In the intricate world of supply chain performance, supply planning ensures products are where they need to be at the right time. Demand and supply planning are the backbone of any retail or e-commerce business, and they encompass all aspects of procurement, resource management, and distribution logistics.
When it comes to the complexities of supply planning and inventory management, leveraging software can be a game changer. Inventory planning software like Inventory Planner is a valuable asset for businesses that want to optimize their supply planning processes. By analyzing historical data, market trends, seasonality, and numerous other metrics, Inventory Planner provides accurate demand forecasts and reliable order recommendations, enabling your business to anticipate customer needs effectively.
In this blog post, we will examine everything businesses need to know about supply planning and how inventory planning software can help.
What is supply planning?
Supply planning is an ongoing, dynamic process that requires collaboration between multiple stakeholders in an organization, as well as with external partners in the supply chain. It plays a crucial role in achieving a balance between meeting customer demand and optimizing operational costs.
Supply planning involves analyzing demand forecasts, comparing them to inventory levels, and coordinating supply chain activities to meet demand. Supply chain planning includes everything that goes into optimizing the delivery schedules of goods, services, and information from supplier to customer, which balances supply and demand. The goal is to ensure the right product is available at the right place and time while minimizing costs and risks. This enables businesses to avoid overproduction or scrambling at the last minute to meet demand.
Supply Planning Process
The supply planning process involves many moving parts. However, when done effectively and utilizing the right data-driven insights, supply planning improves operational efficiency and cuts costs. But how do you know if your supply planning strategy is effective?
Analyzing demand forecasts
The first step in the supply chain planning process is to analyze customer demand to determine the expected demand for a product or service. This involves reviewing historical sales data, market trends, and other metrics that can impact demand. Inventory Planner can analyze your business’s historical data and market trends to forecast demand accurately.
By understanding what customers are likely to buy in the future, Inventory Planner can provide valuable insights for supply planning. The software optimizes ordering to ensure you have the right products at the right time while minimizing excess inventory and removing the need for manual processes.
Compare forecasted demand to existing inventory
Once the expected demand has been determined, the next step is to compare it to existing inventory levels. This helps to identify any potential shortages or overstocks that may need to be addressed. Remember, it’s important to align your supply chain planning strategy with your overall business strategy.
Coordinate supply chain activities
The next step is to coordinate the supply chain activities needed to meet the expected demand. This includes accounting for production schedules, calculating lead times, shipping speeds, and order fulfillment.
Inventory planning software can be a trusted companion in this supply planning process. You can use Inventory Planner to facilitate seamless supplier management, monitor performance, and address any disruptions promptly.
Monitor inventory levels
Throughout the supply planning process, inventory levels must be monitored to ensure they remain optimal. This involves tracking inventory levels, identifying potential shortages or overstocks, and making necessary adjustments to orders, vendors, and customer expectations.
Benefits of Supply Planning
Here are some of the key benefits of supply planning:
Decreased costs
One of the most significant benefits of supply chain planning is the decrease in costs that businesses can see in key areas such as inventory management, storage space optimization, and responsiveness to customer requirements. Businesses can reduce overhead costs and improve their bottom line by optimizing their supply chain.
Improved customer satisfaction
Supply planning ensures that products are available and delivered to customers at the right time and place, which builds brand loyalty. By making accurate predictions and maintaining adequate stock to meet sudden, unforeseen spikes in demand, businesses can improve their customer service and gain a competitive edge.
Minimized risks and increased agility
Efficient supply planning helps businesses minimize risks by diversifying their supplier base and keeping additional suppliers on standby to ensure that stock levels are not impacted if a vendor becomes unreliable. Advanced supply chain planning technology also gives you the ability to respond quickly to changes in demand or supply chain disruptions.
Increased output
Supply planning can help businesses increase their output by improving communication between sellers and buyers and optimizing the supply chain. By predicting demand and taking appropriate actions, businesses can adjust dynamically to fluctuations in demand, emerging markets, and the short life cycles of certain products.
Challenges of Supply Planning
Here are some of the key challenges of supply chain planning:
Lack of reliable data
Historically, the difficulty of combining a variety of data has been the biggest challenge for effective supply chain planning. Different teams work in functional silos, creating barriers to developing, sharing, and collaborating on plans. A lack of data, and more importantly, data analysis, can hamper effective supply chain planning.
Complexity of supply chains
Managing global supply chains can be complex, posing several challenges to businesses. When planning for numerous product SKUs across various locations and sales channels, it becomes challenging to efficiently manage the supply chain due to varying demand patterns and supply availability. As demand and supply dynamics differ across locations, creating different plans for each location becomes necessary to ensure efficient management.
Material shortages
Material shortages can occur due to a variety of reasons, including natural disasters, geopolitical events, and supplier issues. These shortages can lead to production delays, increased costs, and lost sales.
Lack of supply chain visibility
Supply chain visibility refers to tracking the movement of goods from the supplier to the end consumer. Without visibility, optimizing the supply chain and making informed decisions become difficult.
Inefficient warehouse operations
Inefficient warehouse operations can lead to overstocking, understocking, and stockouts, resulting in lost sales, increased costs, and decreased customer satisfaction.
Cost control
Managing costs is another challenge in supply chain management. Managing costs requires businesses to optimize their supply chain, reduce overhead costs, and improve their bottom line.
