Key Concepts in Supply Chain Planning (SCP) – Cheat Sheet.

1. Demand Forecasting

• Definition: Predicting future customer demand using historical data, market trends, and various external factors. Accurate demand forecasting ensures that supply chain decisions align with actual customer needs.
• Methods:
  • Time Series Analysis: Identifies trends and seasonality in historical sales data.
  • Causal Models: Uses external factors (e.g., promotions, holidays) to predict demand.
  • Machine Learning: Advanced techniques that improve accuracy by learning from patterns in data.
• Tools:
  • Forecast Pro: Software for statistical forecasting.
  • SAP Integrated Business Planning (IBP): Provides demand forecasting and inventory management.
• Best Practice: Use collaborative forecasting, where sales, marketing, and production teams align on future needs.

2. Inventory Management

• Definition: The process of managing stock levels to balance supply and demand while minimizing costs and avoiding stockouts or overstocking.
• Key Metrics:
  • Reorder Point (ROP): The inventory level at which a new order should be placed.
  • Safety Stock: Extra inventory kept to protect against demand variability or supply chain disruptions.
  • Inventory Turnover: Measures how often inventory is sold and replaced over a period.
• Methods:
  • Just-in-Time (JIT): Reduces inventory by receiving goods only when needed.
  • ABC Analysis: Categorizes inventory based on value and usage (A items are high priority, B items are moderate, C items are low).
• Tools:
  • Oracle NetSuite: Provides real-time inventory tracking.
  • TradeGecko: A cloud-based inventory management tool.
• Best Practice: Maintain dynamic safety stock levels based on variability in demand and lead time.

3. Material Requirements Planning (MRP)

• Definition: A system that ensures the right materials are available for production at the right time by planning inventory, procurement, and production schedules.
• Key Activities:
  • Bill of Materials (BOM): A comprehensive list of raw materials, components, and sub-assemblies needed for production.
  • Lead Time Calculation: The total time required to procure materials and produce goods.
  • Order Quantity: The amount of materials or products needed to fulfill production requirements.
• Methods:
  • Lot-for-Lot: Ordering exactly what is needed for production.
  • Economic Order Quantity (EOQ): Determines the optimal order quantity to minimize inventory costs.
• Tools:
  • SAP MRP: Automates MRP calculations for efficient production planning.
  • Infor CloudSuite: A tool that integrates production, procurement, and scheduling.
• Best Practice: Regularly update MRP data to account for fluctuations in demand and lead times.

4. Capacity Planning

• Definition: Ensuring that the production system has enough resources (labor, machinery, equipment) to meet forecasted demand.
• Key Metrics:
  • Capacity Utilization: The percentage of total production capacity being used.
  • Bottleneck Identification: Identifying areas where production capacity is insufficient to meet demand.
• Methods:
  • Rough-Cut Capacity Planning (RCCP): Determines whether the production plan can be met with current resources.
  • Finite Capacity Scheduling: Optimizes production schedules by considering resource limitations.
• Tools:
  • Microsoft Excel: For manual capacity calculations and scenario planning.
  • FlexSim: A simulation tool for modeling production processes.
• Best Practice: Use real-time capacity data to make dynamic adjustments to production schedules.

5. Master Production Scheduling (MPS)

• Definition: A detailed plan for production that outlines what needs to be produced, in what quantities, and by when to meet customer demand.
• Goal: Align production with demand while balancing resource constraints.
• Key Activities:
  • Production Schedule Creation: Prioritize orders based on demand forecasts and available capacity.
  • Demand Alignment: Adjust production schedules to reflect changes in customer orders or inventory levels.
• Methods:
  • Forward Scheduling: Start production as soon as possible to meet delivery dates.
  • Backward Scheduling: Start production based on the required delivery date, working backward.
• Tools:
  • SAP MPS: Automates production scheduling with real-time data.
  • Asprova APS: An advanced scheduling tool for complex production environments.
• Best Practice: Maintain flexibility in the schedule to respond to urgent customer demands or supply chain disruptions.

