The importance of planning horizons and review meetings

“Our planning is mainly day-to-day – we’re reactive to a fault. We cannot seem to accurately look into the future…”

This is something we hear regularly, and it is a massive challenge for many businesses. A carefully designed planning process will help your management team to maintain alignment across all business functions.

To be successful, you need to define planning horizons that match the pace of the business and set up regular review meetings to support each planning cycle. Planning horizons and meeting frequencies will, of course, depend on the nature of your business, but here is a general guideline.

Planning horizons

1. Long-term planning – strategic

Issues addressed at the strategic planning level include new markets and distribution channels, investment in production capabilities, new storage and logistical capacity, supplier agreements, and introduction of new products. The time horizon is typically 1 – 5 years, and the frequency of the review meetings quarterly.

2. Medium-term planning – tactical

Tactical planning typically addresses shift patterns, forecast performance, operational performance issues, short-term storage issues, capacity issues that could require overtime or casuals, projected stock on-hand, stock expiry issues, supplier reviews, and product/customer tail decisions. The time horizon here is usually in the 2 – 12 month range, with monthly review meetings.

3. Short-term planning – operational

The main aim of operational planning is to balance demand and supply. The focus is on load balancing, shift schedules, batch size optimization, short-term promotions, stock expiry date issues, and supply adjustments. The time horizon for this tends to be 1 – 12 weeks and with a review meeting frequency of 1-2 times a week.

Review meeting topics

The topics addressed in the review meetings depend on the planning horizon. The following list, which is by no means exhaustive, covers some of the most common agenda items.

Long term planning – strategic reviews

• Demand/product review – Here you are looking at demand at an aggregated level. Competitors and general market conditions are assessed, and any new product lines and markets are discussed. Other questions addressed may include: ‘Should we change the product/market mix?’ and ‘What would this do to our overall supply chain cost and profitability?’
• Supply review – Questions here may include; ‘How are our suppliers performing?’, ‘Should we sign up new or alternative suppliers?’ and, ’Are more profitable supply options available?’
• Capacity review – The capacity review looks at different demand and capacity scenarios and tries to identify the most profitable ones. Questions may include ‘Considering the demand review, do we need to change anything production-wise?’, ‘Do we need to add a production line?’,’ What kind of productivity improvements should we introduce and what would be the cost?’, ‘Should we outsource part of the production?’,’ Should we build another warehouse?’ ‘Should we consolidate warehouses, and if so, where?’

Medium-term planning – Tactical Reviews

• Gross profit review – The key focus of Integrated Business Planning (IBP) is profit, and all medium-term planning review meetings should therefore also be based around profit. Remember to look at your demand, revenues, and supply chain costs for the entire planning horizon. This is necessary to get a proper rolling profit view.
• Demand review – The tactical demand review will look at questions such as ‘Considering our current business constraints, are we meeting all demand?’, ’If not, what should we drop to maximize profit?’,’ How accurately are we forecasting?’
• Product review – Here you consider, ‘Do we need to review the product/market tail?’, ‘How much of the tail should be cut?’, ‘Where is the optimal cut from a profit point of view?’, as well as reviewing new product introductions.
• Inventory review – All of the following need to be considered from a profit maximization point of view, ‘What is our projected inventory profile?’, ‘Do we have any expiry date issues?’, ‘Are we overstocked?’, ‘Do we have any sales opportunities?’, ‘Should we consider running promotions?’, ’Should we re-distribute inventory across our network to meet demand more cost-effectively?’ and, ‘Are we optimizing safety stock?’ (By the way, if you are interested in this topic, you may want to look at the white paper: Setting the Optimal Safety Stock.)
• Operations review – On the production side, you will look at lead-time vs. capacity issues, such as, ‘What is the ideal number of shifts for the next planning period?’ and, ‘Are we optimizing the utilization of our resources and assets?’
• Supply review – Consider, ‘How are we tracking to our supplier agreements?’, ‘Are we optimizing logistics between supply points?’ and,  ’Are our supply batches correctly sized?’

Short-term planning – operational reviews

As mentioned above, reviews are very different depending on the lead-times in your supply chain. If you are in a fresh-food environment with very short lead-times, you’ll address a different set of questions to a company that deals with products with a longer shelf life.

• Demand review – The topics addressed here tend to be quite similar to those discussed in the tactical reviews, just with a shorter time frame focus. ‘Considering the current constraints, are we meeting all demand?’ and, ’If not, what should we drop to maximize profit?’
• Inventory review – Again, very similar to the tactical planning review meetings. Questions discussed may include, ‘What does our projected inventory profile look like?’, ‘Do we have any expiry date issues?’, ’Are there any additional sales opportunities?’ and, ‘Should we consider running in-store promotions?’
• Operations review – On the production side, you will need to look at lead-time vs. capacity. ‘Do we need to prepare for overtime?’,’ What are the optimal production batch sizes for the next few weeks?’ and, ‘What is the optimal number of shifts we should run over the next planning period?’

Further planning considerations

In addition to the planning horizons and regular review meetings, other aspects that need to be clearly defined to establish a successful planning process include:

• Process flows – A clear and detailed business process map is a must. It creates clarity within the organization and helps the organization stay on track. It is also vital to define who is responsible and accountable for each defined process stage and activity.
• KPI’s – For the process to be effective, it needs to be guided by a set of KPI’s that are carefully aligned with the overall business strategy and performance goals. This will enable the team to stay focused on what really matters and deal with any exceptions.

If you’re ready to talk about taking your supply chain planning to the next level, get in touch, we’d love to hear from you.