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What Is Supply Chain Planning and What Are the Benefits?

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The challenges that occurred during the peak of the COVID-19 pandemic brought to light just how important supply chain planning (SCP) is and how underprepared many companies were to deal with unexpected supply chain issues. The issues that occurred across both local and global supply chains during this period caused many companies to reevaluate the importance of supply chain planning and learn ways to utilize it more effectively.

What Is Supply Chain Planning?

Supply chain planning is the first step of the supply chain optimization process. Put simply, supply chain planning is the process of coordinating assets and partners along a supply chain to create an efficient and streamlined flow of products, information and services, from the suppliers at the beginning of the supply chain to the consumers at the end of it. Good supply chain planning efforts will include analyzing various scenarios, capabilities and constraints to anticipate issues and create greater supply chain resiliency. This ensures that companies are creating a cost effective and efficient supply chain that can also respond to setbacks quickly.

What Are the Most Important Components of Supply Chain Planning?

Successful supply chain planning requires that many partners, teams, and processes work together seamlessly. Here are a few of the most important elements of supply chain planning.

  • Demand planning

Demand planning is one of the first steps of supply chain planning. When done well, it creates a solid foundation for the rest of the supply chain planning process. Demand planning involves looking at predictive and historical data, market conditions, projected sales, etc. to create a demand forecast which estimates how much inventory will be needed when. Done well, demand planning helps companies keep in-demand inventory in stock while avoiding the costs associated with unneeded inventory surpluses. Demand management was historically a time-consuming task, but advances in supply chain management software have made it easier. This type of software can track supply chain data such as market conditions and sales in real time. It also makes use of predictive analytics to give supply chain managers data in real time that can be used to plan and forecast quickly and accurately.

  • Supply planning

Once your demand plan is in place, it is time to create a supply plan that meets the inventory needs laid out in the demand plan. Supply planning involves figuring out where your company will source things like raw materials and other items needed for production. This stage of the process makes sure you have the materials needed to meet product demand in the most efficient way.

  • Production planning

Once you know where your materials will be sourced from, the next step is production planning. This step is where you figure out how materials, employees, etc. will be allocated during the production process. Done correctly, this part of the planning process streamlines the production schedule to lower waste, meet inventory demand, lower costs and raise overall production capacity.

  • Sales and operations planning

Sales and operations planning (S&OP) allows different teams across a company to get on the same page during the planning process. This type of integrated business planning allows sales and marketing leaders to merge plans with viable operations. Sales and operations planning allows teams with different objectives to plan and problem solve together. This helps avoid costly miscommunications down the road and ensures that every team knows what they need to do to get a product to market.

What Are the Advantages of Supply Chain Planning?

  • Lowered costs and higher profits

Cost management is a main advantage of supply chain planning. A good supply chain plan will almost always lower costs and raise profits. This happens due to things like better inventory balance, optimized storage solutions, faster customer service and better relationships with distributors, vendors and suppliers. Overtime, the benefits of supply chain planning can help streamline processes enough to increase output and profits.

  • Higher output

An optimized supply chain includes clear collaboration and communication with partner companies such as vendors, suppliers, shippers and transporters. This leads to higher output of goods from the supply chain, as less delays are caused by misunderstandings and miscommunication.

  • Greater efficiency

A well-planned supply chain is capable of dynamically adjusting to things like emerging markets, various fluctuations in demand, seasonable demand for certain products, etc. Having a supply chain like this in place creates improved efficiency and ability to meet customer demand in a timely manner.

  • Increased collaboration

One thing that sets a successful company apart from unsuccessful one is good communication channels. In a supply chain, if communication is poor, employees, vendors and distributers will struggle to know what to do next. Many costly mistakes in supply chains are due to poor communication. Thankfully, establishing good communication across your supply chain is easier than ever due to new technologies that can communicate vital information across teams in real time. Utilizing supply chain software along with training your team in good communication techniques can do wonders for the productivity of your supply chain.

  • Fewer delays

Good communication and pre-made contingency plans can help lower or even eliminate delays across your supply chain. In a smoothly functioning supply chain, everyone knows their role and how to quickly address any issues that may arise. This ultimately leads to less delays and to customers getting their items quickly.

  • Optimized resource allocation

Effective supply chain planning allows managers to see how actual resource allocation is occurring across the supply chain in real time. This allows them to make more informed decisions when there are resource shortages or excess resources. This ultimately can help companies drive down costs by simply channeling available resources in the best direction.

How enVista Can Help

enVista’s supply chain planning team has years of experience helping top-tier companies solve their supply chain planning issues quickly and simply with strategic planning. Our supply chain consulting experts can help you find areas where your company is losing profits and customers due to poor supply chain planning and help you create processes that will prevent miscommunications and delays in the future. Let’s have a conversation™ to see how our supply chain consultants can help your company meet your short and long-term business objectives.

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