Supply Chain Planning To Achieve End-to-End Efficiencies
A detailed supply chain planning mechanism can empower supply chain planners with critical elements to sense demand and align raw material procurement, production, distribution and sales to get maximum revenue while keeping the cost to minimum.
Research shows that 79% of organizations with high-performing supply chains achieve greater revenue growth compared to the industry average. Also, companies with optimal supply chains benefit with 15% lower supply chain costs, less than 50% of inventory holdings and 3x faster cash-to-cash cycles.
Evidently, a well optimized supply chain directly impacts the company’s bottom line. And to optimize your supply chain for exceptional efficiency, you need an even more efficient supply chain planning process.
Why Do Organizations Need an Effective Supply Chain Plan?
Today, most supply chain managers are under constant pressure to reduce costs, improve supply chain efficiency, and enhance revenue margins. Without effective supply chain planning, achieving any of those results can become a matter of sheer luck.
An effective supply chain plan can give you the much needed control and visibility over your end-to-end supply value chain while also enabling you to respond to market fluctuations with agility.
Often, what keeps organizations from creating smooth, synchronized and responsive supply chain plans is a lack of visibility that stems from manual reactive operational approaches and poor demand planning tools.
A robust supply chain plan can provide further contingency sub-plans which can help firefight common points of failure and create strong strategies for demand planning in supply chain management.
What is Supply Chain Planning?
Supply chain planning is the process of accurately planning the journey of a material or a product right from the raw material stage to the final consumer. A detailed supply chain planning and supply chain forecasting mechanism can help organizations with critical elements for operational success including material management, waste elimination, and working capital optimization.
The Key Components to Supply Chain Planning
Supply chain planning involves multiple steps to achieve optimal supply chain goals. The components involved are as follows:
DEMAND MANAGEMENT
Demand management is the process of forecasting or predicting the future demand to ensure goods and services can be accurately delivered based on the customer needs.
Key questions answered with demand management:
- How can an accurate demand forecast help planners directly obtain accurate revenue calculations?
- How can it help match appropriate inventory stocks based on demand trends?
- How can it help improve the overall bottom line for a particular line of product or service?
Additional Resource: Preparing for demand dynamics that can change overnight.
SUPPLY MANAGEMENT
Once you have forecasted the demand, the next step in supply chain planning is to manage the actual supply of goods or services.
Key questions answered with supply management:
- How best can an organization create a fine balance between the inflow or supply of goods and the actual requirement or demand for these goods?
- How can it ensure that it is able to meet its set financial objectives?
- How can it facilitate the best possible manner in which the requirements can be met from the demand plan created?
PRODUCTION PLANNING
The next step is production planning which relates to the actual production and manufacturing processes and their dynamics.
Key questions answered with production planning:
- How can the critical aspect of production capacity planning help determine the real on-ground operations on the factory floor?
- How can planners go about the appropriate resource allocation of workers?
- How best can they schedule for materials along with allocating essential resources and determining the production capacity for a specific unit?
Additional Resource: Choosing the right tool for capacity planning.
OPERATIONS PLANNING
Operations planning is the step that addresses the need to develop specific operational processes for an effective supply chain function.
Key questions answered with operations planning:
- How can effective scheduling help outline the timeline and the resources that are necessary to perform and complete the operational analysis?
- How can planners go about information collection including various methods of data collection depending on the type of operations that the planners want to access?
- How can an appropriate gap analysis be performed which involves performance reporting, identification, cost + benefit analysis and final comparison?
SALES PLANNING
Sales planning is the next step which includes a periodic integrated operations and warehouse management process that can help the organization to focus on key supply chain drivers.
Key questions answered with sales planning:
- How can organizations accurately take into account critical aspects like actual sales, product/ service marketing, demand coordination, production planning, innovation, and new product introduction, overall inventory control, etc. into the final plan?
- How can they ensure that final customer demand is effectively met by the organization’s production, distribution, and purchasing processes?
