An interview with Narendra Mulani

Q. How is the scope of advanced planning changing?

A. The traditional scope of advanced planning has changed tremendously over the last five years. Advanced planning has gone well beyond the factory and into the supply chain. In the past, there were many disparate processes for scheduling, demand planning, and distribution requirements planning. Now, enterprises use a set of integrated planning processes for the express purpose of building a master plan for procurement and supply.

That creates a big corporate challenge. A hallmark of an operationally excellent manufacturing or product-based company today is its ability to integrate the disparate planning processes and to execute all of them as a cohesive whole.

Q. Why is integrated advanced planning such a challenge?

A. The challenge is really in process integration. The demand part of the enterprise must talk to the inventory management part of the enterprise. Then, both of these functions must talk to manufacturing. The greater challenge is to ensure that these parts cooperate with each other and stay focused on a single objective.

These challenges will only increase as vertical disintegration becomes more of a fact of life. That is, as more and more subcontractors, packagers, third-party inventory management companies, and other external parties manage different parts of your supply chain, advanced planning has to cross not only the functional silos within your enterprise but also the corporate barriers across the supply chain.

Q. How has the meteoric rise of Internet technology changed the way companies develop their planning capabilities?

A. Unlike EDI and various other technologies, the Internet is the first true, readily available, and easy-to-deploy technology that integrates the many different corporate entities in the vertically disintegrated supply chain. In so doing, the Internet dramatically increases the velocity of information, which dramatically shortens the cycle times of supply chain processes across the board. In particular, the cycle time for planning becomes negligible.

Add to this the tremendous amount of investment and innovation going on right now to develop new Internet-based applications and infrastructures that tightly integrate business processes across corporate boundaries. This not only improves the visibility of all supply chain partners but also provides intelligent tools that create a single workflow across all trading entities.

Q. Has eCommerce in the form of trading exchanges affected advanced planning?

A. Trading exchanges have had a different effect than the Internet on advanced planning.

Trading exchanges exist outside the four walls of all corporate entities that buy and sell to each other. Trading exchanges let you post information about your business and view information about other businesses. The exchanges give you visibility into the supply chain and let you run a business process that integrates whatever supply chain you're interested in. Even better, exchanges are now technologically feasible and becoming generally accepted for transacting business.

Advanced planning must take all this into account. If you're a supplier, advanced planning lets you participate intelligently in as many sales-side exchanges as possible. If you're a buyer, advanced planning lets you make your needs visible to as many qualified suppliers as you choose to work with. These capabilities reduce the marginal cost of adding new suppliers or buyers to your business operations, especially to your planning efforts.

Q. Given these advances, what do you recommend to companies looking to improve their planning capabilities?

A. Before you make your house a glass house, clean it up. You must be operationally excellent before you tie yourself to point-to-point collaborations or exchanges. Without this preparation, your organization will only make the same errors in advanced planning and supply chain management that it has been making in the past—albeit faster.

My colleague Andrew Berger has written on the prerequisites for operational excellence (Supply Chain Management Review, Special Global Supplement, Fall 1999). Andrew believes that, first, an organization must determine how ready it is to break into the eSynchronized world. It should evaluate its competence in accepting common ways of operating, in developing collaboration between business units, in learning from external role models, and in building new levels of capability by combining the best of existing practices with new ways of using Web-based technologies. Then, the organization is ready to take five key steps: master business fundamentals, learn to operate in the Web-based world, build new capabilities and relationships, manage complexity in real time, and embrace change.

Q. Any other steps?

A. Choose the right sell-side and buy-side exchanges to connect into. For example, if you're a niche supplier, make sure you go to niche exchanges that give you the maximum visibility for the minimum amount of integration effort. Then start a couple of pilot programs. For example, select a key supplier who has the ability to invest in the effort and improve their own processes as well. Correctly integrating your buy-side with your supplier's sell-side would be a huge win for both partners. Once that effort is successful, you can use it as a model for implementing the same capabilities with other suppliers.

Q. What challenges do companies face when implementing a new planning solution?

A. Planning projects fail because of a lack of process alignment across the functional silos within a corporation. This factor is more important than technology, lack of money, lack of good data, or all of these factors combined.

Typically, companies that are implementing new planning solutions fail to agree with or absorb the change required in process reengineering across departmental lines. Often, they don't bring the right skills to bear on the new solution. Rarely do they have the right metrics to give participants incentives to make the process alignment effective.

Companies must recognize that planning is cross-functional, that information must pass between the functional silos within an enterprise, and that these silos must work together toward a common objective.

These challenges are not new. However, they have become even more imperative as we get into cross-corporation vertical disintegration and as the velocity of eCommerce increases.

Q. Any tips for a company about to implement advanced planning?

A. The 80:20 rule applies here. Go for your big suppliers. Go for your major materials. Analyze the planning issues that are challenging your service and availability levels. Solve those challenges first, so you have a dramatic improvement in operational efficiency. Then work backwards through your whole enterprise and out through your supply chain.

Narendra Mulani is an associate partner in the Accenture (formerly Andersen Consulting) Supply Chain Practice with global responsibility for supply chain planning services.