In the supply chain, key challenge for planning activities is to determine the location, quantity and the type of customer demand and to organize and manage the resources required to fulfill it. Key building blocks for the success of such an endeavour for every company are successful supply chain network design, supply & demand planning, and production planning & scheduling.
Supply Chain Network Design
Designing an optimal network structure is a difficult task. Supply chain network configuration refers to decisions regarding the number, location, capacity & functional characteristics of the production, distribution and retail facilities in a Supply Chain. These issues arise in case of acquisitions, growth, market developments and geographical expansion. Making decisions to expand, contract, or modify your supply chain network is critical, has an important impact on performance and can be costly if not planned properly.
Major decisions regarding the Supply Chain network configuration should be based on trade offs between customer expectations and location response speed, production, storage and transportation costs, product variety and characteristics, local regulations and investments. These all can determine the best network structure for your company.
Key Business Issues
• Where should our plants and warehouses be located, how many do we need to have and of what capacity?
• Can we decrease transportation / distribution/ warehousing cost or improve service level by altering network elements?
• Where should our warehouses be located to facilitate distribution in metropolitan areas?
• Should we develop and use own warehousing and distribution capabilities or should we use a third-party?
Supply & Demand Planning
Appropriate supply & demand planning has a great impact on the performance of the supply chain. Through this process the organization identifies external requirements (demand) and aligns its own resources (supply) appropriately to meet them in the most cost effective way.
The first step is to arrive at the expected customer demand for the period. This may include forecasts for make-to-stock items or sales orders for make-to-order items. The second step is to determine how much each point of the supply chain needs to order. Expected demand is to be taken into account as well as current supplies, delivery periods, storage / production capacity and inventory management policies. Inventory management policies (safety stocks, volume & frequency of ordering, stock placement in the supply chain) is a critical component of supply planning affecting both the cost and the service level. The third step is to combine these into a coherent, agreed upon supply & demand plan that will drive operations for the period.
Key Business Issues
• How much stock do we need and where? Can we decrease inventory investment without hurting customer service levels?
• How much a distribution centre needs to order? Are there proper inventory control methods in place based on SKU characteristics?
• How can sales information reach production in a timely and coherent manner to avoid last minute interventions?
• How can we increase accuracy, sufficiency, and timeliness of data from which supply & demand plans are derived?
Production & Material Planning
The goal of production & material planning is to help you produce your products more efficiently. Agreed supply & demand plans need to be transformed into feasible and meaningful production and purchasing plans and schedules. The production & material planning process determines when a specific production order needs to be produced and on which production line. It also takes into account the availability of resources and components. Purchasing / production orders are generated in time to decrease supply costs without endangering the production process.
An effective production & material planning process supports the management and synchronization of master production schedules, material and capacity requirements, tactical maintenance needs, personnel resources as well as the scheduling/ sequencing of jobs through the factory floor in order to achieve business objectives (meet customer orders, contain/ reduce cost) within the supply chain constraints. It is one of the most critical processes for controlling costs and achieving efficiency.
Key Business Issues
• How do we ensure component / material availability to avoid production disruptions without building up stock?
• Can we vary the production planning system depending on product/category characteristics, to achieve better results and how?
• Do we have a lot of rush orders and and how we can reduced them?
• Does planning use fragmented information / systems resulting in manual workarounds and sub optimal decision-making?
• Does production planning often results in the creation of infeasible / unreliable plans?