Supply chain planning: What is it and how it's used?
The lasting impact of the COVID-19 pandemic laid bare the challenges and vulnerabilities of modern supply chains. And to further complicate matters, consumer demands for speed and customization have been rising at a phenomenal pace. Today, many companies are turning to smart technology to help give them the speed, visibility, and resilience they need to thrive and compete in this complex business landscape.
As artificial intelligence (AI) and other intelligent technologies become more widely available, forward-looking businesses are using them to dramatically improve their supply chain planning systems – and we will look at some of those business successes further along in this article. But first…
What is supply chain planning?
Supply chain planning is the process of planning a product from raw material all the way to distribution and sales – with the ultimate goal of balancing supply and demand.
When the components of supply chain planning are fully integrated, supply chain planning is sometimes referred to as “integrated business planning”. Below, we will look a bit more closely at each of these important supply chain planning areas.
Components of the supply chain planning process
Supply chain planning systems typically include the following components:
Sales and operations planning (S&OP)
Sales and operations planning offers businesses 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 forecasting and demand management
It goes without saying that improving demand forecasting and demand management is a key component of 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 fulfillment.
As a key component of effective supply chain planning, demand forecasting helps businesses avoid costly surplus and anticipate customer needs to maximize profits.
Inventory planning and inventory optimization
Inventory planning and optimization allows businesses to meet service level targets without carrying or paying for more inventory than they actually need. To simplify a complex distribution network and be prepared to respond to demand variability, organizations must first learn how to master these inventory challenges.
Response and supply planning
The best practices of response and supply planning help organizations 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.
Demand-driven replenishment (DDMRP)
Since the traditional procurement of materials is often driven by the analysis of past data rather than predictive models, it can be challenging for organizations to plan for an uncertain future without adopting demand-driven replenishment of materials. Also called “demand-driven material requirements planning” (DDMRP), this extension of traditional MRP helps organizations become more agile and adaptable without compromising the quality of their product.
Supply chain monitoring
At the center 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. Improving your supply chain monitoring through AI, machine learning, and even collaborative information sharing can help offer even greater insights, leading to functional improvements at every level of your supply chain and manufacturing process.
Five 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 five case studies of global businesses that have successfully integrated new technologies and approaches to optimize their supply chain strategies.
1. Deutsches Rotes Kreuz (DRK) / German Red Cross (of Saxony)
With only two weeks between the signing of the contract and the go-live, the Deutsches Rotes Kreuz Landesverband Sachsen e.V (German Red Cross State Association of Saxony) was given the monumental task of planning, launching, and running a state-wide COVID-19 vaccination program. This included complex and sensitive supply chain and logistical issues related to the procurement, transport, and storage of these essential vaccines. This local DRK association reacted quickly to various sets of changing circumstances, including supply chain shortages and delivery delays, all while maintaining strict safety and data protection standards.
To manage these challenges and get vaccines into Saxony’s four million arms on time, the DRK used SAP Vaccine Collaboration Hub, which is based around the key components of integrated business planning solutions. When run on cloud ERP and analytics solutions, it offered the coordination and planning team end-to-end visibility of the vaccine supply chain, allowing them to make more accurate plans based on resource availability.
From there, it integrated SAP Vaccine Collaboration Hub with existing third-party vaccine appointment management software to help citizens plan their visits based on real-time resource availability. The solution even allowed the association to prioritize first and second shots based on need, to ensure the most vulnerable were protected.
2. Exact Sciences
Exact Sciences — a company that provides cancer detection, treatment guidance and monitoring services — has helped people make informed and confident healthcare decisions since its inception in 1995. And the company’s goal of driving innovation combined with scientific rigor has contributed to its rapid growth and success. However, rapid growth through large scale acquisitions also created challenges – including consolidation and processing of information across legacy systems and manual coordination of 18 tools.
With the help of integrated business planning tools and SAP’s industry expertise, Exact Sciences was able to address these challenges, standardize their business processes, and gain visibility into its supply and demand planning. The integrated planning approach helped consolidate all legacy business units and improved the monthly reporting process, resulting in a significant reduction in time spent generating and reviewing reports – from 40-hours per month to only two. Exact Sciences is able to maximize its time and energy on continuous innovation in cancer treatment and less on manual tasks.
Through better forecasting models, businesses can achieve more responsive integrated business planning and, in turn, improve resilience and agility.
3. 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 customized 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 harmonize their planning and execution, thanks to improved forecast accuracy and optimized planning results from responsive forecast algorithms. These powerful supply chain analytics empowered their team, allowing them to make more informed, proactive, and transparent decisions.
4. Orkla Food Ingredients
If you’ve ever been to Europe and have enjoyed the taste of a fresh bakery bun or decadent ice cream, chances are you have experienced some of the products supplied by Orkla Eesti AS. This Estonian confectionery company was established in 1806 and since then has developed a massive line of products manufactured out of its two Estonian factories.
To continue providing customers with high-quality products where and when they need them, Orkla sought to automate and standardize a wide range of its supply chain processes. To do this, it required flexible and responsive modern software solutions that could offer real-time supply chain insights. The goal of this new scalable solution was to provide company leadership with integrated business planning components that were easy to access and could be simultaneously rolled out across multiple countries.
Using integrated business planning tools, project leaders leveraged a standard solution for demand planning that offered comprehensive business process knowledge and expertise. The result was a 100% improvement in supply chain transparency, with a 7% increase in company-wide planning accuracy. Having reliable, transparent data has significantly reduced redundant work, made the decision-making process more consistent, and allowed for optimized costs, enabling the company to pass these savings on to its customers.
5. James Hardie Building Products Inc.
When your products are incorporated into more than eight million homes across the United States (and counting), customer service can be a monumental task. That’s why James Hardie Building Products Inc. has sought to deepen its insight into its supply chain. By offering customers and suppliers a faster supply chain response, it can ensure its products are available when they’re needed – and not a moment too late.
To do this, the James Hardie team decided to go with one unified platform for supply and demand teams, built on a powerful ERP application with cloud integration. This centralized data model allowed real-time access to relevant documents, encouraging more functional collaboration since more than one employee could read and edit a spreadsheet at once.
Post-rollout, the James Hardie management team collaborated effectively on all cross-functional and critical business decisions since they could now plan scenarios and run data in real time. This led to a faster supply planning cycle, which allowed the team to run analyses and scenarios in real time, speeding up its response to changing market trends. It was able to optimize its transportation planning across various modes of transport, allowing the company to automate and future-proof its supply plan. When combined, these features allowed for more agile, proactive, and thoughtful responses to the ever-changing market.
Technology helps integrate supply chain planning into more thoughtful business operations
Disruptions to the global supply chain are not going away anytime soon. Businesses hoping to wait it out while maintaining their status quo could be disappointed, as they discover that their current demand forecasting, sales, or operational planning models are not sufficient to meet the present demand. Continuing to rely on outdated modeling tools, software, or solutions will leave employees frustrated and customers searching for other resources to help them get what they need.
The ongoing rigors of supply chain planning and management may seem intimidating, but they can be mitigated. By adopting the tenets of modern supply chain planning systems and relying on data instead of predictions, businesses can help make their operations and supply chain more agile and resilient.
Fortunately, you don’t have to do it alone – integrated business planning solutions can support your supply chain of the future.
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