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THE OUTSIDE-IN PLANNING HANDBOOK | 2023
Definitions
The shifts to outside-in thinking are not a process evolution for planning. The concepts are evolving. There is currently no technology that provides an outside-in planning system. In this paper, we use these concepts. Getting clear on definitions is essential for the journey. Agile Supply Chain. Products with high COV and low flow require the redefinition of capabilities to drive consistent cost, quality, and customer service performance. We define the design of these capabilities as the agile supply chain. Balanced Scorecard. The organizational alignment of planning outcomes to maximize a balanced scorecard to improve value. Using the balanced scorecard, functional metrics focus on reliability to drive cross-functional improvement in balance sheet metrics. Reliability metrics include a shift from the focus on demand error to drive improvements in Forecast Value Added (FVA) in planning, from OEE to Schedule Adherence in manufacturing, improvement in first-pass yield in operations, a focus on first-pass tender acceptance in transportation, and improving on-time and in-full shipments in order management. Baseline Demand. The market potential for a product with no demand shaping. Bi-directional Orchestration. Trade-offs across deliver, make, and source based on well-defined orchestration levers in the tactical and operational planning horizon based on market shifts. Bullwhip Effect. The amplification and distortion of the demand signal through linear processing. Demand-Driven Process Management. The use of channel data to determine demand flows. The dependency on channel data versus order/shipment data reduces demand latency. Demand Drivers. The market factors that influence channel purchase. This includes weather, events, social media, and market positioning. Demand Latency. The time offset between channel purchase and the translation to an order.
Demand Shaping. The increase in baseline lift is due to channel shifts. This could include competitive activity, channel incentives, or manufacturing demand-shaping programs. Demand Shifting. Implementing a program to increase demand lift; however, the program does not improve the lift. Instead, the demand is shifted from period to period without an increase in baseline sales. Demand Visibility. A collaborative what-if analysis layer allows business leaders to analyze demand flows based on shifts in product mix, demand shaping programs, and the changing market response. Efficient Supply Chain. The lowest cost supply chain. Forecast Value-Added Calculation. The process of comparing the output of the forecasting process to the naive forecast to drive lean process improvement in managing the demand signal. Form and Function of Inventory. A solution to analyze the targets by type of inventory—cycle stock, in-transit inventory, safety stock, and seasonal goods—to recommend which form of inventory—finished goods, work in process, or raw materials-- to hold at what stocking level based on demand and supply variation. Market-driven Demand Management. The broadcasting of demand flows in role-based views across the organization with visibility of demand and market latency, the baseline demand, bullwhip impact, demand shifting/shaping, and Forecast Value Added (FVA). Market Drivers. The demand drivers in the market. These include shifts in climate and weather, government subsidies, economic cycles, disease, war, and fashion cycles. Planning Master Data. A data layer to define and align market signals to define planning parameters to align optimization engines based on market shifts (actuals), like lead times, currency shifts, efficiencies, or conversion rates. Process Latency. The time it takes an organization to make a decision.
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