Top Approaches to Effective Supply Chain Planning
1. DEMAND-DRIVEN PLANNING BASED ON REAL-TIME INSIGHTS
In this approach, the supply chain planning process starts with demand planning or rather, demand sensing. A demand-driven strategy is almost always more successful than those which are not.
Key features of a demand-driven supply chain planning strategy :
- Having an accurate forecasting tool as the base for supply chain planning, which will guarantee a holistic view of all the channels.
- Demand-driven planning will ensure effective management of risks including natural calamities, worker absenteeism, supplier unpredictability, etc.
- Using real-time insights for demand prediction, organizations can accordingly tweak their pricing and promotion strategies as well to drive revenue growth, expand margins, add new product lines and deal with limited supply scenarios.
- Also, organizations can leverage the Internet of Things (IoT) driven technology, artificial intelligence, machine learning, and cloud-based apps to get insights into real-time inventory tracking, thus helping them leverage an agile demand-driven supply chain.
2. INTELLIGENT PLANNING + INTEGRATED EXECUTION FOR AN AGILE SUPPLY CHAIN
Agility is key for supply chains to keep up with fluctuating market scenarios and changing patterns in customer demand. The intelligent planning + integrated execution approach works best when agility is your top priority.
Key features of intelligent planning + integrated execution :
- By adopting agile supply chain planning approaches and constantly fine-tuning factory operations, planners can create a smart supply chain that is sensitive to changing customer needs.
- Intelligent planning + integrated execution will enable you to directly respond, react and implement strategies that are necessary to keep up with external changes.
- This approach comes with various benefits like greater visibility across the value chain, streamlined warehousing and distribution, predictable sourcing, logistics and transportation and accurate decision making.
- This also gives the necessary analytical insights with necessary technology capabilities to respond faster, better and smarter with tools for efficient demand planning in supply chain management.
3. INTEGRATED SALES, OPERATIONS AND STRATEGIC BUSINESS PLANNING FOR BETTER ALIGNMENT
A business plan that is operationally feasible, financially viable and aligned with goals and objectives – that’s the foundation of this approach alongside heavy focus on high-level strategic planning that brings together and aligns different teams in the planning process.
Key features of integrated sales, operations and strategic business planning :
- An approach that best suits companies with hundreds of processes running in parallel, and often have evident disconnect between finance, strategy, and operations.
- This is a unified business planning approach that integrates all the people, processes, and technology elements right at the strategy and planning phase.
- It helps create a healthy supply chain forecasting system by involving finance and accounting processes, for critical data-driven business decisions.
- Also, this way all critical processes are well-knit to ensure the operating plans are in line with the financial goals along with real-time visibility into all critical dimensions for business success including demand, supply, marketing, warehousing, production, etc.
Additional Read: Myths about Sales & Operations Planning that Need to be Busted.
4. PRODUCT MANAGEMENT DECISIONS + RIGHT PRODUCT DESIGN FOR PROFITABILITY, INNOVATION AND DIVERSIFICATION
Very often, product-oriented decisions directly impact the level of innovation and profitability for an enterprise.
Key features of product management decisions + right product design approach :
- As innovation only happens with effective collaboration and not in isolation, it is important to ensure products are available at the right cost, place and time.
- Also, driving the right decision early on in the product life cycle can affect the demand-supply dynamics, productive capabilities, and operational efficiencies.
- Further, the level of product innovation is directly related to the choice of suppliers and technical capabilities deployed.
- By effectively managing the volume of information, people and processes across the product life cycle, accurate decisions can be made to ensure a healthy bottom line.
- This is easily possible using a seamless and clear collaboration across the end-to-end supply chain loop including the demand, the actual production, the customers, manufacturers and the suppliers.
5. CREATING A CONTINUOUS SUSTAINABLE, RELIABLE AND PREDICTABLE SUPPLY
All of the above approaches will only work if there exists a reliable and continuous supply of goods or services to help meet agreed customer SLAs.
