Supply chain optimization is about right-sizing and efficiently managing capabilities and critical resources throughout the supply chain, from production to the point of sale and finally, to the customer. Here are the considerations you need to take into account to define a good operational strategy and have an optimal end-to-end supply chain:
- Accurate demand forecasting
- Production decisions
- Inventory decisions
- Logistics strategy (warehousing and transportation)
- Benchmarking (seeking to optimize processes by taking into account what the best companies in the sector are doing)
Focusing on optimizing these points will allow companies to minimize costs and inventory and ensure product deliveries.
First: Get your production planning right
As in any chain, what happens in the first links will affect what happens later on. That is why planning and decisions made at the production stage affect the entire supply chain.
If a customer goes to a store looking for a product and the store has no stock, it may be due to:
- A lack of coordination between the store and the warehouse (poor management of orders, stock or transport).
- A lack of coordination between the warehouse and the factory.
- Poor decisions made on the production floor.
Poor demand forecasting, poor supplier order management or poor production scheduling can lead to a lack of raw materials or delays in the manufacture of products, which will make it impossible to have the product in the store when the client needs it. This will directly impact on the customer experience.
Therefore, the first step you have to take is to plan production optimally according to future demand. This will ensure you have the right quantity of each product and that you will be able to anticipate the customer’s needs. As a next step, you have good logistics planning (warehouse and transportation) and inventory management in order to always have the right product in the right place at the right time for the customer.
What is necessary to plan production operations properly?
As we mentioned previously, you have to create an optimal production plan. But what is necessary to get your production planning right?
Accurate Demand Forecasting
Market volatility and changes in buying patterns make the use of sophisticated demand forecasting methods a necessity in virtually any industry. The use of demand forecasting reduces inventories, helps synchronize the Sales & Operations flow and increases customer satisfaction levels.
The following are the benefits of accurate demand forecasting:
- Get insight on estimated cash flow and production capacity needs.
- Identify seasons and trends.
- Use straightforward forecasting techniques such as time series up to the most complex causal models to take multiple factors into account.
Sales & Operations Planning
Synchronize the flow between production, sales and logistics. Create scenarios based on demand forecasts, production constraints, inventory costs and marketing campaigns and compare the KPIs of each scenario against the overall business objectives.
- Top-down sales driven scenarios and/or bottom-up production constraint driven scenarios.
- Integrated inventory optimization.
- KPI dashboard containing all relevant (financial) KPIs.
Master Production Scheduling
The Master Production Scheduler balances production capacity and order intake. By linking bottle-neck resources and promised delivery dates, the available capacity is used in an optimal way and a high delivery performance is guaranteed.
- Accept orders and promise delivery dates in real-time.
- Balance between MTO (make-to-order) and MTS (make-to-stock) to reduce inventory levels.
- Fulfil every order on time in full.
- Ensure adequate material supply.
Production Operations Scheduling
Create optimized, demand-driven schedules by taking all constraints and parameters into account. Deliver orders on time in full. Choose for a combination of decision support and full automatic scheduling.
- All consequences of any planning decisions are immediately visible.
- Full KPI dashboard to evaluate the quality of the schedule.
- Automatic material allocation.
Real Time Re-Scheduling
Last minute orders, process disruptions, out-of-stock raw materials or other unexpected events require immediate re-scheduling of the production process in real-time. Local re-scheduling often causes productions or capacity issues further down the chain, full and automated re-scheduling takes all possible consequences into account and derives an adjusted schedule that minimizes disruptions.
Interested in getting your production planning right?