Supply chain planning: What it is and how it's used
Supply chain planning optimises the manufacturing and delivery of goods – from raw materials to finished products, and from suppliers all the way to customers. Essentially, it’s a demand-driven balancing act between shortage and surplus.
Supply chain planning overview
In the past few years, a big chunk of our small talk has shifted from “looks like rain” to “how about these supply chain problems?” Of course, the pandemic was the cause of much of that disruption…but not the only cause. With the rise of AI, the ubiquity of online and omnichannel shopping, and the generally supersonic pace of social and technological change – it’s no wonder that supply chain planning is today, one of the most deeply affected and vulnerable operational areas.
To compete, modern supply chain planners must be responsive, accurate, and agile if they want to keep up with fast-shifting customer demands, heightened competition, and unpredictable global events.
What is supply chain planning?
People tend to focus mostly on inventory and logistics when they think of supply chain planning. But of course, it’s so much more than that. For physical products and manufacturing, it starts way back with managing the suppliers who grow and mine raw materials, and goes right up to the moment an item is delivered to a shelf or a front door – and even beyond, to returns, recycling, and reverse logistics. Supply chain planning is also informed by consumers at every level: their shopping habits, their reviews and feedback, and their ever-changing shopping behaviours.
Components of the supply chain planning process
The best integrated solutions can help you optimise, coordinate, and centralise the core aspects of supply chain planning. Following are key functionalities that can be used as stand-alone solutions, but are more powerful when combined:
Demand forecasting
It goes without saying that improving demand forecasting and demand management are key to better integrated business planning. Companies rely upon accurate demand predictions to manage their entire range of supply chain operations, from raw materials sourcing to last mile delivery and fulfilment.
As a vital part of effective supply chain planning, demand forecasting helps businesses avoid costly surplus and anticipate customer needs to maximise profits.
Inventory management
Inventory management allows you to meet service level targets without carrying or paying for more inventory than you actually need. To simplify a complex distribution network and respond to demand variability, organisations must first learn how to master these inventory challenges. Integrated, cloud-based planning solutions give you a single, unified view of inventory, using complementary data sets and advanced analytics to help give more precise predictive recommendations.
Response and supply planning
The best practices of response and supply planning help organisations meet their operational challenges through intelligence supplied by AI and machine learning. This creates a business supply chain that is more resilient, efficient, and adaptable.
Sales and operations planning (S&OP)
Sales and operations planning offers you the opportunity to make better decisions that are informed by key supply chain drivers, such as sales, production, inventory, and marketing. Improving your S&OP process involves using better data, rigorously defining your performance metrics, and aligning goals and objectives company-wide to ensure that clear roles and expectations are developed, defined, and carried through.
Demand-driven replenishment (DDMRP)
Materials procurement has traditionally been driven by analysis of past demand data – an approach that has obvious limitations in times of demand fluctuation and uncertainty. Today’s solutions, however, include predictive models. Demand-driven material requirements planning (DDMRP) – an extension of traditional MRP – helps organisations become more agile and adaptable without compromising the quality of their product.
Supply chain monitoring
At the centre of your supply chain lies a data dashboard known as the supply chain control tower that offers real-time end-to-end visibility of every component of your supply chain. With AI, machine learning, and collaborative information sharing, today’s supply chain monitoring provides insights that can improve every stage of your supply chain and manufacturing process.
From supply chain planning to integrated business planning (IBP)
Traditional supply chain technologies and manual processes are simply no match for modern demands for speed, visibility, and agility. Business planning solutions had to evolve to meet these needs by incorporating powerful AI-driven optimisation algorithms, advanced analytics, and real-time forecasting capabilities -- allowing businesses to adjust their plans dynamically and optimise their supply chain performance on demand. And just as importantly, planning solutions needed to become truly integrated, to take full advantage of each aspect of supply chain planning technology.
Cloud-based solutions offer scalability and flexibility, allowing organisations to accommodate business growth and seamlessly integrate with third-party systems. This delivers a holistic view of the supply chain, facilitating collaboration among different teams and stakeholders, and breaking down silos that hindered efficient planning processes in the past.
