A recent article over on Supply Chain Brain from JDA software on Building the Supply Chain of the Future made a great point when it noted that in any supply chain there are … core business processes that must be closely synchronized in order to enable organizational agility and market responsiveness. Unless business processes are aligned in closed-loop planning processes, the organization will be unable to sense demand shits and … balance a number of priorities, including costs, customer service levels, supply risks, production constraints and environmental targets in its quest to achieve the best possible outcome.
The article from JDA indicated that six core planning processes must be synchronized in order to achieve agility, market responsiveness, and success. And they are right. The following six planning processes must be synchronized:
- Sales & Operations Planning (S&OP)
A good S&OP process provides a disciplined cadence for monitoring and synchronizing demand, production, supply, inventory, and financial plans via a rigorous Plan-Do-Check-Act process as a foundation for allowing the supply chain to share a common perspective on issues and potential resolutions.
- Demand Planning
Typically involves the utilization of advanced statistical and predictive modelling to ensure that sourcing, production, inventory, transportation, and distribution models are optimized on a shared forecast.
- Inventory Planning
Good inventory planning allows for tailored “designer” models for each category and commodity to minimize overstock, out-of-stock, and financial risks based upon key commodity and category attributes.
- Master Planning
That allows for S&OP, inventory, and demand-based supply plans to be analyzed and updated daily in response to demand and supply changes.
- Factory Planning & Scheduling
The creation of optimized production plans by plants by scheduling backward from the requirement date, with material and capacity constraints simultaneously considered for feasible plan creation.
- Collaborative Supply Planning
That allows manufacturers to monitor multiple tiers of the supply chain and each supplier that is supplying a raw material, component, or service necessary for the creation of each product being sourced from a tier 1 supplier and work with multiple suppliers simultaneously to identify minor hiccups before they become major issues to collaboratively resolve a problem before it becomes a major headache.
But this is not enough to ensure success in today’s fast-paced fickle global marketplace. Not only do we have extreme demand, supply, and cost volatility across materials, components, products, and markets, but we also have extreme competition on the sales side as penny pinching buyers, short on cash, are looking for the best deal possible. As a result, your organization not only has to be leaner and meaner than ever before, but it has to be more focussed on the value it can provide. As a result, your S&OP, demand, inventory, factory, master, and collaborative supply plans have to be linked to, and reinforce, your organizational strategy. As a result, each of these plans need to be aligned with organizational:
- Strategic Planning
which is the process of defining the organizational strategy and direction and the allocation of resources, financial and human capital, to pursue this strategy.
If these seven planning processes are aligned, your organization just might have what it takes to make it through this decade and emerge a supply management leader when the smoke clears.