Basic Principles of Supply Chain Planning Process

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There are many ways that companies can approach supply chain management. Often, the process covers three specific phases: planning, execution, and distribution. However, while the supply chain planning process can be different at every organization, there are some basic principles that every company should follow to ensure that their supply chain planning is effective. If you don’t plan correctly, you can’t sell what the market wants. Following are some of the most basic principles to keep in mind to master supply chain planning.

Master data

All organizations have important master data that includes information about suppliers, customers, resources, and more. Keep your master data current and refer to it regularly to ensure that you’re aware of who you’re dealing with during every step of the process. Create, document, and enforce data management rules around who can change different types of data, and identify which system is the system of record.

Regular centralized planning

Leading supply chain management generally has centralized supply chain planning processes; they are not siloed. Synchronizing planning, and leveraging regular data refreshes, across all departments lets organizations set reliable goals and stick to timelines more effectively, ensuring that organizations are using up-to-date and consistent data.

Integrate supply with demand

Organizations need to focus equally on the processes that involve clients and suppliers. Best-in-class organizations integrate their demand and supply plans such that changes in their demand plans have real-time impacts downstream, into the supply plans.

Data-based decisions

Decisions should be based on data and facts, not the loudest voice in the room or a gut feeling. When forecasting for the future, use numbers that actually show what’s happening in the supply chain, including forecast error, cumulative bias, and more.

New product introductions

One of the most difficult forecasts for organizations is those for new products.

  • How will a new product sell in different regions?
  • Will it be impacted by the weather?
  • Will it be impacted by the sale of another product?
  • Will it replace an existing product?
  • Will it cannibalize one or many other products?
  • How will the sale of the product continue after 3 months or 6 months?

Modeling all of these scenarios and their impacts to supply plans is critical.

Focus on sell-through, not just sell in

Many organizations focus on sell in due to a lack of data to understand product sell through. Of the two, the sell through data is far more telling and indicative of a product’s true sales performance. Distributors, for example, often make large bulk buys so it may signal to a company that their product is selling well, when in reality it is just sitting on a different shelf.

Continuous improvement

Organizations should continuously work to improve performance, customer behavior, and supplier relationships. Organizations should constantly learn from their data, experiment with data relationships and correlations, while also adhering to data governance.

Organizations that can mature their supply chain planning processes see a range of performance improvements, which include improved customer satisfaction, more sustainable and enjoyable company operations, and a more efficient process that yields improved cash flows and profitability. By following the basic principles of supply chain planning, organizations can ensure they are approaching the process the right way and optimizing a strategy for creating, producing, and delivering the right product to customers who want and need it.