How do planners build risk assessment into our S&OP processes? Some tools might include a risk register, SWOT analysis, probability and impact matrix, a tornado diagram, modeling and simulation, probabilistic analysis, or expert judgement. Here are results from the survey we took in January 2023.
Demographics
There were 28 respondents with verified experience in demand planning, S&OP, or a related role. Over half of the respondents reported having a title of Director, or something more senior.
There was one duplication with responses from two different people at the same company. That duplication is removed from remaining graphs.
48% of companies responding were Food and Beverage manufacturers. 11% were other CPG. Other respondents included retail supply, packaging, medical device, coffee roasting, and livestock agriculture.
More responses came from people located in the Chicago area than any other region.
The lowest level for Demand Planning depends on the needs and complexities of individual companies. Companies with simple networks may plan demand at item level, but most companies plan by location, customer, or both.
Risk Register
74% of companies represented in the survey reported using a Risk Register or similar document to identify and track risks and/or opportunities related to Supply Chain planning. Those who answered “Never” or “I don’t know” were excluded from remaining questions about risk registers.
Most companies include potential volume impact and probable timing for each risk or opportunity. Half identify probability for each. Half assign individual accountability for responses. Fewer than half document financial estimates. Only a few include response strategies, symptoms and warning signs, detailed response plans, or residual and secondary risks.
Alternate Forecasts
17 of companies represented in the survey reported using alternate forecasts in addition to their base forecast. Over half of those are doing high side forecasts. Nearly half are doing scenario forecasting for specific events. Some are doing low side forecasts as well.
Those answering “None of the above ” or “I don’t know” were excluded from remaining questions about alternate forecasts.
Other Tools
Most of companies represented in the survey reported using additional tools to manage risk, but the tools vary.
Comments on how other tools are used:
- Most commonly to model out service and cost related impacts based on a sensitivity analysis of demand. From there, may result into manufacturing capacity determinations to derive actions (IE shed labor and materials if demand drops, increase production (internal or external) and source labor if demand increases).
- We have a list of upside opportunities with probabilities and next steps needed. We model new product launches with door count and planogram inputs. We use expert judgement from our sales and customer interactions. Risks follow a similar process as opportunities.
- Constrained and unconstrained views in the demand planning software. Supply plans generated from constrained scenario so we are careful not to formally constrain all risks. Other risks modeled in off line spreadsheets with guidelines for formally adding to the constrained plan. A cross functional team reaches consensus on in/out in supply review preceding exec SIOP.
- Most of the time we manage them in an offline spreadsheet.
- Discussion / presentation within S&OP forums.
- In discussions between management and operations.
- In planning discussions.
- Staff review.
- Created and maintained in excel.
Other survey comments:
- Not exactly sure if risk mgmnt is used, but company finally partly moved away from Sales providing forecasts. Starting to use statistical forecasting as our baseline forecast that pushes downstream to SP.
- COVID was a major impetus for risk management and scenario planning. Current logistics issues and economic uncertainty continue to point to the need for new tools and techniques.
- I always loop in Transportation and Warehousing into the process once we have a better understanding.
- Risk is here to stay.
- Less science and more an art. Beyond typical PSI and basic S&OP forward looks, this practice is more a ‘break glass in case’ assessment.
- We don’t spend much time modeling catastrophic risks like unknown viruses, planning system crashes or major market disruptions like tremendous market price or demand swings.
Thank you to all who participated in the survey!