Rise of the FMCG Planner 4.0
A Time of Big Change for CPG
The CPG industry is seeing major changes as large CPG companies are being taken on by highly innovative, nimble, ultra-focused micro-brands. The days of blind brand loyalty are over. Today, rather than buying into brands based on reputation, customer demand is based on how quickly and conveniently they can get their hands on the products they want, how much they identify with the products and how deeply their products understand them and personalize to their needs and desires.
FMCG Planning is Complex
In our blog on Adaptive Planning, we discussed the march of events leading up to the need for the sense and pivot paradigm for planning, and how Adaptive Planning delivers on this vision. To quickly summarize - large FMCG companies are losing market share and the industry is in the midst of a full disruption. COVID is amplifying and hastening the disruption.
All this is leading to a spike in operational complexity. FMCG operations planning is a complex task. It involves tens of thousands of store-location combinations, along with the specifics of daily, weekly, monthly seasonality patterns, the specific promotions being run, the attributes of the store/location such as the specific store replenishment days in the week, maximum shelf space available, the attributes of the products including the different lots and their individual expiry dates, etc. at each SKU-location
The traditional planning machinery is completely inundated.
Traditional Role of FMCG Planner
Planning is turning into an increasingly uphill task for planning organizations; planners cannot humanly keep up with the granularity and effort needed. In this environment, current technology systems and planning paradigms are making things worse.
Classical Planning Paradigm is Obsolete
Even today’s most digitally advanced supply chains still try to first predict what will happen, then optimize performance against plan. The problem is, the world is not as predictable as it used to be a decade ago.
When plans fail, and often they do, companies do not recognize that these failures stem more from unanticipated challenges, i.e. uncertainty, rather than lack of adequate detail in planning. They make things worse by asking planners to focus even more effort in detailed planning and trying to improve forecast accuracy and buffer stock levels, adding more proverbial straws to the camel’s back
Poor Systems Overwhelm Planners
Legacy systems and spreadsheets impose enormous latencies in planning process. However, that’s only half the story. The end to end planning process is the true “system” that needs inspection.
Planners are often extracting, massaging, uploading, analysing data at multiple points in this process – often with disparate tools and spreadsheets. This manner of working induces a constant sense of busy-ness and a false sense of progress.
Another problem that this mode of working creates is that of multiple, cascading errors and failures. Planners have to be extra careful to not let errors slip through, or they have to repeat multiple stages all over again.
Finally, as most of these systems ignore uncertainty, planners have the additional task of planning for safety stocks and other buffer actions, which adaptive planning would have planned in its stride.
Detail Dysfunction Sets in
The psychological effect of being overwhelmed on planners has been well studied. Over time, planners adapt to chaotic planning environment by getting into more and more detail, leading to detail dysfunction - a myopic focus on the business details results in planners and managers losing sight of the big picture. Why does this happen?
Under chaos, planners get comfortable by feeling very busy, and the day flies by. There is a certain degree of job satisfaction that comes from the variety of fire fighting situations that they face, where no two solutions to the crisis are alike. They feel indispensable, that they have saved the day, and thus feel very valuable
Even if they succeed in such environments, it often works against the professional development of the planner. Planners end up working very long hours, carry too much “tribal knowledge” resulting in very little uninterrupted time off from work, and become too indispensable to be promoted to a more strategic, higher role. Often, planners leave the company for another job, taking all their know-how and wisdom with them.
The FMCG Planner 4.0
The role of FMCG planners in most companies in revolves around demand plan creation and forecast accuracy improvement. Some FMCG companies have already arrived at the new shores – the charter for planners in these companies is strictly and directly on achieving business KPIs through inventory deployment and realignment. Is this simply a play of words or is the difference fundamental and real? What does the company expect from these next gen planners?
1. It’s no longer enough to just provide a forecast or a demand plan. Planners are asked to stop creating detailed forecasts and plans manually. Instead of pouring over massive spreadsheets, planners must delegate detailed planning to algorithms entirely. Management expect the human effort in the planning function to contribute to the overall business objectives.
2. The planning function must change focus to develop an outside-in mindset – i.e., they must look first at the business objectives of the company, and align plans to support those objectives. Planners are asked to be aware of what is happening in the market and in the supply chain, and use the capabilities of the planning function proactively to prepare the company for whatever will happen in the future. Planners must find pathways that guide the business to where it wants to go. The analogy that comes up is that of an advanced navigation system that not only plots the best route to get to the destination, but also foresees roadblocks and traffic jams and navigates around them. This is the Sense and Pivot paradigm for planning.
3. Planners must speak in business, to the business, and bring balance. Once the planning team has plotted the path, the next step is to explain to management and other stakeholders why this particular path chosen is the best one and what realignments will be required. Planners must use the data at their disposal to show and explain why their path will enable the business to succeed, thus becoming a scenario advisor to demand and supply side teams – their main role now transforming into create and managing plan-scenarios, applying business judgement, and driving consensus on how to respond to latest demand signals.
How Adaptive Planning supports Planner 4.0
A mere change in mindset or planning paradigm alone will not help companies get benefits, it needs technology support to make it work at speed and scale. Here is how our Algoshelf solution empowers planners in their transition to Planner 4.0
Make it Happen
FMCG companies who want to survive this disruption revolution must think about their ultimate goal, and then build a strategy to support it. Companies are looking to their executive team to create a sustainable advantage to survive the changing tides. What is needed today is bold action.
Thanks to advances in AI and cloud computing, adaptive planning is now practical, achievable, and affordable. These tools and processes need to be in place to contextualize and transform planning to deliver this sustainable advantage. The imperative to be more agile is too pressing to be overly cautious – don’t wait for perfect data, systems, etc. By embracing adaptive planning, companies can turn volatility and unpredictability into sources of competitive advantage. In the process, you will unshackle your data, unshackle your planners, and unleash your organizations’ full operations potential