Supply chain planning involves activities in order to meet future demand in the best possible manner. It’s a forward-looking process that tries to meet supply with demand. It’s a component of the Supply and Operations Planning (S&OP) process. It’s the entire planning process, which includes: distribution, manufacturing, and procurement operations according to demand forecasts, capacity constraints, and material availability.
There are a variety of gaps in the supply planning process where errors typically occur, but there are ways to navigate through them and ensure your supply planning is strong and accurate.
Gaps & Voids in the Supply Chain Planning Process
If you don’t plan properly, you will run into problems with your inventory. These may include:
- You might have too much stock, and items that have a shelf-life might expire before they are sold, meaning your inventory would go to waste before you have the chance to sell it.
- Not having enough stock means your customers might become unhappy when they cannot buy their favorite goods from you, meaning you could lose their business to a competitor. A stock out can be devastating to an enterprise.
- If you don’t account for peaks and valleys in your inventory, you could end up stocked incorrectly during certain times of the year.
- Capacity constraints can be a lethal hindrance. Even if you know you have a rush of sales coming, you still can’t store more materials than you have space for; in this scenario, make sure you are constantly ordering supplies to replace the inventory that is sold.
To make sure you plan the right amount of inventory, consider using supply chain planning tools that will help you forecast and analyze data, so you can accurately stock shelves and even consider the right time of year for a sale.
3 Ways to Tighten Your Supply Chain Planning and Work Through the Gaps in Your Process
Digitize Your Planning
Gone are the days of doing inventory checks by walking around with a pen and paper and tallying up what you have in stock. Digitizing your supply planning is the way to go, and has already helped revolutionize one legacy industry. By letting technology steer them, this HVAC enterprise was able to minimize obsolete inventory and improve forecast accuracy.
The tools are out there to go completely digital with your supply planning. While you will always want to look over the data produced by a computer, take the heavy lifting off your team so you can focus on what computers don’t do best — interacting with customers and creating a pleasurable experience for them when they are shopping at your business.
Using Tools to Look Ahead
Predictive analysis and forecasting are two types of tools that will make sure you are doing your supply planning correctly. To successfully demand forecast, you will want to use each of these tools.
Think of this as the type of analysis where you are looking at customer behavior. What trends does history show regarding the patterns of purchases people make? This is the type of data that is going to show your spike in winter gear in cold weather and bathing suits in spring and summer. People have a history of buying certain materials at a certain time a year.
Use predictive analysis to also help you decide when to put items on sale. Think of this like the after-Christmas sale on wrapping paper and ornaments. There are plenty of people who shop the day after Christmas to get discounted items to use during next year’s holiday season. In this case, it would be better to sell what you can, even at a discounted price, as it gives you more room to stock your inventory for items you will sell in the spring at full price. Don’t look at sales as a way you are losing money, think of them as a way you can help sell inventory that isn’t really in season or in style anymore.
Similar to predictive analysis, but this type of forecasting is going to analyze the materials themselves. This can be vital when you are selling batteries or selling products that contain batteries, so you can manage the shelf-life. While the trends in your customers habits might be driven by emotion, the items themselves also show patterns. Let historical data help guide you while you do your supply planning. Understanding forecastability will set your enterprise apart from all the others.
Don’t forget to apply some human oversight to the forecasting tool. For example, the global pandemic has changed the travel industry. If you historically sold a certain amount of a product that is used by passengers when flying, apply some knowledge and understand that next year you probably won’t sell the same amount as the world recovers and the travel industry gets back on its feet.
Circulate Your Inventory
Since inventory planning is so important make sure one of the solutions to avoiding gaps is to circulate your inventory. You want to avoid grabbing the first items off the shelf to fulfill an order. If you have a stack of batteries on the shelf when someone orders a battery, make sure you are giving them the oldest battery. This will ensure you can sell all batteries before their shelf-life expires.
If you pick a random one off the shelf, you run the risk that the newest battery will ship out. In this case, you might find that your older batteries end up obsolete. You won’t be able to sell these batteries, not because you haven’t had orders for them, but because you didn’t rotate your stock ensuring you sold them while their shelf-life was still valid.
This works for all types of consumable items that eventually go bad — batteries, items with batteries inside them, and most food products.
Does Your Supply Planning Need Adjusting?
If you have been struggling with supply planning, we’re here to help! Reach out and contact our team today, as we have been working in the supply chain industry for years. We have seen it all and can help you avoid the common pitfalls of inventory management.
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