The art and science of supply chain planning
18 October 2018
In this Business Masterclass, Bill Mrzlak from ChainSequence is bringing you the most advanced methods and best practices. In the 12 sessions, we discover how you can bring a step change to your supply chain.
Imagine a future for your business where your inventory is always holding a balanced number of items that you need. Imagine that your forecast of sales and production is so accurate that you have neither scarcity nor surplus inventory. And imagine that you have the highest resolution map of your markets, and you could always spot the most important segment of customers without any doubt.
Balance supply chain with strategic sales & operations goals
Inefficiencies, unknown market conditions, suddenly changing customer needs – these are the obstacles that we are going to remove together in this Masterclass.
It's a noble cause to be all things to all customers, but it can be very difficult to say no to a customer when it comes to supporting their requests. What are the considerations we need to take into account to better support your customers? This is really an exercise in profile building. Consider the following when identifying what makes the customer important to you. Is it volume, is it revenue, is it how much money you're making off of them, or is it your strategic relationship with them?
From a pure sales perspective, all products should be available for whenever they can sell it. But it's really not possible to support that kind of model, for obvious financial reasons. Not unlike customer segmentation, all products are not equal.
Now that we understand to whom we are selling and what we are selling, let's set an overall demand prioritisation schema. Let's look at a couple of examples. We've got a high-tech company that produces computer processors. They are always looking to be leading edge technology and release new processors periodically. They will put a much higher priority on the release of those new products, regardless of customers buying the old products, because they want to move the markets.
One of the biggest challenges for all of us is that customer behaviours are ever-changing. We plan for customer orders based on a forecast, but we know those forecasts aren't always right. Available to promise, or ATP, is what we use to respond to those customer orders. It's a customer's prerogative to change, and it can be very unpredictable. Volatility varies by industry sector, and it depends on the relationship with your customer.
What does good product design mean? Generally we think of shape, colour, user-friendliness, or branding features. But is that enough? Imagine a great product, highly approved by focus groups, that recognised your great innovation.
One more week. One more month. We are behind. We need to catch up. How many times have we suffered from delays in our supply chain? How many times have we felt that the control is not in our hands and we are only victims of these delays? Let's get control back. Let's start with the reasons for delays.
Forecasting any organisation is always a challenge. Many say they are always wrong or, maybe better said, less than right. There are things we know and things we don't. We know that we've got committed customer orders out in time. We know that we've got contractual agreements with our customers that we need to support. We know sales events and promotions that are out in time. And we may have repeating seasonal events that occur year after year.
Inventory is a necessary evil. Finance is usually focused on the cost of holding it, but why do we have inventory? Inventory should only exist for anticipated sales. We can use it to offset the volatility of customer demand. We can also use it to offset that perceived long lead time of components in manufacturing cycle time. We can also use it to level-load manufacturing, where capacity may be constrained in one period of time, and we can spread those manufacturing out over time. But it's absolutely necessary to support customer service levels, and that's why we hold inventory.
Now it's time to bring everything that we have learned together. In the following two videos, we're going to explore how do we build a smart model so we get what we want because that's what we're interested in-- planning the best business that we can run and making sure that we can execute our plan without those unpleasant surprises.
No changes ever happened without a champion, and no failures happen without human mistakes. We depend on those champions in our organisation to help drive change, but we have to talk about the organisational heroes who are appointed to score those goals for us. We also need to discuss what happens when they are given the wrong target.
The first step to improvement-- accepting that there is a problem. We need to start with identifying what are the key issues-- is it low revenue or poor profits, poor customer service, operational inefficiencies in building the products? Do we have any inventory issues-- too much inventory, not enough inventory? Is our on-time delivery performance to our customers low? And do we have poor internal communication and collaboration across all the organisations within the company?
Bring a step change to your supply chain with ChainSequence.
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