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Blog April 21, 2017

Optimization brings added value to business planning

Planning systems have developed at a dizzying speed in recent years. As the technology has developed, more powerful and scalable solutions have entered the markets, providing business planners with totally new opportunities. ‘Traditional’ budgeting processes are being replaced everywhere by real-time, continuous and integrated planning processes. As a result, business planning is becoming continuous, rather than being done once at the end of the year.

More and more planning solutions are moving into the cloud. Flexible and scalable, cloud-based planning platforms offer a highly competitive and attractive alternative to on-premise solutions. The advantages of a cloud-based solution are as follows: 

  • No need for up-front, monetary investments
  • Extremely fast, cost-effective technical implementation 
  • Scalability to fit changing business needs
  • ‘Maintenance-free’ i.e., no need for hardware/software upgrades

Planning system development also creates process development options and provides solutions that reach further into businesses. A range of value-adding scaling options are available for various process stages. An example of this is the use of predictive analytics when, say, creating base values for planning.

Optimization is another, interesting possibility. In this context, optimization means the use of mathematical algorithms and variables for data analysis and the creation of various scenarios. For example, when integrated with the CPlex optimization system, IBM’s Planning Analytics system provides a powerful platform for the processing and computation of large data masses in real time.

Sales & Operation planning, combined with a plan optimized for accumulative sales forecasting at production-line level, is a good example of optimization in practice; this takes account of various parameters which affect business activities, such as time, capacity and products in stock. Another example of the benefits of optimization is HR planning, which plays a major role in labor-intensive sectors such as healthcare. Optimization can be used to create a shift system that provides the best way of guaranteeing sufficient competencies in different departments or shifts, on a cost-effective basis. Factors such as pay, skills categories or weekly maximum working hours by department could serve as optimization parameters.

An optimization solution provides several advantages when integrated with a planning solution. In planning processes, back-end optimization can be almost completely hidden from the actual end-user. So there is no need to make an issue of background data analysis, or to provide special user training. The end user experiences optimization as a new feature of a solution already in use.

The algorithms and parametrization used are defined when adopting the system, in line with business needs. End users experience system optimization as a simple user interface, enabling the user to state her optimization parameter preferences, and a start button for initiating optimization accordingly. Depending on the case, the optimization results are then clearly displayed to the user in either numerical or visual format. In addition, in an integrated environment optimized data is directly available within the planning system; this means that it can be used efficiently to expedite the process. Optimization solutions such as IBM’s Cplex are not sector-dependent. HR, schedule, production and warehouse optimization are available regardless of the industry.

The key to success lies in fully understanding the business need on which the solution is based. It is also best to begin on a sufficiently small scale to confirm that the benefits sought have been realized. As more is learned, it becomes easier to expand the solution and direct it towards the process areas where it generates most added value. At best, the successful integration of an optimization solution as part of business planning can even enable the partial automation of decision-making, freeing up time for other tasks. 

Petri Sipola

Petri is in charge of developing Planning, BI & Analytics competencies for the Enfo Data & Analytics