Streamline Your Supply Chain Strategy Using These 3 Steps

Did you know that the supply chain of an organization impacts every single facet of the business? However, today’s supply chains are constantly changing, and leaders are being forced to reduce costs and increase efficiencies each step of the way. With the recent spike in demand volatility due to the pandemic, supply chain leaders see a clear need to accelerate their processes and increase their agility through improved demand planning and forecasting.

The organizations who are doing it right have robust planning, modeling, and analytical processes in place, which gives them a significant performance advantage over their competition. This article reviews the steps that those successful organizations are taking to maximize their supply chain efficiency and what you can do to start implementing these new strategies and technology within your team today.

Step 1: Map Out Your Demand Plan & Forecast

First, a supply chain strategy starts with a demand signal that’s based on some type of forecast, projection, or actual order. To create a forecast, there are several functions within an organization that are likely to be involved, such as sales account managers, product managers, channel managers, demand planning function, financial planners, and the forecasting process owner.

The goal is to develop a consensus from multiple inputs and distill them into one forecast for a given SKU. Making this happen repeatedly and on-time requires strong internal collaboration, plus a tight analytical, disciplined process. Best-in-Class companies — or the ones who have top systems and processes in place — are 48% more likely to have a collaborative process in their forecasting process and are 34% more likely to arrive at a single demand forecast based on multiple inputs across the organization. Without mapping out a demand plan and forecast, organizations simply won’ have a clear view into their supply chains.

Step 2: Create a Feasible Operations Plan for Execution, Based on the Demand Plan

Next, the Sales and Operations Planning (S&OP) process, or Integrated Business Planning (IBP) process, encompasses the demand planning function, and uses that input for determining the execution plan. Best-in-Class companies are 74% more likely to have an S&OP/IBP process in place according to the figure below.

The fundamental baseline requirement of the process is to create a feasible operations plan for execution based on the demand plan in a supply/demand balancing process. Ideally, the demand exactly matches the available capacity, but that is seldom the case. The supply/demand balancing process revolves around determining “what it will take to meet the demand” — often referred to as an unconstrained view of the plan — and “what can be supported with the existing capacity and resources” — commonly referred to as the constrained view. The goal is to achieve a feasible plan that can be executed. The outcome of the process will often lead to adding capacity to meet the requirements, or conversely, looking for some growth opportunities to better utilize the existing capacity, or it could be a combination of both depending on the demand mix.

Step 3: Implement End-to-End Supply Chain Modeling

Lastly, according to Aberdeen’s latest supply chain survey, approximately 18% of companies have solutions that operate concurrently in their planning such that the impact of any change can be seen immediately across the entire supply chain. For that matter, Best-in-Class companies are 86% more likely to have an “end-to-end” supply chain model for decision making. They are also 20% more likely to have the planning system integrated into the financial planning and budgeting processes, so that any out-of-tolerance conditions can be detected immediately in the form of an exception alert.

Having supply chain analytics to support planning across multiple data sources provides further insight into options before changes are initiated. The consolidation of multiple sources on a timely basis can be make or break for supply chain capabilities.

Furthermore, customer mandates for faster and improved service, along with demand volatility, require an agile and responsive supply chain organization to recognize issues and take corrective action. Having a model and the analytics to critically evaluate the constant churn in a controlled manner is the difference between chaos and a smoothly operating supply chain. All things considered, if you follow these steps outlined above, you’ll be on your way to streamlining your supply chain strategy, resulting in better outcomes across the entire business.

This post was contributed by Brian Michelotti, Research Editor, & Bryan Ball, Vice President and Group Director, Supply Chain, ERP, GSM and Finance Practices.