Supply Chain Planning — The Ultimate Guide of 2022
Supply chain planning helps organizations to meet customer demands efficiently. However, to achieve this, you will need to have effective supply chain planning.
For this article, we will show you steps on how to create a successful supply chain plan. We will also discuss the elements and benefits of supply chain planning in your organization.
Once you finish reading this article, you will be able to successfully create a resilient and effective supply chain for your organization. Additionally, this will streamline not just the procurement process but the overall processes in your organization.
What is Supply Chain Planning?
The absence of a plan in every industry will already lead the organization to fail in the future. Without a plan, you will fail to achieve the goals and objectives that you want for your organization.
This is where supply chain planning comes in. It is the process of forecasting the demand for products and planning their materials and components, marketing, production, sale, and distribution.
The overall goal of the supply chain planning is to balance the supply and demand so that revenue opportunities are maximized while also lowering the cost.
The logical approach for supply chain planning is to look for the result and go back as it often begins with demand planning.
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Components of Supply Chain Planning
1. Demand planning
The chance of producing and stocking sufficient inventory improves when you accurately forecast demand for a product.
Supply chain planners look carefully into historical customer behavior, sales, market conditions, and other factors to effectively forecast the demand.
They also use predictive analytics to understand more the demand for a particular product. Additionally, they estimate the internal demands on each link of their supply chains.
2. Supply Planning
The supply plan involves sourcing or procuring raw materials, components, and other materials needed for production. The goal of supply planning is to meet the demand for the product in the best way possible.
3. Production management
This component focuses on the resource allocation of employees, materials, and production capacity. The objective of production management is to reduce waste and produce what is required to ensure availability.
4. Inventory management
The way an organization manages, orders, and stores goods can highly impact operational efficiency, costs, and customer satisfaction.
Inventory management provides companies to manage inventory levels by ensuring to keep stock on hand at an optimal level.
Sophisticated inventory management systems can determine the high-and-low performing products and triggers when stocks are about to run out.
5. Integrated business planning (IBP)
This approach links the supply chain planning with the rest of the process of the organization.
Due to the fact that IBP gathers information across the enterprise, it can help the organization to perform better predictive analysis to develop the business and handle the risks well.
Its Importance and Benefits
Supply chain planning is important as it affects the top and bottom lines of the organization. Stock shortages can cause lost sales. Additionally, too much inventory ties in money that the organization can invest for growth opportunities.
Over forecasting and canceling orders can damage your relationship with your suppliers which will result in disruption in the organization.
Organizations benefited from supply chain planning as it improves operations by reducing waste, planning demands, and standardizing procedures.
It also plays a big part in price and delivery. A well-developed supply chain lowers costs, improves the reliability of the deliveries, and helps to manage unexpected demands.
Supply Chain Planning Process
1. Strategic Planning
The strategic planning process is focused on the long term and creates a framework for the supply chain of the organization. In this phase, the organization factors in many things such as the location of the business and suppliers.
The organization will check transportation routes and determine the size and location of the warehouse to store the products.
2. Tactical Planning
Tactical planning focuses more on individual aspects of the supply chain planning framework. An example of this is when you try to purchase orders with certain suppliers for just-in-time delivery. You can also decide to store more stocks to avoid shortages.
Even the best plans require tactical adjustments such as changing sourcing strategy and raising costs due to tariff hikes.
Steps to Successfully Plan your Supply Chain
Planning a supply chain is hard, especially when you do not know where to start. That is why we will tell you these steps to create a strong plan in your supply chain.
Below is the list of basic principles that supply chain planners typically follow:
- First, you must synchronize supply chain planning and execution. This includes some key questions such as how organizations often update their data and how far in the future will the company project.
- The organization must systematically manage data for consistent information throughout the supply chain planning and management processes. This includes data about the customers, products, resources, and suppliers.
- The organization must build a strong relationship with its customers and suppliers to better forecast orders and increase profitability.
- It is inevitable to make mistakes. That is why you need to examine the data used in the demand planning such as biases and errors in data.
- You must focus on actual sales data rather than the sales order of the organization.
- The organization must continuously analyze the product life cycle.
- The organization must build a culture of steady improvement to understand more the behavior of their customers.
Frequently Asked Questions
1. What is supply chain planning?
It is the process of coordinating assets to improve the delivery of goods and balance the supply and demand.
2. Why is it important?
It is important as it affects the top and bottom lines of the organization. To simplify, if the supply chain planning fails, the other process will fail too.
3. How can organizations benefit from it?
Organizations can benefit from supply chain planning as it improves operations by reducing waste, planning demands, and standardizing procedures.
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