The last couple of years have seen major disruptions to the global supply chain. Lockdowns, labor shortages, geopolitical tensions, and a sudden surge in demand have all led to shipping backlogs. The surge in inflation that all this has resulted in has further impacted the global economy, adding to the problems caused by the breakdown in the supply chain.
All of which has seriously called into question the ‘just-in-time’ model that the 21st century supply chain was built around. So effective supply chain planning has never been more important or more needed.
What is supply chain planning?
Let’s start with the basics of what exactly supply chain planning is. There are four elements, the first of which is demand.
1. Supply chain planning: Demand
You begin by looking back at the historical data you’ve accumulated, and forward to your projected sales. The latter will be calculated by exploring current market conditions, evaluating where you are as a company, and combining that with any other factors that are likely to have an impact on the demand for what you do.
All of which data will then be fed into whatever system it is that you employ internally.
2. Supply chain planning: Supply
You then take that projected demand and match it up to a supply plan, sourcing whatever raw materials and components you need to carry it out.
The idea being that you only source exactly the right quantity of materials for the projected demand. Because what you are trying to do is to avoid any of the costs associated with having to warehouse and pay for surplus inventory.
3. Supply chain planning: Production
You then need to match your resource allocation and production capacity with the supply plan you’ve devised. Again, the idea is to minimize unnecessary waste and only employ the people and services that you actually require for the projected demand.
4. Supply chain planning: Sales and Operations Planning
Having aligned supply with demand, you then need to ensure that the long-term goals of the supply chain plan you’ve devised is in synch with the more short-term aims of Operations. This is what Sales and Operations Planning (S&OP) is for. Sometimes referred to as Integrated Business Planning, it helps Sales and Marketing coordinate with everyone involved in the supply chain planning process.
Minimizing costs
The whole process of effective supply chain planning is designed to help you to minimize what you spend on purchasing, resource allocation, inventory, and logistics. Which reduces your operating costs, and helps you to avoid delays in supplying your customers.
After all, there are two factors that feed into customer loyalty; availability and price. If a buyer can’t get what they want when and where they want it, and at the expected price, they’ll stop coming back to you. Which is why effective and efficient supply chain planning is so vitally important. But what the Covid experience has taught us is that supply chain planning is much more complex than many had assumed.
Utilizing and managing data
The main lesson we’ve learned from the last couple of years is that your organization becomes extremely vulnerable when you focus exclusively on minimizing your costs, by keeping your inventory down to a bare minimum. You need to factor in a degree of flexibility into your logistics mode in order to allow for unforeseen risks.
The way you do this is by better utilizing and managing your data. The system that you use internally to process and manage your data must incorporate sophisticated analytics, which will hugely improve logistics forecasting and inventory optimization. Ideally, it should be capable of conducting a thorough analysis of all your data, and in real-time, using the likes of Earned Value Management metrics.
This will significantly improve your ability to produce accurate forecasting and help to provide you with an early warning system, which is vital when it comes to the all-important supply chain synchronization. Because managing data isn’t just about looking back at the past. You need to be able to look forward, to the future. As they conclude here in the Supply Chain Management Review1;
“To be the supply chain of the future, organizations must embody adaptability, flexibility, effectiveness, and efficiency.”
But;
“Without a more data-driven approach, they will be unable to anticipate changes that are not expressed in historical patterns.”
In other words, it’s all down to making better use of your data. And what that depends on is the software you use to organize your internal processes.
Visit our Supply Chain Sync with Schedule page to learn how the Cora solution provides users with the control and data needed to simplify, standardize, and speed up their supply chain ops.
