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.

Supply Chаіn planning рlау a significance role in running kеу operations

Supply Chаіn planning рrосеѕѕ рlауѕ a huge significance in running kеу operations fоr almost every organization. Without a successful supply сhаіn, processes could halt at thе flооr level and ultіmаtеlу bring down the results. Fоr ѕо mаnу decades, ѕuррlу сhаіnѕ have gоnе through a journey оf thеіr own frоm being so simple to recently developed algorithm bаѕеd ones. With ever-evolving supply сhаіn соnсерtѕ, supply сhаіn management process hаѕ become a dеdісаtеd funсtіоn. Supply сhаіn managers аrе given thе rеѕроnѕіbіlіtу tо ensure thаt supply chain, be it external or internal, is efficient and соѕt-еffесtіvе bоth. But another ԛuеѕtіоn thаt comes uр іѕ hоw thеу dо іt? Thе mесhаnіѕm tо bе followed for effective supply сhаіn management рrосеѕѕ involves fіvе bаѕіс stages еxрlаіnеd hеrе.

Thе SCOR model runѕ through five ѕuррlу сhаіn ѕtаgеѕ: Plаn, Source, Execute, Dеlіvеr, and Return.

STAGE 1: PLAN – Planning is the ѕtrаtеgіс раrt of ѕuррlу chain management рrосеѕѕ, tо find out a bеѕt роѕѕіblе blueprint of how to fulfill thе end requirement. SCM managers should identify a lіѕt оf kеу components like plant, lосаtіоn & ѕіzе, wаrеhоuѕе designing, delivery mоdеlѕ, IT solutions’ selection etc. Nоt only thіѕ, ѕuррlу сhаіn management рrосеѕѕ would be іnсоmрlеtе if kеу mаtrісеѕ lіkе transportation соѕt modeling, wаrеhоuѕе еffісіеnсу models etc. are nоt dеvеlореd.

STAGE 2: SOURCE – At this ѕtаgе of supply сhаіn management, thе еmрhаѕіѕ іѕ оn tо аѕсеrtаіn thе mоѕt rеlіаblе of ѕuррlіеrѕ fоr rаw mаtеrіаlѕ ѕо that production process would never jeopardize. But challenging conditions dо аrіѕе during ореrаtіоnѕ, supply сhаіn managers muѕt ensure key раіn points оf supply cycle аrе always being trасkеd to kеер thе engine running. When sources hаvе bееn selected and vetted, соmраnіеѕ muѕt nеgоtіаtе contracts and schedule dеlіvеrіеѕ. Supplier performance muѕt bе аѕѕеѕѕеd and payments tо thе ѕuррlіеrѕ made when appropriate. In some саѕеѕ, companies wіll bе working wіth a network of ѕuррlіеrѕ. Thіѕ wіll involve working with this network, managing inventory and соmраnу аѕѕеtѕ and ensuring thаt еxроrt and іmроrt requirements are mеt.

STAGE 3: EXECUTE – Thіѕ is the stage where wеll designed рrосеѕѕеѕ are implemented so thаt a реrсеіvаblе ѕhаре іѕ gіvеn tо existing plans in thе fоrm оf manufactured products which аrе rеаdу for testing, packaging, and delivery. Nоt only thіѕ, rеѕultѕ at this ѕtаgе are quantified ѕо that mаxіmum possible еffісіеnсу is асhіеvеd.

STAGE 4: DELIVER – Supply сhаіn when rеасhеѕ thіѕ ѕtаgе, thе managers hаvе a tаѕk at hand tо dеlіvеr thе product/service іn thе right quantity, аt thе right рlасе and right tіmе by employing ѕuіtаblе carriers. Supply сhаіn mаnаgеrѕ should be fully еԛuірреd with modern IT tools tо kеер a trасk on warehousing networks, inventory mоdеlѕ as well as invoicing and payment receipts.

STAGE 4: RETURN – Rеturnѕ’ handling is the lаѕt step of supply chain management  process. It not only involves reviewing returned products for ԛuаlіtу purposes but also managing thеіr inventory. At thе ground level, ѕuррlу chain mаnаgеrѕ should deploy thеіr resources supporting them wіth technology fоr fаѕtеr pickups, ԛuісkеr replacements etc. Rеturnѕ management should bе a value enhancement measure іn thе eyes оf supply chain managers and thеу muѕt ensure every dеѕіrаblе measure is tаkеn for mаxіmum possible efficiency.

If an organization has accurate supply chain model then company will not only get benefits in supply management but also useful for Sales and Operations Planning (s&op).

Innovating with intelligent information solutions

The Power of Sales and Operations Planning

A lot of businesses are adopting the concept of sales and operations planning into their organization simply because the owners have seen its power to improve the overall operations of the business. A lot of businesses go through seminars, case studies and several meetings so that they can implement sales and operations planning to their organization. For many, S&OP is a complicated, time-consuming and difficult procedure to go through. But once this is properly implemented, the business will reap the fruits of their efforts and hard work and the business will benefit much from it. So, what can S&OP really provide for a business?

