Supply Chain Planning: Definition, Process and Benefits
Supply chain planning is of paramount importance significance in today’s fast-changing business environment. Before we get into the details of supply chain planning, let’s first look at how the COVID-19 pandemic affected supply chains worldwide.
Many businesses didn’t know what was happening at other ends of the supply chain because they were not able to see Tier 1 suppliers.
Chaos was created when there wasn’t a backup plan. Businesses were subject to unprecedented supply chain disruptions in the first half of 2020. For a long time, lockdowns and restrictions on the movement of people and goods continued.
Supply chain leaders were left stranded. How can supply chain professionals prevent a similar situation? How can supply chain professionals plan ahead for such an event?
What is Supply Chain Planning?
Supply Chain Planning Is the process of anticipating demand and planning for materials as well as components and meeting that demand along with production, marketing, distribution, and sales.
This definition focuses on anticipating product demand. This means that you can have a system without having to do anything. This can accurately forecast demand. Half of the job is done, and supply chain planning becomes simple. Planning is about balancing supply and demand, and ensuring that sales revenue opportunities can be fully tapped in a timely fashion.
Gartner defines supply-chain planning as the forward-looking coordination of assets in order to maximize the delivery of goods and services from supplier to customer. This process allows for what-if analysis and synchronization of supply and demand. It also helps businesses fulfill real-time demand obligations.
In supply chain processes, it is logical to look at the end result first and then work backward. This holds true even for supply chain planning which, often, begins with demand planning.
Members of different teams (e.g. sales, marketing, and production) meet to estimate demand using historical data and other parameters.
The demand projection is then transferred to production, logistics, and other departments. Predicting demand helps to keep inventory at its best and reduce costs associated with excess inventory.
Also read: What Is Supplier Performance Management: A Complete Guide?
The Key Elements of the Supply Chain Planning Process
Supply chain planning can be executed successfully using there must be seamless coordination among different teams and processes. These are the essential elements of supply chain planning.
As we have discussed in the previous part of this blog, demand planning is the basis for subsequent supply chain processes.
This involves analyzing a variety of data to forecast demand. The inventory can then be stored and maintained at the best possible level to avoid excesses and costs. This is accomplished by looking at historical data and market conditions, as well as forecasting future sales.
Advanced technology is used to assist demand planning today.
Advanced supply chain management software is powered by machine learning and artificial intelligence. It can accurately predict demand. It can sense demand by analyzing real-time data, market conditions, events, and point-of-sale data.
Predictive analytics has been used more often to forecast demand. This allows for a better understanding of consumer behavior, buying patterns, and other factors that affect demand.
Next, you will need to create a supply plan that is compatible with the demand plan. This will allow the supply plan to meet all the business’s needs.
Supply planning involves the sourcing of raw materials, parts, and other products required for production. It is important to plan supply so that the product can be available in the most efficient way.
This includes the allocation of resources, including material and production capacities. A production plan’s main objectives are to reduce waste and produce only what is necessary to maintain optimal inventory. This is achieved by a supply chain plan which increases cross-functional visibility through efficient inventory management.
Sales and Operations Planning (S&OP)
Sales and operations planning is often conducted once per month. It brings together diverse business teams with different goals on one page. It allows sales and marketing leaders to assess their plans and combine them with operations.
An all-party meeting of diverse teams helps in the coordination of supply resources and capabilities to meet short and long-term demand needs.
S&OP can be part of an integrated business planning process that includes plans from other departments such as finance or HR in one company-wide plan.
Benefits of Supply Chain planning
Planning supply chain operations can streamline operations, improve efficiency, reduce delays, and lower operating costs. Planning can help reduce the costs of many processes such as purchasing, production, and logistics.
Planning can also increase customer satisfaction by making sure products are always available when they are needed. A business can build customer loyalty by improving customer satisfaction. It is essential that businesses of all sizes engage in supply chain planning in today’s business environment.
A comprehensive plan must be in place that can coordinate demand, supply, and production, as well as shipping and delivery. It must cover all risks and contain contingency plans for common failures. A comprehensive supply chain plan is essential for a business to be able to anticipate and deal with any unforeseen events.
The business is exposed to new risks in the event of an unexpected event such as the COVID-19 Pandemic that causes severe disruption. Without preparation, the business cannot react in a way that ensures seamless operations.