What’s new in supply chain planning?

About 100 years ago, Frederick Taylor created history by separating planning from production. He was the first person to create a planning office with well-defined roles.

There was someone to create production routes.

Another person to ensure that the relevant raw materials were available.

Yet another person to track the orders and update the status of tasks.

And, of course, someone had to ensure that everyone knew exactly what had to be done and when. (This was achieved with the help of large bulletin boards in the planning office and on the shop floor.)

Supply chain planning had finally been organized.

If Taylor organized supply chain planning, it took his colleague, Henry Gantt, to recognize the importance of organizing the way information was presented to planners. Gantt was the father of the Gantt chart – a graphical overview of production orders that enabled planners to see where the bottlenecks were. With a Gantt chart, planners could change sequences and see the effect of their changes. Today, Gantt’s invention is still going strong in companies that schedule production.

After that flurry of innovation, nothing much changed for decades. Then, somewhere in the 90s, companies and universities began exploring how to apply complex mathematical algorithms to maximize production capacity. The new era of supply chain optimization had arrived.

Some successes were achieved, but practical, real-world benefits were few and far between. Often the algorithms assumed that the problem to be optimized was a standard problem. And as anyone who has ever worked in production knows, production problems are rarely ‘standard’. The results were usually limited to highly successful optimizations of fantasy worlds that bore little relation to the reality on the shop floor.

How things have changed.

Quintiq began with the premise that it should be possible to optimize even unique production problems with standard software. Today, this innovative approach to supply chain planning and optimization has proven to be of enormous value. Leading companies worldwide are experiencing the benefits of deep optimization over multiple production steps, multiple facilities and even entire supply chains. This kind of optimization has led to significant improvements in their KPIs and bottom line.

So what is new about supply chain planning?

The easy answer, of course, is optimization. The interesting answer is that the legacies of Taylor and Gantt live on today in the way supply chain planning solutions are implemented.

It’s still important to define the right roles. What impact will the system have on how planning is organized? Who’s going to make which decisions and why? There are no ‘right’ answers here – only the most appropriate answer given a company’s unique circumstances.

It’s still crucial to ensure visibility. Will the system support planners in making well-informed, high quality decisions? If planners aren’t able to see the impact of their decisions, they could be in danger of achieving a local optimum at the expense of the company’s global KPIs.

And finally, there’s a new focus on transforming bottom lines through optimization. Will the optimization actually lead to improved KPIs? This is critical as automated decisions do not necessarily help companies exploit their unique, but hidden, optimization potential. 

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Arjen Heeres

About Arjen Heeres

There are few things in life that give me more satisfaction than uncovering hidden optimization potential. My interest in this intersection between business and technology began at university where I researched the application of intelligent technologies to business problems, and earned a master’s in management science from the University of Groningen. I’ve been the COO of Quintiq since 2000, and have helped countless businesses in all kinds of industries realize their optimization potential. What a privilege!