Changing consumer demands
Fast-evolving and rapidly changing customer needs have added to the current challenges in supply chain management. Businesses must be able to adapt to changing consumer demands to remain competitive.
Supply Planning Best Practices
Businesses can follow several best practices to optimize their supply chain. Here are a few:
Collaborate and communicate
Supply planners typically have to collaborate and communicate with the operations team, suppliers, and procurement to ensure available capacity and material in support of the supply plan. Businesses should ensure that all teams and functions within the organization are aligned and working toward common goals. This includes collaborating with suppliers and third-party vendors to ensure that everyone is on the same page.
Inventory planning software like Inventory Planner enhances coordination between suppliers and internal departments while simultaneously furnishing the business with real-time data, allowing the flexibility to make agile and informed supply chain planning decisions.
Establish trusted alliances with suppliers
Establishing alliances with suppliers and other partners can help businesses mitigate risks and improve their supply chain. By diversifying supplier relationships, businesses can avoid delays and ensure that supplies are not impacted. As a business, it is imperative to focus on achieving continuous supplier relationship improvements while reducing costs. These alliances should be based on mutual trust and the pursuit of common goals.
Use data to forecast trends
Data collection and analysis are critical for effective supply chain planning. Businesses can plan, budget, and monitor stock more effectively by studying historical reports and forecasting trends. Inventory Planner’s supply chain planning platform provides visibility into all parts of the supply chain, giving you the agility to adjust forecasts and operational plans to optimize supply planning.
Streamline inventory
Streamlining inventory is essential for avoiding delays and shortages. By balancing demand and supply planning, businesses can optimize inventory levels and ensure that they have the right product available at the right time. This is a key place to lean into software tools such as Inventory Planner to cut down on costs and get your replenishment plans right the first time.
Leverage inventory planning software
Inventory Planner is your ultimate solution for efficient supply and demand planning. Its precise demand forecast, driven by customizable models and real-time trend adjustments, ensures you stay ahead of consumer demands, striking a balance between the unnecessary costs of overstock and missed sales from stockouts.
The software provides automated buying recommendations based on 200+ crucial metrics, optimizing purchasing decisions and saving time. With seamless multi-location inventory management, you can avoid overordering and maintain inventory balance. The software’s insightful reporting tools refine your merchandising strategies. There are many reasons supply planners need inventory planners. Reduce the complexities of supply chain management and embrace Inventory Planner for streamlined, customer-centric operations.
FAQs
Supply planning vs. demand planning
Supply and demand planning are both key components of effective supply chain management, each serving distinct yet interconnected purposes. Demand planning primarily revolves around forecasting customer demand, thereby allowing businesses to anticipate future needs.
Supply planning determines how a business will fulfill the projected demand while still meeting its financial and service goals. Supply planning involves various componenets, such as setting expectations for manufacturing lead time, establishing minimum order quantities, synchronizing production processes, and overseeing safety stock levels.
How is production planning different from supply planning?
Production planning focuses on the manufacturing of products. It involves categorizing items into families based on similarities in design and production processes. The goal of production planning is to balance resources and demand, mapping out the entire manufacturing process, from gathering resources to producing finish products ready for sale.
How do you measure supply planning effectiveness?
Measuring and reporting supply planning effectiveness is essential for companies to optimize their supply chain operations and improve efficiency. Here are some key metrics that can be used:
Forecast Accuracy
This metric measures the accuracy of your forecast and how well it aligns with actual demand. A high forecast accuracy indicates that the supply plan is aligned with the demand plan, which can lead to better inventory management and customer satisfaction.
On-time delivery
This metric measures the percentage of supplier deliveries that are on time. Late deliveries can negatively impact a company’s manufacturing and delivery schedules, leading to increased operating costs and overall lead time. If you experience too many discrepancies between supplier deliveries, it may be time to find a new supplier.
Inventory Turnover
This metric measures how quickly a company is selling its inventory. A high inventory turnover indicates that the company is efficiently managing its inventory and is not holding onto excess inventory, which can lead to reduced costs and increased profitability.
Days of Inventory Outstanding (DIO)
This metric measures the average number of days that inventory is held before it is sold. A low DIO indicates that the company is efficiently managing its inventory and is not holding onto excess inventory, which can lead to reduced costs and increased profitability.
Supply chain cost as a percentage of revenue
This metric calculates the proportion of supply chain costs to the company’s revenue. A lower percentage indicates a more cost-effective and efficient supply chain.
Supply chain cost = (Supply Chain Expense Incurred / Total Company-Wide Revenue Generated) x 100
Perfect Order Index
This metric measures the percentage of orders that are delivered on time, complete, without damage, and with the proper documentation. A high perfect order index indicates that the company is efficiently managing its supply chain and meeting customer expectations.
Customer Order Cycle Time
This metric measures the time it takes for a customer order to be fulfilled, from the time the order is placed to the time it is delivered. A low customer order cycle time indicates that the company is efficiently managing its supply chain and meeting customer expectations.
Step up supply planning with the Inventory Planner.
Want to improve your supply planning efficiency? Don’t rely on outdated manual processes and incomplete data. Inventory Planner can help you strike a balance between meeting customer demand and maintaining a low-cost and efficient supply chain. Sign up for a free demo find out how to streamline your supply planning process.