By streamlining supply chain planning processes, integrated planning solutions help businesses improve operational efficiency and navigate the complexities of today's supply chain landscape.
Successful supply chain planning examples
One of the best ways to see how incorporating new technology solutions can lead to better supply chain planning is by looking at companies that have already done it. Here are case studies of global businesses that have successfully integrated new technologies and approaches to optimise their supply chain strategies and planning.
1. Microsoft
You’d be hard-pressed to find anyone who’s not familiar with Microsoft software, but another big part of the company’s success comes from the devices it sells. This hardware business is served by the company’s complex devices supply chain, with more than 42,000 active stock-keeping units and 33 manufacturing and distribution centres carrying out work in 108 countries. When Microsoft was looking to bring a substantial number of new devices to market, it realised that it would need to digitally transform the manual processes and spreadsheets it relied on to avoid significant inventory and supply chain risks as it scaled up. The goals of this transformation were to gain a holistic view of its business data, become more predictive and less reactive, and enable planners to make better and faster decisions. Using integrated business planning and collaboration tools from SAP alongside Microsoft’s own Azure tools, planners now capture real-time data from across the business to generate and compare various scenarios as well as create simulations and more realistic plans. With the help of Big Data and AI capabilities, the company has shortened planning cycles from five days to less than one day. Better predictive capabilities have helped the company avoid more than US$550 million in inventory risks. Microsoft is also using better insight and actionable intelligence to increase customer revenue opportunities, resulting in around $50 million in increased revenue.
Through better forecasting models, businesses can achieve more responsive integrated business planning and, in turn, improve resilience and agility.
2. Zinus
When a customer needs a new mattress, they don’t want it in weeks – they need it in days. Zinus, Inc. is a South Korean mattress manufacturer dedicated to offering customers in-home comforts faster than any competitors. The only way that it can make this happen is with a more resilient and transparent supply chain. To help accelerate growth and keep the company agile while offering consumers the reliable customer service they expect, Zinus sought to improve visibility across its supply chain. This visibility would allow it to make improvements to the supply chain overall, leading to increased agility in response to customer demands and market trends. The easiest way for Zinus to adopt these central tenets of integrated business planning was to take advantage of customised supply chain software applications. Their automation and integration capabilities allowed Zinus to reduce manual work and automate many aspects of demand forecasting, inventory planning, and even sales and operations. The solutions were natively integrated with a powerful ERP, allowing them to be quickly factored into company-wide decision-making. After adjusting to the new applications, Zinus was able to harmonise their planning and execution, thanks to improved forecast accuracy and optimised planning results from responsive forecast algorithms. These powerful supply chain analytics empowered their team, allowing them to make more informed, proactive, and transparent decisions.
3. Shutterfly
If you’ve ever ordered personalised holiday cards or photo books online, you’ve understood that there’s no room for errors or delays. Shutterfly has become an e-commerce leader in personalised photo products and custom design by consistently meeting customers’ expectations for high quality and fast turnaround time. With highly customisable products and big seasonal fluctuations in its business, customer demand forecasting and supply chain planning are substantial challenges that Shutterfly needs to meet to keep order timelines short and customers satisfied. To take the unpredictability out of its manual, siloed forecasting and planning processes, Shutterfly employed the SAP Integrated Business Planning for Supply Chain solution, which provides comprehensive, integrated supply chain vendor management and visibility. AI-driven supply chain analytics and what-if simulations give stakeholders the insights they need to make informed decisions, and unified planning and forecast capabilities enable faster and more accurate inventory planning and fulfilment. Now, with the ability to accurately predict customer demand and make real-time, component-level forecasts based on associated finished goods, Shutterfly is maximising the efficiency of its supply chain operations, along with customer satisfaction and profitability.
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Perspectives on supply chain planning
Explore this collection of key insights on how supply chain planning can help improve operations and navigate complexities.