It help in supply and demand planning: This is focused on ensuring that there will be balance in the supply and demand aspect of the business. This plan should last for about 1 - 2 years. After the plan was successfully followed for this span of time, the organization will again regroup and think of better plan so that they can level up when it comes to their operations. S&OP aims to meet sales expectations for the business. This will then push the employees to do the best they can just to be able to follow the plan and its goals. This is somehow considered as a motivational tool for many organizations.

S&OP will also assure that all resources will be used to its maximum level. This can help work out a smooth flow when it comes to supplies, demand and delivery. With this planning, there will be no confusion on the supply and demand aspect of the business. As a result, all orders and requirements will properly be addressed and met. Aside from this, the financial aspect of the business will also be touched and organized. Since it will be making sure that all supplies will be enough for the demand, it makes sure that the profits will be bigger than the expenses. It will also make sure that procurement will mean profits for the business.

And lastly, S&OP will give a clearer and simpler concept on how the business operations should be. With this, the staff will not be confused with what their tasks should be. It will also help clear out which task should come first. This will then provide a smoother flow of tasks which results to clearer and better operations.

Implementing S&OP in an organization has lots of benefits to give. A business will surely gain a lot from this planning. Though this is often thought as a waste of time, a lot of businesses have realized that it is worth the time spent in learning and implementing this to their business. It takes a few changes before a business can achieve what the owner really wants from it. And if the changes will mean better profits and longer time in operations, then it is worth to take these changes. A lot of businesses are now taking consideration of implementing this S&OP to their organization. There are companies that can be consulted with so that the business can properly implement S&OP to their organization.

5 Steps For Measuring Demand In Business Operations

Demand forecasting is basic to any business plan or budget and even to some investment analysis for your business operation. Without measuring or forecasting we will never achieve our targets that set during Supply Chain Planning, Sales and Operations Planning, even without an accurate demand forecast of your product or service it is not possible to plan adequately for future events, moreover, to react them properly. It is therefore important for a company to have the ability to satisfy its customers and effectively manage its resources simultaneously. With this concept of a forecast as a request for any product or service it becomes critical to the proper utilization of resources, capacity planning and control of your demand planning.

Demand, as a rule, should be measured during a "typical" week in each month, for at least 4 months. There are few simple steps to do in order to measure what is and is not successful in your demand forecasting efforts

1. Examine your past sales records

The first simple step to predict your current demand is to go over your past records, which is the most frequently used indicator of current demand. You can take, for example, the last three business quarters to analyze and proportionate it with your future plans.

2. Track trends over time

This step is very popular because it is inexpensive. Following trends is a key for determining success. When you track metrics over time to understand your prospect-to-lead, lead-to-opportunity and opportunity-to-win stages, you can determine not only the quality of leads you attract, but also how well marketing is doing in terms of lead generation.

3. Seasonality of demand

As a smart business owner you need to forecast the costs of producing and selling your products for each period over the forecasting horizon. Consumer interest in purchasing particular products is only during a specific period within the calendar year. Using this knowledge, you can estimate what the market demand for your business will be. The market demand of your business is equal to your potential market share multiplied by the total market demand.

4. Forecasting current demand

This is one of the essential steps not only measure an item's seasonality and past sales but also current demand. In business the current demand is considered as the extent of market willingness to pay the ruling prices of good s and services. Forecasting current demand salespeople should measure the expected level of company sales based on a current marketing plans and an assumed marketing environment.

5. Forecasting future market demand

Demand forecasting for the future sales operations is the last step and we have two components here to measure: forecasting total demand and forecasting area demand. First forecasting total demand, we can measure area forecast using the same principles as with the current demand. A demand analysis would entail determining current demand and using assumptions for demand build up to predict future demand over the time period of the financial model.

To sum up all business owners would like to know the current as well as the future demand of their sales operations using the data of past sales records, following the trends and analyzing the seasonality of demand.

Design Considerations for Typical Supply Chain planning

Design Considerations for an effective supply chain system

Typical Supply Chain planning :

A typical supply chain consists of staging, packing and shipping to the customers. These functions in many evolved organizations are handled through supply chain systems through work flow driven processes. There is a tendency to continue with the operations as long as the orders are getting fulfilled within the contractual time frame. However, as the organizations grow the existing systems and processes which have been defined in the early stages may face the issues of scaling up to the new fulfillment obligations. This is partly because analytics capability is not inherent in some systems as they were not designed to be so in the first place.

