Insightopedia: Supply Chain Planning

Supply chain management revolves around following processes:

Let’s understand what these terms mean:

Demand planning:

Forecasting

Demand collaboration:

Collaborative resolution process to determine consensus forecasts.

Meeting orders:

When can one promise a product to a customer, taking into account lead times and constraints

Strategic network optimization:

What plants and DC's should serve what markets for what products -- monthly – yearly

Production and distribution planning:

Coordinate the actual production and distribution plans for a whole enterprise - daily

Production scheduling:

For a single location create a feasible production schedule -- minute by minute

Transportation planning:

For multiple supply, manufacturer, distributor and warehousing points in a network

Transportation execution:

Enactment of long-term plans on a per shipment basis, typically performed by forwarders

Tracking and Measuring:

An ever increasing aspect of supply chain management designed to highlight potential against the plan and possible process improvements

Cost reduction and performance management:

Diagnosis of the potential and the indicators, the organization and planning strategy, masters dysfunctions in real time, evaluation and accounting reporting, evaluation and reporting quality

Planning Matrix – Typical SILO Approach

Sales develops the forecast
Finance develops the budget
Sale alters the forecast to meet the budget
Operations ignores the forecast and builds based on current orders

Planning Matrix – Forecast Approach

Implications of a Typical Forecasting Process

The reoccurring process of using statistics along with business knowledge to identify how much product to produce in a certain period to meet future demand:
Sales changes their plans to match the budget and therefore requests the wrong products at the wrong time
To meet the budget, unsustainable sales are made to impact the future
At some point, the process collapses and lowers initially planned sales
As a result, the overall process fails

Statistical Forecasting

The reoccurring process of using statistics along with business knowledge to identify how much product to produce in a certain period to meet future demand:

Identify Trends
Demand
Include Seasonal and Promotional Activities
Compare forecast with Strategic and Operational Plans

Getting Started

Set clear and obtainable goals

Unreasonable goals will lead to failure

Get management’s buy-in

Experience and knowledge supplied by management provides the fuel for any project
Test the waters and show initial ROI

Don’t forget your end-users

Team-members must understand the “Why” behind the works

Demand Planning

Understand Demand

Analyze demand at end point of supply chain

Develop forecasts and manage supply chain based on data captured at the point of consumption instead of generalized or historical data. Create processes that enable analysis of data and revise forecasts as frequently as business requires.

Capture actual demand accurately and reliably

Use data collected at the point of sale to develop production forecasts that reflect what the market is seeking

Plan for Demand

Align your supply chain infrastructure based on demand

Base your long-term investments in facilities, materials, labor and supply chain partnerships on the source and composition of your demand

Manage inventory levels based on demand

Establish inventory policies based on a thorough analysis of demand trends. Take a strategic approach to supply chain relationships to assure the most cost-effective compliance with inventory policies

Respond to Demand

Directly link financial goals and production planning

o Take a strategic approach to Sales and Operations Planning (S&OP) that extends its focus beyond aligning demand, supply and financial metrics. Directly apply the demand and supply data revealed by ongoing S&OP updates to drive better manufacturing operational efficiency.

Leverage event management to drive response to customer demands and planning

Implement real-time event management to detect unexpected changes in demand and supply as they happen so you can make adjustments in manufacturing and the supply chain in hours or days rather than weeks or months.

Plan production based on actual demand

Base production planning as close to actual demand as possible. Avoid production just to fill up available capacity. Schedule complex production operations in real-time or near realtime to respond quickly to new events such as last-minute customer orders, breakdowns or raw materials shortages

Shape Demand

Develop demand-driven products

Adopt a formalized process for connecting engineering and the supply chain so demand information is integrated into the development process. Use this formalized process to achieve greater efficiencies in new product introductions and engineering changes.

Analyze pricing and promotion strategies

Adopt formal processes for analyzing prices and the financial return on marketing programs. Use the information to minimize overstocked products and slow moving inventory through targeted promotions.

Stages of Maturity on way Toward Supply Chain Planning Excellence

Benefits of Supply & Demand Planning

Take advantage of new revenue opportunities.

Provide a simple overview of the production process while avoiding the complexity and expense of full material requirements planning (MRP).

Know what’s in your inventory.

Calculate item availability and deliver on your promises using tools that give you real-time information about what is in the warehouse.

Provide more responsive customer service.

Constantly adapt your manufacturing methods and processes to reflect changing customer requirements.

Increase operational efficiency.

Use multiple planning options to satisfy demand while minimizing the total cost of producing and storing the items. Quickly adapt production to meet new demand with clear, graphical display of your production schedules.