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Supply Chain Planning- The Manufacturer’s Guide for Accurate Planning and Forecasting

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What is supply chain planning?

A detailed supply chain planning mechanism can help manufacturers with critical elements for operational success including material management, waste elimination, and working capital optimization.

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. This includes multiple processes such as supply planning, demand planning, production planning, distribution planning, operations, and sales planning.

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. It is evident that a well-orchestrated supply chain mechanism starts with an efficient supply chain planning process. 

Why do manufacturers need an effective supply chain plan? 

Today, manufacturers are under constant pressure to reduce costs, increase operational efficiencies and enhance revenue margins. With a lack of clear visibility into their supply chains due to manual reactive operational approaches and poor planning tools, they miss out on the much needed deep insights. This keeps them from creating smooth, synchronized and responsive supply chain plans to achieve the desired operational excellence.

Effective supply chain planning can help answer the following questions and fill gaps accordingly:

  1. Are demand and supply forecast numbers accurately updated and shared across all the functions across relevant department heads and key stakeholders?
  2. Are the inventory numbers being tracked accurately across the several stages of production? 
  3. What is the alternative plan when uncontrollable factors like natural disasters or worker issues affect the existing supply chain?

Supply chain planning within a manufacturing facility lays the basic groundwork for all operations activities both inside and outside of the facility. This includes multi-plant operations that require the necessary planning for synchronization of disparate production plans.

In the absence of a well-designed supply chain plan for production, manufacturers may lack proper foresight and the essential coverage needed for all of the potential “what-ifs” that are capable of occurring. A proper supply chain plan can provide further contingency sub-plans which can help firefight common points of failure. This includes machinery breakdowns, personnel absenteeism, material shortage, weather irregularities, unforeseen operational bottlenecks, etc. which can disrupt the apple cart for the entire batch of production output. 

The process involved in supply chain planning

Supply chain planning itself involves multiple steps to achieve optimal manufacturing goals. The process involved is as follows:

1. Supply management

The first step in supply chain planning is to manage the actual supply of goods or services.

Key questions answered with this:
– 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?

2. Demand management

The next step is demand management which is the process of forecasting or predicting the future demand to ensure goods and services can be accurately delivered based on the needs.

Key questions answered with this:
– How can an accurate demand forecast help manufacturers 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?

3. Production planning

The next step is production planning which relates to the actual production and manufacturing processes and their dynamics.

Key questions answered with this:
– How can the critical aspect of production capacity planning help determine the real on-ground operations on the factory floor?
– How can manufacturers 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?

4. 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 this:
– How can effective scheduling help outline the timeline and the resources that are necessary to perform and complete the operational analysis?
-How can manufacturers 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?

5. 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 this:
– 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?

Strategies for effective supply chain planning

1. Demand-driven planning based on real-time insights:

Supply chain strategies that are purely demand-driven always are more successful than those which are not.

The key indicators :

  • Having accurate forecasting tools as the base for supply chain planning, which will guarantee a holistic view of all the channels.
  • This 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 strategies as well to drive revenue growth, expand margins, add new product lines and deal with limited supply scenarios. 
  • Also, organizations can now 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:

As organizations get clarity on the demand forecasting aspects, they next need to adapt their supply chains to fluctuating market scenarios, changing opportunities and possible alternatives.

The key indicators :

  • By adopting agile planning approaches and constantly fine-tuning factory operations, manufacturers can create a responsive supply chain that is sensitive to changing customer needs. 
  • This helps to directly respond, react and implement strategies that are necessary to keep up with external changes. 
  • As a result, manufacturers experience 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.  

3. Integrating sales, operations, and strategic business planning for better alignment

Although the objective of sales and operations planning is to run all just in time manufacturing processes together like a well-oiled engine with good coordination among sales, distribution, logistics, etc., many times this doesn’t happen.

The key indicators here are:

  • In manufacturing companies with hundreds of processes running in parallel, often there are disconnects between finance, strategy, and operations. 
  • A great way to address this is by using a unified business planning approach that integrates all the people, processes, and technology elements right at the strategy and planning phase.
  • This 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. 

4.  Focusing on 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.

The key indicators here are:

  • As innovation only happens with effective collaboration and not in isolation, it is important to ensure products are manufactured 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 strategies will only work if there exists a reliable and continuous supply of goods or services to help meet agreed customer SLAs.

The key indicators here are:

  • In the absence of this, manufacturers 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, manufacturers 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 digital manufacturing bond across the end-to-end supply chain, data-driven manufacturing 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 planning, relevant information about customer demand and market conditions helps manufacturers 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, manufacturers also see improvements in system responsiveness, customer/ vendor relationships, logistical issues, etc. 

4. Better resource allocation

With effective supply chain planning, manufacturers 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. With 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) lead technologies rapidly gaining momentum especially in the global logistics and supply chain management industries, manufacturers 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 manufacturing can help obtain new insights into several areas to boost productivity and optimize resources as well. As a result, manufacturers 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 manufacturers can meet their revenue targets easily. 

Eliminate operational bottlenecks with ThroughPut

For safer, smarter and better supply chain planning 

ThroughPut’s ELI is a fully-automated, scalable, enterprise-ready Kaizen Artificial Intelligence product based on the digitalization of the world’s leading continuous improvement operations principles. ELI enables your operations managers ineffective supply chain planning to achieve unprecedented productivity and operational excellence.

ELI analyzes existing industrial data in real-time to detect, identify, prescribe and prevent potential bottlenecks saving millions in delays and lost revenue

Finally, ELI 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 management software – ELI to help you in creating your supply chain plans, click here for a demo. 

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