Well-designed supply chain plans can help companies effectively manage their supply networks to deliver goods and services to their consumer markets. Creating an adaptable and detailed plan can improve the company's capability to meet consumer demands while maximizing profits. Knowing how to create a supply chain plan can ensure that your organization accounts for production supplies and customer demands for an evolving market. In this article, we explore what an effective supply chain plan encompasses and how to create a plan in six steps.
What is a supply chain plan?
A supply chain plan is the process of companies determining the ideal manufacturing and sales volume to achieve profit or revenue-related goals. This plan usually involves specific steps a company can take to achieve profit goals. These plans often factor supplies, production, market demand and sales into the steps. Supply chain plans are typically long-term plans that may encompass a year or longer depending on specific company production and revenue goals.
What is the supply chain planning process?
Several parts of the planning process help companies convert raw materials to finished products that are then distributed to consumers. The five parts of supply chain planning include:
1. Supply planning: The first part of the process is managing the physical supply of goods or services. The objective of this step is to balance material supplies with consumer demands to maximize revenue while meeting market needs.
2. Production planning: The next part of the planning process involves the production and manufacturing processes within an organization. This step analyzes the resource allocation of employees, raw materials and production capabilities.
3. Demand planning: Demand planning involves forecasting consumer needs to ensure that the company can meet those requirements. Accurate demand planning can help companies forecast revenue, align inventory requirements and enhance company profits.
4. Operations planning: This step helps companies develop specific operational processes to improve their supply chain effectiveness. This step might determine logistics scheduling operations, production timelines and gap analysis requirements.
5. Sales planning: This portion of the planning process can help companies determine actual sales goals and other crucial supply chain drivers that influence sales. The goal of this step is to consider sales, marketing, demand management, production, inventory management, new product introduction and how it affects the overall supply chain.
How to build a supply chain plan
While the specific steps to build an effective supply chain can differ between industries, companies follow several common steps to build a comprehensive supply chain plan. Here are six steps to consider when creating your supply chain plan:
1. Review company goals
Reviewing your company's revenue and production goals can help you determine inventory levels and daily production output. It also helps your company create marketing and sales strategies that can aid them in reaching revenue goals. This can also assist you with aligning different departmental operations with the overall supply chain plan.
2. Perform market research
Conducting market research surveys or analyzing market trends can help you understand what products or services might be successful. Market research is largely useful if your organization's products or services rely on customer trends or seasonal offerings. This can ensure that the final products you create will still be relevant when they reach consumer markets.
3. Forecast consumer demand
The next step is to anticipate future consumer demands to ensure that your organization can meet market needs. This can help you determine inventory requirements, storage capacities and logistics needs. Additionally, predicting future needs can help prevent supply or product shortages.
4. Allocate inventory requirements
Translating consumer demands to an inventory and replenishment plan can help ensure that your company has enough inventory to consistently meet demands. Determining current and future inventory needs can also help you gather data regarding company expenditures and profits. Another item to consider when creating inventory requirements is how long your inventory can maintain its quality. For example, if your company handles perishable products you should plan to only keep an inventory level that maximizes product quality for final consumers.
5. Fulfill consumer orders
Order fulfillment is essential to meeting consumer needs and fostering long-term relationships with your customer base. Planning the logistics to transport your company's goods to the final customer can help you expedite transportation timelines. Some ways to help plan the logistics of order fulfillment include using a third-party logistics (3PL) company to physically transport their goods to consumer destinations.
6. Ensure planning flexibility
Allocating enough flexibility in your plan for changes can help your supply chain plan maneuverability. Some changes that you might consider include supplier, inventory, demand or logistical changes. This can decrease the time taken to re-forecast needs which can result in reducing expenditures that improve overall company profits.
Benefits of a supply chain plan
Creating a well-balanced and organized supply chain plan has several benefits for your organization. Some of those benefits include:
• Enhanced throughput: Creating a well-planned supply chain increases the overall capacity of the supply chain itself. This can allow your organization to increase production capacities, increase production yields and improve finished product output.
Improved operational execution: Accurate planning allows companies to make proactive decisions to ensure they meet changing consumer needs. This can improve your company's efficiency because you're proactively responding to customer needs rather than reacting to market changes.
• Decreased costs: An adaptable supply chain plan can help decrease company expenditures such as inventory costs, logistics expenditures and production costs. Accounting for change within your plan can also prevent unexpected expenditures such as additional inventory sourcing or new transportation plans.
• Improved resource allocation: Once you analyze and determine average resource requirements for your company, you can better forecast future resource needs. This can help ensure that your resource allocations actually match production requirements that can reduce waste or unnecessary expenditures.
• Reduced operational delays: Incorporating communication pathways in your supply chain plan can help reduce operational delays across the entire supply chain process. It can also help prevent late shipments, logistical misunderstandings and delivery impediments.
Clarified responsibilities: Your plan can also help clarify the role each part of the supply chain holds in the overall performance of the company. This can help prevent functional redundancies and improve chain-wide communication.
How can technology help build a supply chain plan?
Incorporating technology into your supply chain plan can help companies create agile, flexible and profitable plans. Using technology to help manage inventory tracking, monitor supplier contracts and track logistical requirements can help improve the efficiency of the supply chain. It can also prevent processes from overwhelming individual chain components and creating delays. This can ultimately improve the availability of goods and services to consumer markets and enhance company profitability.
