Disruptions prompt renewed focus on scenario planning

scenario planning

Supply chain professionals have a renewed focus on scenario planning in response to the currently changing business landscape. This is according to new data from Board International, provider of intelligent planning technology. According to the new Board 2024 Global Planning Survey, 71% of global decision-makers are taking planning more seriously again, with the war in Ukraine, the cost-of-living crisis and ongoing supply chain disruptions as key catalysts.

Cyber-attacks (34%), labour shortages (36%), blocking key channels in the supply chain (30%) and fluctuating oil prices (29%) top the list of key business threats that decision-makers are currently planning for. Yet many supply chain professionals continue to face challenges in planning effectively.

The survey also shows signs of planning fatigue within many companies, with a 14% drop in the extent to which companies take planning seriously compared to last year. Just under three-quarters (73%) of supply chain decision-makers admit that their company makes planning decisions based on assumptions.

These findings suggest that many supply chain professionals struggle with implementing data-driven decision-making, according to Board. Almost a third (29%) of respondents also reported that ineffective planning has impacted profitability, productivity, and the ability to drive innovations, new products, or services.

From scanning to planning

The survey makes it clear that too many companies are just scanning for potential crises rather than actively preparing. For example, Board found that 39% of respondents discuss rising tensions between China and Taiwan, but only 27% are actively engaged in scenario planning for an escalation in the region. However, the conflict in Gaza and the war in Ukraine highlight how important it is for companies to anticipate the risk of geopolitical, economic, and social disruptions.

The survey also reveals that 70% of supply chain professionals usually leave out the most extreme scenarios when planning. Often because it is too difficult or time-consuming to include them in planning. According to Board, this implies that most companies are exposing themselves to risk should the unexpected happen.

Taking action on scenario planning

‘Supply chain leaders are under tremendous pressure to navigate a complex and unpredictable business environment. The need to move from just talking to taking action around scenario planning has never been more important,’ says Jeff Casale, Board’s CEO.

In far too many cases, however, he says, companies are constrained by error-prone, outdated tools and data separated by business function, leaving them vulnerable to costly mistakes and outdated insights. ‘To better compete, they need to anticipate disruptive events proactively, model calculated scenarios and align strategic, financial and operational plans,’ Casale comments.

Planning is not yet agile

An agile and integrated approach to planning is essential for companies to drive greater flexibility, streamlined operations, faster time-to-market and better collaboration and resource allocation in a rapidly evolving market. However, the study reveals a worrying gap in such agile planning, which exposes a sizeable gap between aspirations and reality.

The survey found that 73% of respondents believe their company is well equipped for agile planning, but only 17% have the right processes and technologies in place to actually achieve this. For companies looking to close this gap, the survey identifies three main barriers: poor data quality and governance (46%), ineffective processes based on largely manual activities (48%) and a lack of modern tools and technologies (43%).

Underlying each of these barriers is an over-reliance on static spreadsheets. The survey shows that 55% of supply chain planners worldwide use spreadsheets like Excel for at least half of their business planning. According to Board, one source of potential risks is due to limitations caused by manual data entry and a lack of real-time data integration. In addition, 71% of companies do not sufficiently consider potential scenarios when planning, leaving them insufficiently prepared for unexpected events.

With AI towards successful planning

Companies frequently look to artificial intelligence (AI) to overhaul their approach and move to data-driven, flexible planning. Almost half (46%) of respondents are exploring machine learning to improve decision-making, while 44% are looking for AI-enabled business intelligence tools. A third (34%) of respondents also plan to use generative AI tools to improve their decision-making process.

‘By embracing intelligent planning tools and agile planning processes, companies can analyse internal and external data for planning a range of contingencies, better informed, proactive decision-making, and better business outcomes. Over the next decade, companies that do not switch to a fully integrated planning system will face an uphill battle,’ says Casale.