Matching supply chain and demand planning

Have you ever wondered how companies know how much to produce in advance so that they do not make too much or too little? The answer is matching supply and demand planning.

What is supply chain planning? A supply chain planning is the component of supply chain management involved with the predicting future requirements to balance supply and demand. A supply chain is also a system of organization, people, information, activities, and resources involved in moving a product or services from the supplier to the customers. Every supply chain has three component in other to be efficient and generate revenues. This is supply chain, functioning logistics and product design innovation strategies are all required to create more effective values within the organization operations. To enable innovation and achieve real agility, you need all these things working together.

Some important benefit of supply chain planning are:

STAY ON TOP OF DEMAND: when supply chain planning is effective, companies are better positioned to predict demand and meet people demand. Product innovation with logistics and effective supply chain management is one way to make sure business stay on top of demands.

HIGH-PROFIT MARGIN: when the supply chain is well managed, it is easier for a company to maintain and even increase their revenue, which results in higher profit margin. Effectively managing of product innovation, and supply chain through the use of product management software can help businesses produce and deliver product much faster, more successful and still attaining higher profit margin.

ELIMINATE WASTE: supply chain planning helps to identify and eliminate waste in the supply chain, and it helps the organization to make an effective response to unpredictability. Integrating data operation is the best way to ensure that supply chain is sustainable and successful in the long term.

DEMAND PLANNING

Demand planner is essential in an organization because they were referred to as statistical forecaster. The data source they forecast for include planned sales order, inter company standing orders and customer contract. After forecasting the final result is then shared with the suppliers. That leads us to the definition of demand planning; it is a multi-step operational supply chain management process used to create a reliable forecast. Effective demand planning improves the accuracy of revenue forecasts and enhances profitability for a given channel or product. Demand planner rarely got credit for doing their job correctly, and they always noticed when the forecast wrongly. The following point is effective in demand planning:

• Importing historical sale data.
• Creating statistical forecast.
• Importing customer forecast.
• Managing forecast.
• Collaborating with customers.
• Supply and demand collaboration.
• Building consensus forecast.
• Confirmation with the customer.

SALES AND OPERATIONS PLANNING

Sales and operations planning is a process where executive level management meets and make a revision on projection for demand, supply, and the resulting financial impact. It is also a decision-making process that makes certain tactical plans in a business area which are in line with the overall view of the company’s business plan. The overall result of sales and operations planning(S&OP) is aimed towards the operating plan created in identifying the allocation of company resources, including money, time and employees. The benefits of sales and operations planning include:

Tactical planning: a tactical plans look at the company’s business plan over the coming years and also look at the company’s plan for the future. Sales and operations plans are aimed at helping the companies developing and aligning the tactical plans developed by the various business areas. There is also two approaches that are used in sale and operation

planning which are top-down planning and bottom-up planning.

Production plans: production plans is carried out after a company has worked through their sales forecast and calculated the resource requirement. Three processes that are used for the production plan are Level, Chased, and Mixed.

LEVEL: The level production plan is used where the cost of making a change in output level is prohibitive, while the cost of holding inventory is meager.

CHASED: The chase production plan is the opposite of the level production plan. The production is changed for each time interval of the plan to match the sales forecast for that interval.

MIXED: the mixed production consists of both chase and level plan, where there is variance in output and inventory levels which will produce the best production plan.