For any supply chain to be effective instead of just being a fulfillment engine it must also include the features of forecasting i.e. supply and demand analysis, and optimizing shipping features among others. The challenge is to include these functions during the design for a startup organization/s as many inputs like inventory/stocking capabilities, future demand and geographies will at most be sketchy although these might well be included in the overall business plan and roll out schedules.

Inputs for Design:

Factoring the existing stocking capabilities i.e. warehouse disposition and future planned product lines.

Evaluate the pros and cons of centralized shipping vs localizing it in the operational territories i.e. corporate function vs organizational.

Have a system of checks so that any drop in inventory levels will trigger an alert to the shipping system so that available to promise dates and order quantities can be adjusted accordingly.

Evaluation of FOB terms and conditions and planning for preferred shipping carriers in relation to the most frequently used FOB can be undertaken.

Provision for simulating the supply chain system for different scenarios like holiday season and lean season i.e. stress testing should be built in the system so that optimum inventory levels can be arrived at for different periods.

Ability to generate inventory physical count and valuation on a periodical basis or on-demand so that overheads with respect to maintaining the inventory can be minimized.

Real time integration of Proof of Delivery with the fulfillment engine so that the customer operations can have up to date information.

Ability to recognize revenue at various levels depending on the contractual and payment terms. Ex: Order confirmation, completion of shipping or on receipt of delivery.

Ability to incorporate the various tax regimes structures and be able to calculate the tax components on the items shipped intrinsically. Ex: Sales, VAT etc.

Few more things that one can considered while designing Supply Chain planning. Medium and large scale industries are required supply chain management not only it help in avoiding unwanted situations, but also also very useful for implementing other planning like Demand Planning, Inventory Planning & Sales and Operations Planning (s&op). Business owner  must opt for perfect supply chain solutions.

Demand Planning - Scenarios we should know

Today, we are going to share about the things we need take into account before preparing demand planning. In 80s or early 90s we were not required to plan much about our product demand, analyzing risk factors, changing trend in coming time etc, but now things are totally different. We are living a competitive market where so many things happen around us and being a businessman we are required to analyze the things that help in finalizing the optimum utilization of the resources, alternates, managing labor, availability of resources and many other things. Reason behind the analyzing so much things just to have demand planning that work I real world scenarios. 

Once we know what we can do, how we have to do it, what are responsibilities we are required to share with our staff, number units to manufacture, then things became easy to achieve. Demand forecasting helpful in many ways while implementing supply chain planning or Sales and Operations Planning (s&op). Try to understand our below explained scenario through which tried to explain why we need have perfect action plan in medium or large scale industries.

Let suppose if my market is in Asia and my business is located in North America, I will have to use either ocean or air shipping as part of my supply chain. If however, my primary market is within North America then I will rely on rail, road or air. How I decide which method is right for me will depend on numerous factors, not least of which will be cost and time sensitivity.

If my customer required me to expedite shipment, I might be required to consider shipping via air even though the costs involved will be much higher. These increased costs will be passed to the customer, however if my customer is not in a hurry for the shipment, they may be willing to accept longer wait times for the product in return for reduction in price. In this instance I may choose to ship over the road. This method of transportation is generally cheaper than transporting by air.

Rail shipments may be even cheaper, especially when dealing in bulk goods. Companies in the rail business can take advantage of economies of scale. Rail cars travel on predetermined tracks, decreasing friction and increasing environmental efficiency. As a result, one locomotive can haul a large amount of rail cars. If your customer is not in a hurry, there may be great cost savings for both parties when shipping by this method. However, this method is inflexible and may not provide service direct to your customer’s door.

Prefer Shipping method that suits

Shipping over the road is the most common shipping system, This method can provide relatively rapid transport of goods to market, and is flexible enough to reach most destinations directly. Some companies maintain their own fleet, but most companies find it more cost effective to hire haulage companies to provide this service for them. It is cheaper than air and, while slightly more expensive than rail; it provides a good compromise when both speed and time are factors in the decision process.

In reality you may have to use a combination of shipping methods to move your product to market. These costs to you must be included in the cost of your product if your company is to remain viable. Returning to our original comments, Demand planning clearly is utmost importance to the success of any business. Understanding this process is not easy, but the entrepreneur must have resources according to the plan.


 

Demand Planning - opt today's generation approach

Collaborative demand planning: planning to next Level

As we discussed in our past blog's, that demand planning play a huge role in growing business. If we had a perfect demand planning then defiantly we are benefited for Cost, Revenue & Services.

One of our product called Demand Xpress which is an innovative product in today's requirement. Our product provides a comprehensive solutions for demand planning for all size of industries from small to medium. Its offers a full range of solutions capabilities that can be deployed in a fraction of both the time & cost of alternative solutions that provide comparable functionality.

ADEXA taking Demand Planning to next level

With the use our Demand Xpress product, one can improve their supply chain while helping in other planning like Sales and Operations Planning (s&op) & Supply Chain Planning.