15 THE OUTSIDE-IN PLANNING HANDBOOK | 2023
15
Supply Lead Time and Planning Horizons
In an outside-in planning process, the elements of strategic, tactical, operational, and execution planning flow change. Tactical processes focus on decisions
Companies do not have one supply chain. This report explains that organizations typically have four-to-seven supply chains.
Based on our research, only 20-30% of the flow is high-volume and predictable. A common mistake is treating all flows the same and not recognizing the characteristics of different supply chains. Today’s architectures do not enable flow visibility, and most organizations do not differentiate strategies based on demand and supply variability. The third issue is governance. Global teams typically make tactical planning decisions, while operational and execution planning are usually regional planning processes. Governance, the definition of who should make decisions, and what defines a sound decision process is essential. Leaders clearly define supply chain excellence for the company, the global organization’s
______________________________ BARRIERS TO EFFECTIVE S&OP PROCESSES Lack of clear operating strategy. To drive the best results, balance the “S” with the “OP.” Clearly identify demand and supply flows. Design of flow based on demand and supply characteristics. Alignment of processes: appropriate use of time horizons. Lack of clear governance: definition by role. Alignment of measurement systems. Failure to recognize latency as a barrier to driving improvement. Measurement of error without driving improvement in Forecast Value Added (FVA) analysis. ______________________________
made outside of supply lead time, while operational planning aligns the organization’s decision-making within supply lead time. Sales and Operations Planning (S&OP) should be a tactical process focusing on improving decisions outside of supply lead time. However, this is not always the case. Many companies mistakenly focus their S&OP efforts on short-term discussions, which is a mistake. During the pandemic, companies became more reactive, focusing on short-term decision- making. A common mistake is not defining lead times for each supply chain within the business and aligning S&OP to these cycles. In Figure 4, we share definitions.
roles, and the regional and divisional teams. Companies with the most robust tactical and strategic planning tend to get the most significant improvements in margin, asset utilization, and inventory turns. At the same time, successful operational and executional processes are essential to improve customer service.
In the horizontal cross-functional process of S&OP, the organization should align based on corporate strategy. The lack of a clear operational strategy is an issue for 80% of companies 7 .
Figure 4. Definition of Planning Time Horizon(s)
Week 2
Month 3
Month 18
Year 5
Granularity: Yearly, Quarterly, or Monthly Forecast Horizon: Depends on the Goal Review Frequency: Depends on the Process Goals
Strategic
Granularity: Quarterly, Monthly, or Weekly Depending on the business Forecast Horizon: End of the Freeze Duration through the Period Required for Asset Planning Focus: Planning for Constraints and Aggregate Buying Process Frequency: Monthly
Tactical
Granularity: Weekly or Daily Forecast Horizon: Within the Freeze Duration Process Cadence: Weekly or Daily
Operational
Granularity: Daily or Hourly Forecast Horizon: With the order duration Process Cadence: Daily or hourly
Executional
Granularity: Daily or Hourly Forecast Horizon: Within a transaction Process Cadence: Daily or hourly
Transactional
7 What Does Good Look Like For S&OP? – Supply Chain Shaman and Strategy. Strategy. Wherefore Art Thou Strategy? – Supply Chain Shaman
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