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Integrated Planning and Execution:

What Does It Really Mean?

Applying an integrated approach to business functions can improve your firm’s top and bottom line by eliminating silos and improving your firm’s procurement and forecasting practices.

By Chris Norek, PhD and Chris Lauritzen

WE HAVE ALL HEARD about how companies want to transition from operating independently within functional silos to organizational structures that are truly integrated. But how much of this integration has really occurred? The reality is that most companies still operate in these functional silos – even larger scale organizations perceived as being progressive. One significant result of this lack of integration is that technology acquisition is often done independently by the various parts of the organization to address their own specific business requirements. This approach often results in purchases of redundant applications, and solutions that do not talk to one another. Illustration

You are probably familiar with companies who employ multiple technology solutions to create forecasts required for the various areas of the business. Sales utilizes one tool, category management another, operations yet another, and so forth. This is obviously not the best way to optimize the entire business. In fact, these multiple forecasts actually cause confusion and misalignment internally. Complicating matters is the decision on what to share with their external supply chain partners.

Without a single consensus forecast that synchronizes all business functions, a variety of problems occur. For example, a key reason inventories in most channels are too high, too low, or simply not stocked in the right places at the right times is due to bad forecasting practices. Therefore, executives should look to solutions that integrate functions and eliminate redundancies while taking down internal silos. This means integrating supply chain systems to arrive at a single, consensus-driven forecast.

Planning versus Execution
One factor that has led to the current situation of disparate software solutions is that traditionally, planning and execution were handled separately. In the context of this discussion, “integrated planning and execution” refers to the ability to tie together planning functions such as forecasting, merchandising, assortment, space and floor planning with execution functions such as replenishment (inventory movements) ordering, transportation, and workforce management. The “execution” in these planning and execution systems is different than the transactional or back office functions typically performed in standard ERP offerings.

Of course, planning and execution systems need transactional data (e.g., POS history, on-hand/on-order quantities, last year’s financials, etc.) to come up with their answers. The good news is that some of today’s advanced software solutions easily integrate to existing transaction systems whether they are “homegrown,” and/or commercially available “ERP” systems. When shopping for software solutions, executives should strongly look at “integrated planning and execution” systems that also easily integrate to existing (or planned) transaction systems.

Organizational Challenge
Functionally-siloed companies are prevalent in both the retail and consumer goods manufacturing verticals. Looking at retail, examples of functional silos include merchandising, supply chain, marketing, and logistics. This is not to say the groups don’t talk to one another, but they are often working with separate, non-integrated software solutions. In reality, financial planning, forecasting, promotions planning, replenishment, assortment and space/floor planning decisions are all intertwined. For example, as stated, all of these major areas should be driven by a single consensus-driven forecast. This forecast must incorporate promotional impacts from the various planned promotions – this is where marketing comes into play. The merchants use this information (along with other information such as inventory projections from the supply chain planners) to help create budgets, assortment, space, and floor plans that include recommendations on new products to bring to market and what products to discontinue. Armed with all of this information, it is now the supply chain team’s responsibility to plan the timing and amounts for inventory, replenishment, and procurement to ensure service objectives are met.

Of course, replenishment planners also need to factor in any space constraints (DC and store) and presentation quantities determined by the space/floor planners. Finally, the product has to be physically moved throughout the entire supply chain. This is the domain of the transportation/logistics group which tries to minimize transportation costs while meeting the plans defined by the rest of the organization.

Some companies are now taking the integrated planning and execution philosophy further and are starting to add areas such as workforce management to the equation. This means they realize that they should be using the same single forecast (including the promotional plan) and the information on planned events such as DC/store receipts and store resets provided by the other groups in the organization.

Software Functionality Available to Help
– Systems that include both planning and execution – historically, they were separate sets of functionality – Solutions that provide one demand forecast that can be used to plan across multiple disciplines – Easy integration between planning and execution systems with transactional systems

What Executives Should Ask
– Do I have duplicate systems in my supply chain technology capabilities? – Are we using software we already have to its fullest? – Can we better integrate our solutions to improve planning efficiency? – Do our planning and execution systems share data? – Do we tie long-term plans to daily operational tasks? – Do we have one demand forecast that all groups use?

There is a great deal of supply chain software functionality in the market and the capabilities continue to grow. The key is to limit any duplication in your solution set both across functional capability as well as planning versus execution capabilities. By managing both of these tasks, your company will be more effective while keeping your technology costs down.

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