What is supply planning?
Supply planning is the cornerstone of the end-to-end supply chain planning process. While there are specialized planners working in each functional area across the supply chain – including demand planners, inventory planners, production planners, and capacity planners – it’s the responsibility of the supply planner to bring all these plans together and ensure that the company’s products will be available to meet the demand from the market.
The supply planning process determines how the company will fulfill the demand for its products and meet or exceed its various business and operational goals, such as delivering products on time to customers, reducing manufacturing costs, and meeting revenue and profitability targets. Supply planners create and execute a supply plan to optimize inventory levels, production schedules and supplier relationships. The overarching goal of supply planning is to align the supply of products with future demand.
What are the key activities of supply planning?
Supply planning is a complex process that encompasses a wide variety of planning, coordination and management activities. Some of the key supply planning activities performed by the supply planner include:
Creating the supply plan
Supply planners analyze the demand forecast created by demand planners and determine exactly how that demand will be met with products that are currently in inventory along with products that have yet to be manufactured. The supply plan captures all the steps and activities it takes to manufacture the product, warehouse it and deliver it to the end customer. These steps span all levels of the supply chain and include inventory planning, production planning, capacity planning and distribution planning. The supply plan ensures that the company has the right inventory levels to meet customer demand while minimizing supply chain costs and maximizing efficiency.
As part of the supply planning process, planners assess whether the company has enough capacity to meet the demand for products outlined in the demand forecast. They consider various types of capacity limitations and analyze possible constraint problems. Specialized capacity planning software is often used to conduct constraint impact analysis. Planners need to manage material and capacity across the company’s manufacturing plants, distribution centers and suppliers. They typically collaborate with the operations team and procurement to ensure available capacity and material in support of the supply plan.
Sourcing raw materials and components
The supply planner is responsible for sourcing the raw materials and components required to manufacture the products needed to meet the demand forecast. As part of this process, supply planners determine which suppliers to use, as well as negotiating contracts and payment terms with them. Supplier management is another key responsibility of supply planners.
Supply planners collaborate with muli-tiered networks of suppliers to align production with changing scheduling and fulfillment requirements. Some companies’ suppliers coordinate with them directly through advanced planning solutions that enable companies to share order changes with suppliers instantly, so both sides can improve on-time delivery and effectively manage inventory.
Why is supply planning important?
Supply planning is a critical function in supply chain management that has many moving parts. When it’s done effectively, supply planning improves operational efficiency and cost-effectiveness and helps the company achieve its financial goals. Some of the specific benefits of effective supply planning include:
- Helping the business maintain optimal inventory levels to reduce the risk of stockouts on one hand, or excess inventory on the other.
- By optimizing inventory levels with careful planning, businesses can reduce the amount of capital being used for production and reduce costs associated with inventory holding, warehousing and transportation.
- Effective supply planning increases customer satisfaction by ensuring that customers get the right products at the right time and in the right place.
- With the right supply plan in place, companies are more agile and better able to take proactive measures to mitigate the impacts of volatility.
- With a comprehensive supply plan supported by current data from across the entire supply chain, decision makers are equipped to make better, more accurate decisions.
- Companies that excel at supply planning improve their ability to manufacture their products more efficiently and cost effectively and get them to market faster to meet customer demand. This can create a significant competitive advantage in the market.
- Supply planners play an active role in proactively identifying gaps or issues with demand forecasts, sales orders, material, capacity, shipments and other elements of the supply chain, which increases efficiency and reduces risks to the business.
- By optimizing supply chain efficiency through planning, companies can reduce waste, which not only minimizes costs but also helps achieve the company’s sustainability objectives.
What are some key challenges of supply planning?
Supply planners face numerous challenges as they look to fulfill demand for the company’s products. These include:
The supply planner is tasked with tying together the various threads of the end-to-end supply chain planning process and that means dealing with high levels of complexity every day. Globalization, large numbers of suppliers, increasingly sophisticated products, sudden spikes in customer demand – all contribute to high levels of complexity that must be managed by supply planners. Well-executed supply management depends on sophisticated supply chain management software tools along with experienced and highly skilled supply chain planners.
With raw materials, components, suppliers, and people located in different geographic regions, supply chains are subject to sudden unforeseen events or circumstances that can create volatility. A natural disaster, for example, can have far-reaching consequences for supply chains, such as increasing demand, limiting supply, and placing transport networks at risk. The supply planning process must take into account the potential sources of volatility as well as their likely impact and build specific mitigation strategies into the plan to deal with them.
More demanding consumers
Consumers are more demanding than ever before. They are looking for unique buying experiences, increasingly personalized product options, and they want the ability to buy products from anywhere, receive them where they want and return them anywhere. As these needs and demands continue to evolve, supply planners have to take steps to ensure that they are met. They need to find ways to deliver more products faster and build agility into the planning process to deal with sudden spikes in demand.
The most efficient and cost-effective supply chain plans are formulated based on the most current and accurate data available. In many organizations, however, planners within the different functional areas of the supply chain operate in siloed environments and use generic spreadsheet tools that make it challenging to share up-to-date planning data with other groups. This presents a significant challenge to supply planners, who need instant access to the latest data to create comprehensive and actionable plans.
In global supply chains, frequent regulatory changes are a given. Governments routinely implement new regulations covering everything from environmental protections and human rights to transportation and health and safety. Any single change has potential to impact one or more layers in the supply chain. Supply planners not only need to stay up to date on any regulatory changes, they also need to be proactive to ensure compliance and avoid any costly disruptions.
In their own words: Lessons from supply chain planners
What are the key features of supply planning software?
Despite the availability of advanced software solutions that are purpose-built for supply chain planning, many companies still rely on manual processes and use generic tools like Excel to do their planning. This outdated method leads to siloed operating structures that hinder data sharing with other groups. Lack of actionable, real-time data limits cross-functional visibility and collaboration and makes it challenging for planners to make fast, informed decisions.
The leading supply chain planning platforms vary in their approach and the specific features they provide, but they are all designed to meet the specific needs of supply chain planners. They provide planners across every discipline with sophisticated tools that reduce manual effort, minimize errors and maximize planning effectiveness. Typically cloud-based, these solutions feature easy-to-use interfaces and often include separate applications or modules targeting the requirements of the different functional planning groups and roles. These may include modules for supply planning, inventory planning, demand planning, production planning, capacity planning, etc.
One of the key benefits of the leading supply chain planning software solutions is their ability to analyze large data sets using advanced technologies like AI and machine learning. Planners can use these capabilities to identify key trends and patterns and run simulations and what-if scenarios, which can greatly improve the accuracy of plans and forecasts and enable them to be more agile when dealing with volatility in the supply chain.
Some of the key features and capabilities for supply planning include:
- Enhanced visibility across the supply chain, which enables planners to continuously monitor demand plans to determine whether they can support material and capacity constraints
- Intelligent automation capabilities to assist with complex decision making, such as when it makes sense to use an alternate source for parts
- Instant multi-level, multi-site bill of material (BOM) explosions to achieve demand and supply balancing across the network in seconds
- Advanced analytics, which help planners simulate scenarios and understand trade-offs between various plan options at all levels
- Automation that accelerates the planning process and reduces manual tasks with configurable and expandable algorithms and analytics
- Intuitive dashboards that give planners a real-time view of supply chain health and key business metrics from a single pane of glass
- Automatic alerts that notify planners when there’s a misalignment between supply and demand, which enable them to respond quickly
- Collaboration tools that make it simple to work more effectively with operations, procurement, and other professionals involved in the different aspects of supply chain planning and execution