The Supply Planning Process

The supply chain planning process involves coordinating the movement of goods, from raw materials to finished products, in a supply chain. Here are the steps in the supply planning process.

 

Forecast Demand

Forecasting demand for products is the first step in the process. It involves analyzing historical sales data and market trends to predict the level of product demand in the future. It is important to develop these forecasts regularly because there are many external factors – such as inflation or the inability to get raw materials due to trade sanctions – that could impact sales of your products. These potential disruptions must be considered when planning for future inventory requirements to support an efficient supply chain.

 

Demand can be determined by analyzing sales levels, historical data, customer surveys, and past trends. The forecast relies on sales forecasts because they show how market demand will change over the product’s life. 

 

Depending on the type of product you are selling, you must also project custom orders. You can project the custom order from various sources, and each custom order should be considered a separate demand element rather than a single lump sum for each item in the sale. It’s more efficient to handle your customers as individual buyers.

 

Determine Sources of Supply

Once the forecast demand is known, the next step is identifying the sources required to meet that demand. This process includes identifying suppliers, negotiating contracts, and establishing inventory levels.

 

For retail stores, this step involves identifying the supplier’s location and establishing a contract to buy products. For consumer goods producers, this step would include finding suppliers to provide raw materials for their production process. 

 

With this step, you may also identify changes in payment terms, such as requiring immediate payment or accepting open account credit terms with your suppliers. Your objective is to set up a supply plan that supports your business strategy while managing cash flow and working within your company’s budget allocations.

 

Schedule Production

Based on the forecast demand and the sources of supply, the company creates a production schedule based on the availability of goods necessary for production. Scheduling production affects the order of the usage of raw materials and the manufacture of finished products. 

 

It involves setting up production schedules to meet demand and coordinating with suppliers to schedule plant production runs. For example, a manufacturer may set up a production schedule based on raw material and labor availability, known as manufacturing resource planning (MRP). MRP is a computerized system that schedules resources to meet demand.

 

Plan Transportation

Plan the transportation of goods from the supplier to the manufacturer and from the manufacturer to the customer. This requires selecting carriers, coordinating with multiple carriers, and determining the most efficient modes and routes to get the product where it needs to be when it needs to be there.

 

Manage Inventory

Inventory management involves allocating space and other containers required for storing materials in a distribution center. It determines the optimal inventory levels to maintain for production schedules’

 

A key component of inventory planning is understanding what drives demand for an item. Inventory monitoring is automated to identify trends in the market, order patterns, and sales history. This information determines how much product should be acquired to have sufficient supplies before selling at the optimum price.

 

Monitor and Adjust the Plan

The supply chain management planning process is ongoing, and the plan may need to be adjusted as market conditions change or new information becomes available. Regularly review and update the supply plan to ensure that it remains effective.