Supply Chain Consultancy
The backbone for supply chain management is effective planning. Without it, businesses will struggle to meet customer service expectations, manage costs, and allocate capital efficiently. At its core, supply chain planning seeks to orchestrate activities across the supply chain network to satisfy demand. As supply chain networks have extended, planning must meet the challenge posed by increasing complexity, volatility and variability. Many of today’s planning approaches are simply unsuited to the challenge.
For many businesses, supply chain planning is centred on the concept of material requirements planning (MRP). Based on forecasted demand for finished products, MRP calculates required replenishment orders, production volumes and precursor materials. Extended to incorporate capacity planning, material resource planning (MRP ΙΙ) takes requirements and schedules orders with known thresholds or creates exceptions for resolution. Subsequent development of Enterprise Resource Planning (ERP) systems integrates this functionality with other business applications supported by a common database.
Advanced Planning System (APS) solutions have been developed to enhance capability and to cope better with today’s supply chain networks; essentially based on the same approach as MRP ΙΙ, APS software seeks to plan and optimise material and capacity volumes simultaneously within defined constraints. That said, it is impossible to truly optimise anything but the simplest process activity.
The MRP approach, and subsequent iterations, have several core limitations including:
As actual demand varies from forecast, safety stock gets used to compensate, production yields and lead time vary, course corrections multiply as operations respond to reality. Adjustments get amplified through the supply chain network and physical flows become impeded, fractured and distorted. A new approach to supply chain planning is imperative. An approach that accepts real world variability and eliminates the need for certainty in execution can transform outcomes.
Flow-First design recognises the variability inherent to supply chain networks and configures the operating model to the specific context of a business. Placement of inventory, capacity and time buffers to mitigate and manage variability must then be supported by a flow-oriented planning approach; that approach is demand-driven planning (DDP). Key characteristics include:
Conditioning the supply chain network to maximise flow is the role of Sales and Operations Planning (S&OP). Visibility across the network against Flow-First measures should guide a collaborative planning effort; this is a significant change of emphasis from many S&OP processes currently undertaken. It is no longer about chasing the false goal of forecasting accuracy and justifying variances to plan. DDP continuously gears execution in the open knowledge of variability and, critically, applies as simple an approach as possible to maximising flow.
If you're under pressure to deliver efficiencies within your supply chain, our Flow-First 'health check' is designed to reveal new opportunities for improvement at a fixed investment cost to you.