5 Key Steps to Supply Chain Planning

5 key steps to supply chain planning

Supply chain planning is the first step to productively manage the movement of goods throughout its network of suppliers, manufacturers, and retailers. By developing a well-defined plan, businesses will have the opportunity to organize their operations and gain visibility into their potential performance.

5 Tips on Supply Chain Planning

Supply chain planning is the process of coordinating an item's journey from being a raw material to an end product. It also involves strategizing the distribution, delivery, and transportation of goods, as well as managing inventory to maintain opportune levels of stock.

Effective supply chain planning provides many advantages to businesses, such as minimizing inventory-related costs due to over-ordering products and having an overstock of items.

Businesses will also improve their efficiency, as each organization in the supply chain network is aware of their roles and responsibilities. Additionally, a proper supply chain plan will outline appropriate communication methods to ensure that suppliers, vendors, and manufacturers can cooperate and collaborate. In turn, productivity will boost, the output will be increased, and production delays will be eliminated.

Organizations can streamline their supply chain planning and management with the implementation of inventory software. These digital tools can help managers plan their supply chain, communicate with different parts of their network from any location, and assess demand forecasts and real time data reports.

Businesses that want to effectively strategize the supply chain can follow these 5 steps-

1. Define a Plan

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To begin resource planning, it is important to determine a business's goals regarding sales, profits, and revenue. Organizations can effectively do this by conducting demand planning.

Demand planning is a key supply chain management process that enables business owners to forecast consumer demand for products and services using historical sales data and statistics.

This insight allows for informed decisions to be made on how to satisfy customer expectations while reducing instances of a surplus. It also provides information about seasonality and a product's life cycle in the market.

When planning, it is also important to consider the suppliers that will be in the supply chain, costs for manufacturing, delivery targets, and transportation expenses. This will help a company identify ways to be more cost-efficient and profitable.

2. Have an Inventory Strategy

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To ensure that inventory is properly replenished to meet customers' needs, organizations should curate a strategy for safety stock. This refers to additional amounts of inventory that a company has on-hand to minimize the chance of stock-outs. Reorder points, which is the minimum quantity a business should have of a stock item before they must reorder more product, needs to be established as well.

Having an inventory strategy that addresses these components will allow management teams to productively oversee and maintain stock. It will also help businesses plan their ordering and delivery schedule with suppliers and distributors.

3. Optimize Supply

Businesses with multiple warehouse facilities have the responsibility of managing all sources of inventory. This means management teams must monitor all locations and make purchase orders to ensure that inventory at all warehouses is balanced and consistent.

The latest inventory technology can help businesses with multi-location management by offering features that allow users to make orders for a specific warehouse at any location. These solutions also use advanced artificial intelligence (AI) to automate ordering, which will save managers time from having to count and calculate their inventory.

4. Manage Constraints

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Constraints refer to obstacles that may limit a business's output. For instance, scheduling too few employees on a production line can cause fewer products to be created. Companies can manage their constraints by balancing worker capacity to product demand. This will ensure that demand is fulfilled and maximum levels of output are produced.

This can be simplified with scheduling software powered by AI, in which these tools use machine learning to match consumer demand with labor.

5. Make Informed Decisions

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To make decisions about supply chain management, business owners should be informed and familiar with data related to their sales, inventory, and profits. For example, if an organization wants to maximize its revenue and optimize the amount of stock they carry, it is recommended that they examine their financial trade-off in selling certain products.

Key Takeaways

  • Supply chain planning is key to managing the movement of products from manufacturers to consumers.
  • Creating an effective plan will enable businesses to reap many benefits, such as eliminate delays in the supply chain, reduce costs, and boost profits.
  • There are 5 steps to curating a supply chain plan- identify plan objectives, create an inventory strategy, optimize supply, limit constraints, and make informed decisions.