factors available within the company.
This is where Plan © generates value. By applying transparent and consistent business rules and planning parameters in addition to well thought-out prioritizations and allocation logics, the planners will be able to plan from a completely different perspective. The result will be a significant gain in planning accuracy at the lowest possible planning level (e.g. weekly/market/factory/SKU level), which will directly lead to a reduction in volatility between subsequent demand plan releases. Planners will see the consequence of different planning decisions on all affected supplier tiers (tier 1 factories, tier 2 suppliers, tier 3 suppliers…) of the underlying supply chain.
Another aspect of Plan © to consider is the reduction of lead-times (LT). LT are composed of information lead-times (ILT) and physical lead-times (PLT) following the formula:
By looking at the full Concept to Shelf cycle illustrated below, LT can be reduced at two points: during the Concept Phase and during the Production Phase.
The Concept Phase is a time period meant to decide on a high level which resources to use for what product in the coming season. From our experience, the finalization of the Concept takes between 2 and 3 months. With Plan ©, brand companies will be able to reduce this time period by more than a third by affecting the ILT only, while achieving a more effective initial allocation of products.
The Production Phase starts at the moment at which a product is first mass manufactured and lasts until this same product phases out of the market. This phase is split into several production cycles whose length depend on the availability of resources that are directly impacted by the granularity (or frequency) and accuracy of demand signals (e.g. orders and forecasts). In a typical production cycle of 3 months, the PLT usually take 50% of the time (40 days of material LT and 5 days of assembling and shipping LT), and the ILT take the other 50% (15 days of process LT and 30 days of granularity LT). We believe that if a brand company successfully integrates Plan © as part of its sourcing strategy it will be able to reduce both the ILT and PLT, shortening the production cycle LT by half. A faster production means less inventory, which means less capital involved in the process while having faster reaction times to customers’ demand and therefore a better inventory turnover performance. Furthermore, a faster production is crucial for improving the capacity loading to become more responsive to market demand and by doing so, produce more Make to Order than Make to Stock.