The concept of supply chain management has evolved significantly in recent years. In the past, companies relied on a mix of Enterprise Resource Planning (ERP) systems, spreadsheets, and cloud-based planning platforms. Regardless of this this approach’s wide-spread popularity, without the implementation of connected supply chain planning, many process gaps remained open or unidentified. As a result, many companies were forced to face-down tough challenges and ask themselves the following questions.
- As a manufacturer, what do you do when natural disasters and labor issues interrupt the supply chain?
- Are critical forecasted numbers accurately updated and shared with all relevant stakeholders, including sales, finance, and operation teams?
The large-scale transformation of supply chain management also means businesses can’t afford to stand still and must constantly evolve to remain competitive. In this article, we’ll define exactly what a connected supply chain planning is, explain its importance, and discuss what businesses can do to implement a successful strategy for achieving it.
What is Supply Chain Planning?
The supply chain management planning process involves four important steps that take a product from raw material to the consumer. This includes supply planning, production planning, demand planning, and sales and operations (S&OP) planning. We cover these in more detail below:
- Supply chain supply planning involves analyzing the best ways to fulfill the requirements highlighted in the demand plan. The main objective is to balance supply and demand, so delivery times are always met with efficiency and businesses are never left with surplus material. This balance is critical for achieving an organization’s financial and service objectives.
- Supply chain demand planning is the process of forecasting demands to ensure products can always be delivered on time. Accurately doing so can support forecasting revenue, aligning inventory levels, and enhancing profitability for a specific product or channel.
- Supply chain production planning identifies production and manufacturing requirements within an organization. It involves allocating resources and assigning employees to roles that will result in production capacity.
- Supply chain sales and operations planning is a management process that supports a businesses’ leadership with sales, marketing, demand management, production, inventory management, and new product introduction.
The Challenges in Global Supply Chain Management
Supply chain challenges highlight the need to reassess and develop new strategies. Here is a look at some of the most significant challenges in global supply chain management faced by many businesses today.
The COVID-19 pandemic has caused major disruptions since 2020. The challenge today is to create new strategies and address the issues of supply chain management that come with an expectation of frequent, significant, and combined disruptions.
A world recovering from disruptions caused by the COVID-19 pandemic demands higher transportation and logistics costs. This includes fuel, labor, port congestion, and replacing materials with sensitive expiration dates.
Lack of transparency
One of the most significant challenges in global supply chain management is a lack of transparency. It is one thing to lose track of an order or shipment in transit, but it is another altogether to lose an entire ship or a huge supply of raw materials.
Raw materials, paper products, commodities and silicon shortages are leading to popular product lines being scaled back.
Increased supply chain complexity
All of the above work in concert to render the supply chain more complex. This increase in complexity can overburden a demand and supply planning system if it is soloed or fragmented, increasing the need for connectivity.
New processing technologies
Technologies such as the Industrial Internet of Things (IIoT) are revolutionizing global manufacturing operations. The introduction of advanced tech can strain manually driven demand and supply systems and lead to additional supply chain management issues.
The Supply Chain for Dummies Guide provides a an easy-to-understand guide for inventory management technology designed to increase production rates, accelerate processes, reduce risks, lower costs and improve quality.
Positive Business Outcomes of Connected Planning
A well-orchestrated supply chain plan that is connected throughout the business gives organizations a significant competitive advantage.
Businesses who implement a well-balanced supply chain planning system can expect:
- Enhanced throughput: Effective supply chain planning allows an organization to increase its production capacity, resulting in greater throughput, better yield, and superior output.
- Improved efficiency: The relevant information gathered during the supply chain planning process helps manufacturers make proactive decisions that improve efficiency and execution. It also makes organizations more agile in responding to customer demands and handling unexpected challenges.
- Lower costs: Supply chain planning reduces costs around the business, including inventory costs, shipment costs, operational costs, and damaged machinery.
- Better resource allocation: Thorough production planning allocates resources and assigns employees to roles that will result in production capacity. It also helps manufacturers make more informed decisions about resource shortages and excess resources which contributes to lower costs.
- Reduced operational delays: Connected supply chain planning means everyone who is involved in production and shipping is clear of their role and responsibilities and provides leadership with more visibility over manufacturing processes. This reduces operational delays, avoiding issues like late shipments, logistical confusion, and delivery delays.
Strategies for Achieving Connected Supply Chain Planning
We have discussed the value of supply chain planning and control but understanding how to implement a system that works is a different matter. In this section, we look at successful strategies for achieving a connected supply chain planning system.
Demand-driven planning based on real-time insights
A successful supply chain plan is demand-driven. It uses accurate forecasting tools to provide real-time insights to ensure effective management of the potential challenges we discussed earlier. It will also allow businesses to predict customer demand, allowing for better resource allocation and the opportunity to tweak pricing to maximize revenue. IIoT and AI can be used to gain insights into real-time inventory tracking, something we will discuss more in ‘The Role of AI in Supply Chain Planning section.
Managing your supply plan to overcome dynamic fluctuations
An organization’s supply chain plan needs to be adaptable to fluctuating market scenarios, changing opportunities, and potential challenges. Flexibility to cope with change and an agile approach to planning allows organizations to be adaptable to changing customer needs.
Staying ahead of customer trends not only means increased revenue and the beating of competition, but it also provides manufacturers with greater visibility across the value chain, streamlined warehousing and distribution, and accurate decision making.
Integrated sales and operation planning
The objective for sales and operations should be to use strategic business planning to achieve better alignment when it comes to sales, distribution, logistics, etc. There are so many processes within supply chain management that if not managed properly, can become the source of major disconnects between finance, strategy, and operations.
The solution to fragmented processes is the creation and implementation of a connected supply chain plan that considers all the different channels in one overarching strategy, using supply chain forecasting for critical data-driven business decisions.
Optimizing inventory strategy
Manufacturers face a range of issues right across the inventory chain, leading to the loss of revenue, frustrating paperwork, and potential damage. Optimizing inventory management strategy can be key for businesses looking to overcome these challenges and benefit from lower costs, fewer issues, and happier customers.
Focusing on profitability, innovation, and diversification
Product-orientated decisions can limit innovation and profitability. Instead, focusing on profitability, innovation, and diversification through effective collaboration can ensure that products are manufactured at the right cost, place, and time.
Focus on driving the right decisions early in the product life cycles to increase production capabilities and operational efficiency.
Make a sustainable, reliable, and predictable supply chain the core strategy
Achieving a connected supply chain plan will only work if there is a sustainable supply of goods or services that meet customer demands. This is done by implementing the right technology infrastructure, analytical insights, and efficient application to decrease operational costs and damages.
Artificial intelligence (AI), the Industrial Internet of Things (IIoT) or Asset Performance Management (APM), and other technologies are rapidly becoming more influential in manufacturing, and this applies to supply chain planning and operations. Businesses should be keeping an eye on the evolution of artificial intelligence and the potential it has to bring meaningful innovation to their industry.
AI is capable of reducing supply chain costs, managing inventories, and eliminating potential bottlenecks. It can also provide real-time insights that allow leadership teams to make informed decisions that can boost productivity and optimize resources.
If you’re looking for additional support improving your current supply chain planning strategy, Plex DemandCaster automates processes, provides robust inventory forecasting and optimization software, and can empower teams to reduce costs through better, more precise planning. Contact us today to find out how Plex DemandCaster can help your company achieve connected supply chain planning.