Robert Kugel's Analyst Perspectives

Kinaxis is a sales and operation planning software company headquartered in Ottawa, Canada. Its RapidResponse is an S&OP platform for concurrent planning, designed to integrate an organization’s supply chain planning silos, accelerate planning cycles and optimize supply chain execution to match customer demand.

At its recent users’ conference, the company emphasized its continued progress in making its platform more powerful and accessible to its users, enabling them to achieve more agile planning motions. It reported on its progress in attracting third-party developers to its platform to accelerate the build-out of specific industry and functional capabilities. Its development roadmap highlighted the use of artificial intelligence using machine learning to automate lower-value, repetitive mechanical tasks so planners can focus on work that requires their expertise, experience and judgment.

Kinaxis is currently benefiting from a major shift in how many organizations think about and plan supply chains. In early 2019, I wrote about supply chain management in new era of trade, which was an observation on the on the strategic challenges facing organizations resulting from the decade-long dismantling of the liberal global trade environment and the shift to more restrictive regimes. Consequently, supply chains designed for the lowest possible cost had to be restructured for resiliency.

This trend accelerated in 2020 as a series of extraordinary events, especially the pandemic-induced supply chain shocks, compounded the tactical challenges facing supply chain managers and increased awareness of the brittle nature of lowest-cost supply chain structures. The impact of this shift has been accentuated by the recent fracturing of the world’s political order, which is reshaping strategies about where goods are sourced and manufactured. S&OP software can diminish the impact of increased trade frictions and costs associated with this new environment by enabling organizations to react faster to implement changes that optimize plans consistent with their specific tactical and strategic objectives.

Unfortunately, our Dynamic Insights Sales and Operations Planning research found that just 26% of companies manage this process well or very well. Typically, there are multiple underlying factors, but, in our experience, inadequate technology, data adequacy and quality issues are common. For that reason, I assert that through 2024, supply and demand chain management in over one-half of organizations will remain inadequate to ensure resilience and business continuity, requiring aggressive digital innovation.

Kinaxis has benefited from the growing awareness and acceptance of resiliency in supply chain management and the S&OP that supports it. This is especially so where, for instance, lead times for materials or components are measured in months, bills of materials are complex and product life cycles are short. Supply chain managers are constantly challenged by common, day-to-day disruptions caused by weather, port strikes, major scale accidents and other events. However, software like RapidResponse enables them to continuously orchestrate the minute details of matching supply with demand.

A distinguishing feature of RapidResponse is that it replaces a siloed planning structure with concurrent planning, an approach that enables organizations to simultaneously connect and synchronize business planning processes across an enterprise to match supply with demand on an ongoing basis. This accelerates planning cycles compared to cascaded techniques, and enables organizations to perform multi-echelon inventory optimization to appropriately mediate the sometime competing aims of different parts of a business, such as long production runs for manufacturing efficiency versus minimizing delivery lead times or achieving faster inventory turnover. Organizations managing long or complex supply chains use multi-echelon inventory optimization to achieve the best overall balance of customer, operational and financial objectives.

This year’s Kinaxis user conference outlined a product roadmap emphasizing advanced analytics, automation and extensions. At the time of the meeting, the company announced the availability of its Planning.AI offering, designed to foster speed and accuracy in S&OP through the combination of heuristics, optimization algorithms and machine learning. Using heuristics to narrow the scope of the problem, the system is designed to return an accurate enough solution in a much shorter amount of time. This approach is consistent with a well-accepted management philosophy that good enough information right now is far more valuable than the best information available sometime in the future. And because markets are dynamic, “optimal” S&OP solutions and accurate forecasts exist only in narrow time frames, which is why short planning cycles and the ability to respond quickly to changing circumstances are valuable.

As part of Planning.AI, Kinaxis is initially offering two tools (which it calls Amplifiers). Demand.AI improves supply and demand forecasting by employing machine learning for demand sensing and forecasting built on internal and external data sources. Supply.AI uses an array of analytical techniques to address complex planning problems, arriving at optimized solutions that achieve a desired balance of trade-offs between considerations such as cost, carbon impact, delivery fulfillment, capacity utilization and revenue.

Analytical tools like Planning.AI provide executives and managers with a better idea of the impact of decisions under different scenarios. Yet our research finds that relatively few organizations use advanced analytics to any significant extent. Planning.AI is designed to address a challenge many organizations face because advanced analytics aren’t readily accessible to business users. Our recent Analytics and Data Benchmark Research found that only 13% of organizations have technology that is completely adequate for planning and devising what-if scenarios.

The application of artificial intelligence using machine learning has significant potential to improve S&OP because of the intricate orchestration of processes and the granularity of data involved in this form of planning. By automating the many repetitive and unambiguous steps that are currently handled by people, AI can cut unproductive workloads, shorten cycles and enable planners to focus on the work that makes best use of their skills. AI has been a hot topic, but mainly spoken of as a future capability. I expect there will be a steady stream of innovations – albeit modest at first – through the rest of the decade.

Kinaxis adopted a platform approach to its offering three years ago with the objective of enabling customers to use their own propriety algorithms or build custom applications for their specific needs. The platform is also designed to enable partners with specific industry or domain expertise to create “Solution Extension” applications built for and run on the platform. This creates value for customers and enables Kinaxis to offer a more complete solution much faster than it could on its own. Currently, there are three such applications available: PlanetTogether’s production scheduler, OCYO’s Recycling End-to-End Planning for planning and monitoring recycling flows, and 4flow’s Transportation Load Optimizer, designed to optimize utilization of transport capacity, balancing multiple objectives such as cost, schedule, carbon and inventory utilization.

For years, Kinaxis targeted billion-dollar-plus corporations, largely because the cost and complexity of its software made it accessible and affordable mainly to those companies. To expand its addressable market, it has developed a go-to-market approach to target companies with revenues between $500 million and $1 billion, using a reseller channel for sales efficiency and tools to get customers up and running quickly. This not-quite-as-large segment is likely to be the subset of companies where supply chain management is central to their strategy and S&OP is a core competency because of the size and complexity of their supply and demand chains.

The changes to the global trade environment and the impact of social and political ructions on supply chains have forced organizations to rethink S&OP strategies, placing greater emphasis on resiliency. This shift almost always raises costs unless organizations devise ways of mitigating the impact. Software can provide the ability to plan, react and execute in shorter time frames to promote agility. It can also devise new ways to reduce inefficiencies in a highly complex process. I recommend that organizations with long or complex supply chains review sales and operations planning processes to assess areas for improvement and investigate Kinaxis to determine how it might enhance resiliency and competitiveness.

Regards,

Robert Kugel