6. Supply Planning

• Definition: Ensuring that sufficient materials, components, and finished goods are available to meet forecasted demand.
• Key Activities:
  • Supplier Collaboration: Work closely with suppliers to align delivery schedules with production plans.
  • Lead Time Optimization: Reduce lead times by working with reliable suppliers and minimizing internal delays.
• Methods:
  • Vendor-Managed Inventory (VMI): Suppliers monitor and manage inventory levels at customer sites.
  • Kanban: A pull-based system where inventory is replenished based on consumption.
• Tools:
  • Oracle Procurement Cloud: Manages supplier relationships and material procurement.
  • Zebra Technologies: Provides IoT solutions for real-time inventory management.
• Best Practice: Build strong, collaborative relationships with suppliers for better planning and timely deliveries.

7. Production Planning

• Definition: Creating detailed plans for the production process, including raw materials, workforce, equipment, and scheduling.
• Focus: Achieving efficiency in production and minimizing waste while meeting demand.
• Key Activities:
  • Capacity Loading: Assign production tasks based on available capacity.
  • Production Lot Sizing: Determine the most efficient lot sizes for production runs.
• Methods:
  • Finite Scheduling: Schedules production considering available resources.
  • Batch Production: Grouping similar products to optimize production runs.
• Tools:
  • Plex Manufacturing Cloud: Offers end-to-end production planning capabilities.
  • Asprova APS: A tool for optimizing production schedules and managing resources.
• Best Practice: Optimize production runs by grouping orders with similar requirements to reduce downtime.

8. Distribution Planning

• Definition: Planning the delivery of goods from manufacturing to customers, ensuring timely and cost-effective transportation.
• Key Activities:
  • Transportation Management: Plan and optimize transportation routes and methods to reduce costs.
  • Warehouse Management: Optimize warehouse layout and inventory management for fast picking and packing.
• Methods:
  • Cross-Docking: Transferring goods directly from inbound to outbound transportation without storing them.
  • Milk-Run Delivery: A transportation strategy that minimizes costs by delivering multiple orders in one trip.
• Tools:
  • SAP EWM (Extended Warehouse Management): Manages warehouse operations and optimizes space utilization.
  • Transplace: A cloud-based TMS for managing transportation and logistics.
• Best Practice: Use data analytics for route optimization and real-time tracking of deliveries.

9. Collaborative Planning, Forecasting, and Replenishment (CPFR)

• Definition: A strategy where trading partners (suppliers, customers, manufacturers) share forecasts, plans, and inventory data to optimize the supply chain.
• Goal: Improve forecast accuracy, reduce stockouts, and improve relationships.
• Benefits:
  • Improved Forecasting: By collaborating, all parties have access to more accurate data, leading to better forecasts.
  • Faster Replenishment: With better visibility, products can be replenished quickly and efficiently.
• Tools:
  • Blue Yonder: Offers CPFR capabilities to enhance collaboration across the supply chain.
  • Kinaxis RapidResponse: A supply chain management tool with CPFR functionality.
• Best Practice: Share sales and inventory data across the supply chain to improve alignment and avoid inefficiencies.

10. Performance Monitoring & Adjustment

• Definition: Continuously tracking and measuring supply chain performance to ensure that plans are being executed efficiently and meeting objectives.
• Key Metrics:
  • Forecast Accuracy (MAPE): Measures how close forecasts are to actual demand.
  • Fill Rate: Percentage of orders that are fulfilled completely and on time.
  • On-Time Delivery (OTD): Measures the percentage of orders delivered by the promised date.
• Tools:
  • Tableau: A data visualization tool that can track and display supply chain KPIs.
  • Power BI: Microsoft’s data analytics platform, ideal for real-time monitoring.
• Best Practice: Use dashboards and key performance indicators (KPIs) to continuously assess performance and adjust plans.

Conclusion

Supply chain planning is an intricate process that spans demand forecasting, inventory management, production scheduling, and distribution. Effective planning ensures optimal resource utilization, meets customer demands, reduces costs, and improves operational efficiency. By leveraging the right tools, techniques, and best practices, organizations can create agile, resilient, and efficient supply chains.