Every company does supply chain planning.  You always need to have a sense for how much you can get and at what cost.  But not everyone does it efficiently.  Would you consider your companies supply chain plan efficient?  If demand changes, how long does it take to get a new supply chain forecast?  If the answer is “too long”, you might need to evaluate your supply chain planning process.

supply chain

What do you plan in Supply Chain?

This might sound simple, but it is important to know what you can control and what you can’t and focus on planning those metrics.  You cannot control how much product is sold (at least from a supply chain standpoint). But,  you can control which factory produces it.  You can’t control the cost of raw materials, but you can make sure you are buying from a vendor that is close to the factory.  These are the sorts of metrics that you should be focusing on when creating a forecast, and you should build your planning model to reflect that.

supply chain

How does everything work together?

Apart from choosing the right metrics, you should define a process that allows you to reduce the number of input and have your system determine network optimization.  In most cases, you want to produce at the low-cost option until they reach capacity. Then use the second lowest cost option for overflow.

Choosing the low-cost option isn’t always straightforward though.  You need a forecast that includes all costs in every option.  This includes raw materials, manufacturing, storage, shipping, and anything else that may be needed for the final product to the customer.  You might also want to include a turn around time.  That way you can build a model to have orders in process. And if something changes in a short-term horizon, the system knows which options allow for on-time order fulfillment and at what cost.

Where are you planning?

In a lot of cases, this is Excel.  Or some tool to predict our manufacturing volumes, and Excel.  Or tools to help us purchase raw materials, and Excel.  The reality is that most companies use Excel as the central repository and main reporting tool for all their supply chain planning. This has limitations though.  The biggest being it prevents you from doing a continuous forecast.  All budgets, forecasts, and estimates must be event-driven and someone will manually have to put everything together. You lose flexibility to do things like high low planning (unless your team members are organized and coding wizards with Excel), and it always takes much more time than it should.

One option to consider would be using Adaptive Insights for planning your supply chain.  Adaptive Insights allows you to plan, report, and analyze your supply chain environment all in one place.  It is fast enough to calculate any changes as they are made, powerful enough to allow you to analyze your business in the way that works for you, and easy enough so your end users can intuitively figure out what they should be planning.

If you are still using Excel as the focal point of your supply chain planning process, you need to start looking at modern tools for planning and analysis.  Contact eCapital Advisors for a demo today.

David Grande

David is a certified implementation specialist and has led, designed, built, and deployed multiple enterprise-wide implementations at Fortune 500 companies across a variety of industries. He specializes in corporate finance processes and technologies but has also led implementations in sales, supply chain, and SG&A.

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