Planning cycles and horizons in a nutshell
Generally speaking, most organizations work with five cycles: a mid-term plan, an annual plan, rolling S&OP updates of an annual plan (quarterly, bi-monthly, or monthly), a weekly plan, and a day-to-day plan.
Cutting through complexity: 3 guiding principles
These five cycles may result in frustration due to their underlying complexity and flaws. We see this happen too often. To avoid a situation like this, you can keep three guiding principles in mind. We'll discuss them below!
1. A clear purpose for each cycle
Every planning cycle should have a clear purpose. If, for example, you promise customers a delivery week, you should have a weekly plan that focuses on doing just that. This way, you'll be able to fully deliver the right product in the right week to the right customer — exactly on time. Your day-to-day planning shouldn't play a role, as it has a different goal: to maximize warehousing productivity and transportation efficiency. The key is not to mix up these weekly and day-to-day objectives.
2. The right hierarchy
Do top-down and bottom-up interfere? Is it unclear whether demand or capacity is leading? In these cases, you're dealing with a wrong hierarchy. Each planning cycle should be clear on three things upfront:
Top-down or bottom-up: generally speaking, it’s helpful to have a clear top-down set of planning degrees of freedom and planning restrictions that are properly understood by all the teams involved.
Demand leading, capacity lagging, or vice versa, including the role of inventory: it really depends on the flexibility of capacity.
Input from the previous cycle: make sure each follow-up cycle starts with the output of the previous one (e.g. mid-term plan feeds annual plan, etc.).
3. Disconnection and one-way feed
Iteration complexifies things. So, disconnect and ensure a one-way feed where possible. Examples of disconnected planning processes include scheduling, fleet planning, and crew planning in aviation and rail transportation. Scheduling is relevant to passengers and relates to other stakeholders, such as alliance partners and slot authorities. As fleet and crew planning reflect internal processes, they can be disconnected from scheduling and follow a different rhythm. For example, you can perfectly combine six annual schedule updates in rail transportation with a weekly updated fleet and crew planning, which relates to travel forecasting.
When reviewing your planning cycles, use these three guiding principles to eliminate complexity. We have come across many examples which demonstrate that applying them helps you simplify and clarify planning matters. On top of that, they provide a solid starting point for increased agility and data-driven planning!