These days, it’s easier than ever to start a successful business. That means there’s plenty of competition for everyone. Supply chain planning is the key to coming out on top. Optimising your supply chain processes will give your business the best chance at thriving in a competitive landscape.
In this supply chain planning guide:
What is supply chain planning?
Supply chain planning is the process of optimising the delivery of goods and services from manufacturer to consumer. It aims to balance supply and demand through accurate forecasting, ensuring maximum revenue and minimal spending.
The supply planning process involves:
- Forecasting customer demand based on historical data and market trends
- Identifying opportunities for optimisation throughout the supply chain
- Putting a strategy in place to capitalise on those opportunities.
In short, supply chain planning is about making sure you’re maximising efficiency through every phase of a product’s lifecycle.
Why supply chain planning is so essential
Supply chain planning is important because it allows companies to achieve greater revenue growth, remain competitive, and increase profit margins.
By reducing the cost and lead times of your goods, you’ll make more from each sale. As a bonus, all that saved cash can be reinvested into growing your business and developing better products for your customers.
As it stands, only 22% of companies have a proactive supply chain network.
By joining this exclusive group, your business gains an immediate leg up on the competition.
The 5 components of supply chain planning
Supply chain planning covers a lot of ground, so let’s break it out into its separate elements.
The 5 components of the supply chain planning process:
- Supply chain visibility
- Supply chain mapping
- Production optimisation
- Product pricing optimisation
- Implementation of supply chain planning software
Combine these and you’ll get an optimised supply chain planning strategy that brings in extra revenue and helps you cut unnecessary business costs.
1. Increase supply chain visibility
Supply chain visibility refers to how accurately you’re able to track goods as they move through the supply chain. Without it, you’ll struggle to forecast lead times and supply chain costs.
Only 6% of companies claim to have full visibility over their supply chain. Therefore, acquiring better visibility will give you a huge competitive advantage.
You can increase supply chain visibility by ensuring your systems and communications are optimised for accuracy and efficiency.
Improving supply chain visibility looks like this:
- Integrating data from your various systems into one centralised location
- Working with suppliers to increase supply chain transparency
- Automating data collection, analysis, and reporting
Supply chain visibility relies on accurate, synchronised data. That’s why you need to ensure you’ve got systems in place to collect key data relating to purchasing, logistics, inventory, and sales. And why you must communicate with your suppliers to keep your timing and pricing expectations accurate.
2. Set up supply chain mapping and event planning
Supply chain mapping is the process of documenting all of the individuals and companies involved in your supply chain, from manufacturing components to shipping out the finished product. This grants better vision over your supply chain network.
You can then use the supply chain map to assess opportunities for improvement and mitigate risk.
Use supply chain mapping to:
- Identify which steps in the supply chain are slow and costly.
- Prepare for risks ahead of time with contingency plans.
- Streamline your processes and eliminate bottlenecks.
- Assess how each link in the supply chain affects your cash flow.
This first step of supply chain mapping – risk identification – is called event planning. Each potential risk and bottleneck can be considered an event.
The rest of the process falls under ‘event management’.
This is where you fix, mitigate, or prepare for the various events identified in the planning stage.
In 2021, the number of global supply chain disruptions almost doubled year-over-year, according to data from Statista. Preparation is critical for coping with disruptive events.
3. Production optimisation
Production optimisation is where you look at the internal supply chain. That’s right: your own production process.
The goal is to analyse and improve the efficiency of how you turn parts into products. Or, if you’re a middle-man retailer or wholesaler, how you manage your warehouse.
In simple terms, that means working out exactly how many products you’re able to have ready for customers in a given period and where the opportunities are to make more products at a smaller cost.
To optimise production, consider your:
- Staff costs
- General overheads
- Overall efficiency
Start with the items or processes that have high costs and the most room for optimisation. Continue to optimise until your entire production ship is firing on all cylinders.
4. Pricing optimisation
Price optimisation is where you analyse customer and market sales data to find the optimum price point for your products and services.
The aim is to determine the best price that will encourage customers and increase your total profit.
This is one of the more challenging steps in supply chain planning. You must predict how customers will react to a pricing change and how that will affect total profit.
For example, if you raise the price of a product by 10% that may result in a higher margin for that product but less total sales. It’s up to you to work out whether the overall gains will be worth the loss in sales.
Price optimisation is a continuous process. It’s about constantly assessing and optimising your prices as your business grows. Monitor any pricing changes to see if they’re helping or hurting your business and revisit your pricing strategy at least once per year.
5. Supply chain planning software
Supply chain planning software helps you to plan and organise the different parts of your supply chain. By automating the data collection and reporting process, this software will allow you to make accurate predictions and track the success of any optimisations made.