Key features of this approach are :
- In the absence of this approach, planners may end up hoarding excessive inventory stocks which can result in increased operations costs, damages, and may even create supply shortfalls.
- Also, in the absence of sustainability as a core strategic component in the supply chain strategy, it is difficult to create a long-term impact across the supply chain itself.
- With a continuous supply chain improvement and operational excellence strategy which is well-connected, reliable and sustainable, planners can create successful end-to-end supply chain operations.
- When organizations have the right technology, infrastructure, analytical insights, and efficient application processes that complement the operations across the end-to-end supply chain, data-driven operations become more well connected and integrated with demand-facing and planning processes.
Benefits of a Well-orchestrated Supply Chain Plan
A well-balanced supply chain planning mechanism that touches all the revenue influencing factors within an organization can help improve the overall competitive advantage. This goes a long way in benefiting the organization in several ways:
1. ENHANCED THROUGHPUT
A well-planned supply chain directly influences the ability of an organization to increase its production capacity that results in greater throughput, better yield, and superior output.
2. BETTER OPERATIONAL EFFICIENCY + EXECUTION
With accurate supply chain planning, relevant information about customer demand and market conditions help planners make proactive decisions that influence the operational capacity directly. This helps boost efficiencies and become more agile in responding to customer demands.
3. DECREASED COSTS
A good supply chain plan can directly help decrease several costs including inventory costs, unplanned breakdown/damage costs, shipment costs, operational running costs, etc. Similarly, planners also see improvements in system responsiveness, customer/vendor relationships, logistical issues, etc.
4. BETTER RESOURCE ALLOCATION
With effective supply chain planning, planners become more perceptive about the actual resource allocation across the operations value chain. They make more informed decisions about resource shortages/ excess resources which could save them millions of dollars in channelizing efforts in the right direction.
5. REDUCE OPERATIONAL DELAYS
A well-planned supply chain with good two-way communication and collaboration can directly reduce operational delays across the supply chain processes. When everyone who is involved is more clear of their role and responsibilities, redundant processes can be avoided and issues like late shipments, logistical confusions, and delivery delays can be completely eliminated.
The Power of AI-driven supply chain planning
With IoT and artificial intelligence (AI) led technologies rapidly gaining momentum especially in the global logistics and supply chain management industries, supply and demand planners stand to benefit from these in several ways. The powerful evolution in artificial intelligence, machine learning, and data science has the potential to bring in massive disruption and meaningful innovation across these industries.
With specific reference to supply chain planning, AI can help to a great extent in reducing supply chain costs, managing inventory, and eliminating potential bottlenecks. AI in supply chain can help obtain new insights into several areas to boost productivity and optimize resources as well. As a result, floor operators and planners are able to create more agile, flexible, and profitable supply chain plans to deliver goods and services as per customer expectations.
One such important application of AI in supply chain planning is the process of eliminating bottlenecks across the supply value chain to ensure supply chain planners and managers can meet their revenue targets easily.
Safer, Smarter and Better Supply Chain Planning with ThroughPut
ThroughPut’s Demand-driven supply chain planning software is a fully-automated, scalable, enterprise-ready Kaizen Artificial Intelligence product based on the digitalization of the world’s leading continuous improvement operations principles. It enables your operations managers in effective supply chain planning to achieve unprecedented productivity and operational excellence.
ThroughPut analyzes existing industrial data in real-time to detect, identify, prescribe and prevent potential bottlenecks saving millions in delays and lost revenue.
It helps meet your supply chain goals by nailing down bottlenecks and eliminating inventory waste to achieve end-to-end efficiencies. You ultimately benefit from an efficient and optimal smart supply chain plan along with time, money, and resource savings.
If you wish to learn more about our supply chain planning and optimizationoptmization software to help you in creating your supply chain plans, click here for a demo.
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