Usually Gartner’s year-end predictions for the upcoming year consist of extrapolation of recent trends and gradual changes that are already happening, so they don’t make for particularly exciting reading. Not this year. For the first time in many years, Gartner is predicting big near-term changes in supply chain planning.
In Predicts 2016: Reimagine SCP Capabilities to Survive, Gartner starts by laying down the gauntlet. “Supply chain planning technology has been around for many years, and most companies have been producing their supply chain plans more or less the same way over that time period. However, times are changing; what has worked for decades no longer works in the supply chains of today and tomorrow.”
“As many companies will attest, today's supply chains have to operate in environments that are anything but a steady state,” Gartner says. “As globalization, unpredictability, volatility, complexity and speed continue to increase, leading companies have to find ways to improve their planning. In addition, we now have to factor in digitalization and the Internet of Things [IoT].”
Gartner sees technology as key in the upcoming transformation. “Supply chains are evolving fast, and companies must address many capabilities to stay ahead of the competition, not the least of which is enabling technology,” says Gartner. “SC and IT leaders must reimagine what SCP technology they will need to support their organizations' supply chains over the next four years.”
Gartner focuses on demand sensing to meeting these challenges. They say that 20% of companies have already deployed demand-sensing and short-term response planning technologies for more responsive supply chains, and they expect many more to do so in the next few years. “They will do this to provide a more accurate, daily-level forecast to help drive more accurate replenishment and inventory placing or to provide a fast, often scenario-based, event-level planning capability that supports an assessment of execution deviations from the agreed plan,” they say. “Companies that don't have demand-sensing and/or short-term supply response planning capabilities will likely be at a competitive disadvantage."
Gartner says companies will also have to rethink their analytics. The analyst firm says that in the next two years an overwhelming majority of organizations “will conclude that their current descriptive analytics solutions will not support their supply chain realities.” They will need advanced analytics—prescriptive and proactive, not simply explanatory—to be effective.
Gartner explains that many descriptive analytics solutions rely on fixed and cumulative information, and can’t process fast-flowing data in diverse structures and formats. “Additionally, current descriptive analytics solutions are typically inward-facing, only capable of presenting insights of the organization's internal performance, with little visibility across the extended supply chain,” they state. “Most of the current descriptive analytics solutions barely go beyond reporting on past performance, with no support for proactive analysis and execution.”
Gartner sees core planning systems as becoming more like a connected planning foundation in this evolving supply chain planning philosophy. By 2018, they believe nearly all top-performing companies will have planning systems of record that support “Stage 3” or greater planning maturity. Gartner calls Stage 3 the "integrate" stage, the step that “supports a company getting its hands around its end-to-end enterprise supply chain.”
That integration provides a strong underpinning for processes like Sales & Operations Planning (S&OP) and multi-echelon inventory optimization. That’s crucial, the report says, because a large majority of firms expect half their revenue to be tied to digital business in five years or less—meaning they will be fulfilling demand in an exceptionally dynamic environment. “Companies must be able to accurately and quickly answer the ‘So what?’ and ‘What to do?’ questions,” Gartner says.
This requires automation. In a recent Gartner survey, supply chain organizations replied that, in five years, they expected the level of automation in their supply chain processes to double.
Gartner says they’ve seen this transformation on the horizon for a while now, but now it’s coming at full force. “For a few years, Gartner has been predicting an inflection point in the SCP market will occur around 2016 and 2017,” they say. “What was suitable SCP technology five years ago is not suitable today, and traditional planning systems will no longer be fit for purpose.”
Is your company ready? Check out this description of a highly automated planning approach with demand sensing and minimum latency.