For product-based businesses, Unleashed is the ultimate supply chain solution.
Unleashed supply chain planning software allows you to:
- Track and manage all your suppliers in one place
- Create purchase orders
- Seamlessly transfer data into your accounting software
- Easily analyse sales data
- Measure supplier delivery times
- Access full visibility of your production and assembly metrics
- Automate your KPI monitoring
Supply chain automation is critical in business, especially when you’re dealing with a high volume of sales.
Invest in good software early on to give your business the best chance at success.
Supply chain planning strategies
Supply chain planning can be tackled all at once or piecemeal depending on the size of your team.
Either way, the first thing you should do is establish metrics and KPIs. These will help you stay on track as you begin to execute your changes and ensure everyone is working towards the same goal.
Customer demand planning is the process of forecasting how popular a product will be (volume of future sales) in a given period.
It allows you to optimise other processes, such as production and inventory replenishment, to improve how efficiently you’re able to fulfil customer orders.
Your demand planning process should include:
- Collating historical demand data based on sales and seasons
- Using this data to make a preliminary forecast
- Researching and integrating data from your industry and your competitors
- Identifying potential risks to demand stability, such as seasonal shifts or major events
- Reconciling new data and demand stability risks with your original forecast
- Creating a final forecast based on all available information
The best way to do this is by using business intelligence software, such as Unleashed’s BI tool.
Supplier optimisation involves sourcing and procuring the best vendors for the various parts, products, software, and services you need to run your business. This will ensure your business is running at maximum profitability.
Insider tip: You’re not necessarily looking for the supplier with the lowest prices per item or service.
When optimising the vendors in your supply chain, consider:
- Order lead times
- Quality of goods or services
- Potential bulk discounts
- Credit terms
- Capacity for scale
- Are they a good fit?
This last point might seem ambiguous, but it’s very important.
A bad business/supplier relationship often has financial repercussions. You end up wasting hours of valuable time arguing over payments or receiving unfair order prioritisation – all because you just can’t get along.
Sales and operations planning
Sales and operations planning (S&OP) is about looking at what you’re doing right now, with a special focus on sales and products.
The first step is to ask yourself:
- Are we selling the right products to meet our sales targets?
- How much do we expect to sell? Does this align with our sales goals?
- Are we secure in size and capabilities to meet customer demand?
Start by assessing which improvements need to be made, how much they will cost, and what their overall benefit to the company will be.
Create a business case using your collected data. Then present it to specific stakeholders that can action the change or that you need to be on board with it.
Product portfolio management
Product portfolio management is the practice of looking at your entire catalogue (portfolio) of products, the relationships between different products, and each product’s contribution or role in the market.
This is about holistically auditing your product line and determining if it needs a shakeup.
Take a sweeping, strategic view of all the products you currently sell. Ask yourself: Are these goods successfully meeting our customers’ needs?
An old product may no longer be viable for the current market.
Your next job is to identify market opportunities and potential for new products or further product development. Determine if resources could be reallocated to better benefit the business. Then fill any portfolio gaps uncovered by your investigation with more profitable goods.
Facilities planning deals with your end of the supply chain. Put simply, it’s about optimising your storage facilities and shipping processes to improve efficiency.
Assess your current warehouse:
- Is it big enough to optimally store the volume of goods and fulfil the volume of orders you’ve predicted with your demand forecasting?
- Is it so big that you’re paying extra for space you don’t need?
- Are your parts and products shelved according to popularity?
- Is the layout of your warehouse logical and designed for maximum productivity?
Consider the costs of any necessary changes to the size, location, or arrangement of your warehouse. Then weigh them up against the cost of keeping things the same and decide based on data-backed predictions.
Logistics planning encompasses your entire fulfilment process, including how you pick and pack your goods and which shipping carriers you use.
The first step is to optimise your warehouse processes.
Look into your order-picking methods, the equipment and supplies you use to run your warehouse and pack orders, and how you receive and put away goods. Identify which areas are slowing you down and how they might be improved.
Next, examine the shipping companies you use to deliver products to customers:
- Are they the cheapest, fastest, and most reliable for the tasks you’ve assigned them?
- Is it possible to negotiate better terms in exchange for your loyalty?
- Is it time to find somebody else?
You may also want to use this supply chain planning strategy to find more economical ways to ship goods.
Consider the packaging and packing materials you use for shipping: Are there better alternatives, or a cheaper way to get the same products?
Integrated business planning
Integrated business planning is where a company unifies supply chain processes with other business processes such as sales, finance, and operations.
Once you’ve put your supply chain planning into action, the next step is to integrate it with the rest of your business.
The idea is to combine the best practices from each area of business so that they align with current business goals. This will help you maximise profits while minimising the risks that come with growth.