Why Supply Planning? Today’s increasingly global supply chain needs to be able to cope with shorter product life cycles and to deal with fluctuating demand and supply. One of the most important benefits of integrated supply planning is increased flexibility. When the supply chain is running like a well-oiled machine, based on solid distribution, production,
Why Supply Planning?
Today’s increasingly global supply chain needs to be able to cope with shorter product life cycles and to deal with fluctuating demand and supply.
One of the most important benefits of integrated supply planning is increased flexibility. When the supply chain is running like a well-oiled machine, based on solid distribution, production, and supply planning, it is easier to maintain and even increase your revenue. Your organization will achieve higher profit margins by producing and delivering at a much faster, more successful rate.
Supply planning entails the translation of the demand throughout the distribution and manufacturing network upstream to suppliers. It also requires the detection of capacity shortages and an appropriate response that considers service, cost and cash in order to deliver the best Return On Capital Employed (ROCE).
Designed in 3 dimensions
The first is the hierarchical dimension, whereby complex problems are broken down into manageable pieces. This translates into several planning levels, each with different horizons, e.g. strategic planning, budget planning, Rough-Cut Capacity Planning (RCCP), Master Production Scheduling (MPS) and detailed scheduling.
The second dimension is the supply dimension; Distribution Resource Planning (DRP) is used to calculate the net requirements on the level of downstream production, while a Material Resource Planning (MRP) calculation translates that into the net requirement of intermediates and raw materials.
The third dimension is the combination of complexity and maturity. You can sometimes be blinded by the wealth of opportunities that an advanced planning solution offers. However, it is better not to run before you can walk, so a phased approach is recommendable.
The Results of Good Supply Planning:
Customer Service Level
A customer’s satisfaction largely depends on them receiving the ordered product on time. In that sense, effective supply planning is by far your most effective customer service tool.
Finding the optimal balance between demand and supply automatically has a positive impact on the inventory level, reducing out-of-stocks and minimizing obsolete stock.
Working Capital Requirement
A well-functioning supply chain which truly revolves around supply planning is a fundamental strategic differentiator that enables global expansion and revenue growth.
Supply planning process needs to be designed in 3 dimensions: hierarchical dimension, supply dimension and combination of complexity and maturity.
On demand webinar
In this webinar Prof. Dr. Bram Desmet, CEO at Solventure will talk about “Rough Cut Capacity Planning as an essential part of your S&OP process”.