What Is Supply Chain Planning?
Demand driven supply chain planning is an organized process for the movement of raw materials and finished goods from point A to point B. It is a complex process with multiple objectives, including efficiency, quality, security, cost-effectiveness, and availability. Supply chain management has a number of important functions, including planning for customer requirements and manufacturing capacity; maintaining efficient shipping routes and infrastructure; and complying with various legal requirements. Supply chain planning helps businesses reduce costs and improve productivity, while improving customer service. In other words, it improves the entire profit margin for any business that applies for it.
Supply chain planning includes five crucial stages: planning, manufacturing, transportation, consumption, and recycling. The first stage, planning, involves defining the entire process before production begins. This includes establishing a clear plan for all production processes, including pricing, production levels, materials, and labor requirements. Next, manufacturing occurs, which involves the actual production of goods as well as the procedures that produce them. Finally, transportation processes occur, which include the transportation of materials to production sites and the delivery of finished products to customers.
In simple terms, supply chain describes how resources are acquired, used, and returned to gain maximum profit and decrease waste. Supply chain planning helps a company make better use of its assets, including raw materials and finished goods. It can help improve production efficiency by reducing cycle times and can maximize productivity by identifying the proper actions for each phase in the supply chain. By applying appropriate control methods, a company can more precisely determine where, when, and how resources are used most efficiently. It can also determine which processes are most appropriate for a given product.
Supply chain management is very detailed, often requiring numerous in-depth analyses. Often, supply chain analysis and optimization require an in-depth knowledge of a company’s operations and the specific demands of each process within it. This makes logistics specialists in highly specialized fields. For example, a supply-chain specialist who specializes in environmental compliance and logistics at one company may not necessarily be an expert on manufacturing processes within the company. Similarly, the same logistics specialist at two different companies could both make recommendations concerning the same supply chain issue; however, their recommendations will be different because of their own individual expertise, experience, or specific needs based on their organization.
A supply chain is a series of processes, starting with the idea for a new product and ending with the delivery of that product to end users. These processes occur throughout the supply chain, but there are four primary stages of the supply chain: planning, manufacturing, distribution, and customer/end user satisfaction. Each stage is an important part of the entire chain, but none is vital. Each stage allows for the timely manufacture of products and adequate storage and logistics of finished goods. However, there are delays in each stage that impact the other processes and lead to customer dissatisfaction. Proper planning can help identify and eliminate these problems before they occur.
Planning, as mentioned above, is a critical component of the supply chain. It helps to define and create a vision for long-term success for the company. It identifies and addresses issues that may arise over time and looks for opportunities to improve upon those processes that are already in place. It also identifies the limitations and tradeoffs that need to be made in order to reach the desired goal of optimized profits and optimal performance in the product.
The planning process is a detailed process that addresses many different issues related to the entire supply chain. Each stage consists of defining and evaluating critical issues. These issues include such things as the product development process, sourcing and logistics, pricing, advertising and promotion, and customer service. This broad scope provides companies with numerous opportunities to find innovative solutions to any problems they may be experiencing in any of these four stages.
Properly planning a supply chain offers a company tremendous advantages. It allows companies to be flexible, increase their profit margins, and reduces their dependence on outside consultants. By managing their supply chains effectively, businesses can remain profitable for years to come and maintain excellent customer relationships.
