Effective supply chain management is a balancing act, with many factors involved. A few at the top of the priority list are completing orders on time and in full, meeting financial goals, and running facilities at optimal productivity levels. Achieving balance across these and other competing priorities is no small feat. One best practice in achieving balance within demand and supply planning is implementing a sales and operations planning (S&OP) process to integrate demand and supply planning processes.
Sales and Operations Planning (S&OP) is a process in and of itself, enabling you to align supply with demand. The outcome of the S&OP process is a consensus-based operating plan that allows your organization to produce supply aligned with the expected demand of your products.
Sales and Operations Planning – Alignment is pivotal to success
The term “sales and operations planning” implies that demand and supply planning are connected. As a best practice, demand planners work with marketing and sales to accurately forecast future demand, while supply planners anticipate the resources needed for the operation to fulfill the demand. The S&OP process enables organizations to identify discrepancies between the demand and supply plans and allows planners to apply different methods and run scenarios to align the two better.
It is essential to understand what each planning function – both demand and supply – contributes to your organization before considering the benefits of integrating them.
Demand Planning – The foundation of optimizing productivity
Without a proper understanding of demand, organizations can fall short of facilitating orders and maintaining a steady workflow. Demand planners leverage historical sales data and an awareness of upcoming new product launches, promotions, and other marketing initiatives to anticipate future demand.
Supply Planning – A building block for effective order fulfillment
During the supply planning stages of the S&OP process, supply planners interpret demand forecasts and create a roadmap for meeting that demand. Supply planners work closely with other key stakeholders, logistics, finance, operations, and manufacturing, to gather accurate data.
Unconstrained Versus Constrained Planning
A best practice in demand and supply planning is to consider the demand forecast, often referred to as an “unconstrained forecast.” The primary goal of this forecast is to indicate the level and direction of future activity so that all teams and functions within your organization have time to respond to changes. This unconstrained forecast is based on the actual demand potential of running forecasts, with no consideration given to constraints that may exist, such as capacity, materials, cash flow, etc.
On the other hand, the constrained forecast is bound by your organization’s operations. While it may not be realistic to fulfill the unconstrained forecast, it allows you to run scenarios and explore possibilities.
After you consider the potential upside from meeting the unconstrained forecast, evaluating the forecast from a constrained perspective allows for a view of an actionable and realistic operations plan. Typical constraints include:
- Minimum and maximum batch sizes
- Acceptable backorder numbers
- Accessibility of specialized skills in the manufacturing process
- Storage capacities
- Safety regulations and employee well being
- Time-based limitations on production
- Service levels
By correctly anticipating these and many other constraints, your organization can meet customer service goals while minimizing costs.
Some products or product families require different inventory optimization rules/constraints to meet demand and business constraints. Advanced Supply Chain Planning packages, like Vanguard Predictive Planning™, can easily support this requirement.
Adopt AI-Enabled Software to Improve Forecast Accuracy and Save Time
With AI-enabled supply chain planning software, your organization can readily use best practices to coordinate demand and supply planning, ensuring all contributors can access the same data through a single, efficient and accessible platform.
Compared to manual planning methods, supply chain planning software can analyze large data sets, leading to more accurate forecasts. With purpose-built software, it is also more likely you’ll see trends and patterns within the data. The right software also decreases the time spent compiling and reconciling spreadsheets and prevents conflicting demand and supply plans. And with an AI-enabled supply planning software, you can generate a supply plan to match your organization’s demand plan swiftly and systematically.
To learn how to seamlessly integrate your organization’s demand planning and supply planning with Vanguard Predictive Planning™, request a demo today.