Supply Planning in Practice

Manufacturing supply planning is the strategic process of coordinating the procurement, production, and distribution of materials and resources to meet the demands of manufacturing operations. It involves analyzing market demand, assessing inventory levels, and developing production plans to ensure that the right materials are available at the right time and in the right quantities. Overall, manufacturing supply planning aims to optimize the flow of materials and resources throughout the manufacturing process, ensuring efficiency, cost-effectiveness, and customer satisfaction.

The steps that make up supply planning for manufacturing

Supply planning for manufacturing is a multi-stage process aimed at ensuring the right materials are available at the right time and in the right quantities to meet production demands. Each of these stages have their own processes and can be quite detailed and intensive. 

While these steps may differ from organization and industry, below are the typical steps involved in the process:

1. Demand Forecasting

This is the initial step where historical data, market trends, and other relevant factors are analyzed to predict future demand for the manufactured products. Accurate demand forecasting forms the basis for supply planning.

2. Inventory Analysis

Evaluate the current inventory levels of raw materials, work-in-progress (WIP), and finished goods. Determine which items are in surplus, which are at optimal levels, and which are deficient.

3. Production Planning

Based on the demand forecast, develop a production plan outlining what needs to be manufactured, when, and in what quantities. This plan should consider production capacities, lead times, and resource availability.

4. Materials Requirement Planning (MRP)

Generate a detailed list of raw materials, components, and parts needed for production based on the production plan. MRP helps ensure that necessary materials are available when required, taking into account lead times and order quantities.

5. Supplier Collaboration

Engage with suppliers to communicate production requirements and ensure a smooth flow of materials. This may involve negotiating contracts, establishing delivery schedules, and maintaining good relationships with suppliers.

6. Procurement

Place orders for the required materials based on the MRP outputs. Monitor supplier performance and address any issues that may arise, such as delays or quality issues.

7. Inventory Management

Keep track of inventory levels throughout the supply chain, including raw materials, WIP, and finished goods. Implement strategies such as just-in-time (JIT) inventory to minimize excess inventory while ensuring materials are available as needed.

8. Capacity Planning

Assess the production capacity of manufacturing facilities and equipment to ensure they can meet the planned production volumes. Adjust production schedules or invest in additional capacity if necessary.

9. Risk Management

Identify potential risks that could disrupt the supply chain, such as supplier failures, transportation delays, or natural disasters. Develop contingency plans to mitigate these risks and maintain continuity of supply.

10. Performance Monitoring and Continuous Improvement

Monitor key performance indicators (KPIs) such as on-time delivery, inventory turnover, and production efficiency. Analyze data to identify areas for improvement and implement changes to optimize the supply planning process.

What data is needed for the supply planning process?

Supply planning relies on a large amount of data to make informed decisions and optimize operations. This information requires collection from several departments within the company. While each manufacturing operation will have their own processes and methods, the data collected for supply planning typically includes:

1. Historical Demand Data

Information on past sales, orders, and demand patterns for products over a specific time period. This data serves as the basis for demand forecasting and is provided from the Sales department.

2. Market Trends and Analysis

Data on market conditions, customer preferences, competitor activities, and industry trends. This information helps forecast future demand and adjust supply plans accordingly. The Sales or Marketing department typically has this information on-hand.

3. Inventory Levels

Data on current inventory levels of raw materials, components, work-in-progress (WIP), and finished goods across all locations. This includes details such as quantities on hand, in transit, on order, and in quarantine.

4. Supplier Performance Metrics

Supplier lead times, delivery reliability, quality performance, and pricing make up this data set. The information helps evaluate supplier performance and make informed decisions about sourcing and procurement.

5. Production Capacity and Efficiency Data

Information on the capacity and utilization of manufacturing facilities, equipment, and labor resources. This includes data on production rates, downtime, setup times, and efficiency metrics.

6. Materials Requirements

Detailed data on the bill of materials (BOM) for each product, including the quantities and specifications of raw materials, components, and parts required for production.

7. Transportation and Logistics Data

Information on shipping schedules, transit times, transportation costs, and logistics constraints. This data is crucial for planning inbound and outbound logistics and managing inventory across the supply chain.

8. Financial Data

Cost data related to materials, production, transportation, and inventory holding costs. This includes data on pricing, tariffs, taxes, duties, and other financial factors that impact supply chain operations.

9. Quality and Compliance Data

Information on quality standards, regulatory requirements, certifications, and compliance issues related to materials, products, and suppliers.

10. Demand Forecasts

Data-driven forecasts of future demand for products based on historical data, market trends, and other relevant factors.

11. External Factors

Data on external factors that can impact supply planning, such as weather patterns, geopolitical events, economic indicators, and changes in consumer behavior.

Collecting and analyzing this data allows manufacturers to make informed decisions about production planning, inventory management, procurement, and logistics, ultimately optimizing their supply chains for efficiency and responsiveness to customer demand.

Ongoing management of the supply planning process

Supply planning doesn’t happen once, it’s an ongoing process that will require calibration and adjustment to both internal changes and external forces acting on the organization. Overall, the duration of the supply planning process can vary widely depending on the specific circumstances of the manufacturing operation, but it typically involves regular and ongoing activities to ensure that materials and resources are effectively managed to meet production requirements.

For most companies, the supply planning process is typically spread over the year in a cyclic manner, with certain activities occurring at regular intervals to ensure continuous operation and adaptability to changing market conditions. While the duration of the supply planning process can vary depending on factors such as the complexity of the manufacturing operation, the industry, the size of the company, and the specific requirements of the products being manufactured, we’ve outlined a general breakdown of how the supply planning process may unfold over the course of a year:

1. Annual Planning

At the beginning of the year or at the end of the previous year, companies often conduct an annual supply planning exercise. This involves setting high-level goals, defining strategic objectives, and establishing key performance indicators (KPIs) for the year ahead. During this phase, long-term demand forecasts and production plans for the entire year may be developed, taking into account factors such as expected market trends, seasonal fluctuations, and capacity constraints.

2. Quarterly Planning

On a quarterly basis, companies may conduct more detailed planning exercises to refine their production plans and adjust forecasts based on actual performance and market feedback. Quarterly supply planning sessions may involve reviewing inventory levels, analyzing sales data, and updating production schedules to align with changing demand patterns. This allows companies to adapt quickly to market dynamics and make necessary adjustments to their supply chain strategies.

3. Monthly Planning

Monthly planning activities typically involve fine-tuning production schedules, managing inventory levels, and coordinating with suppliers to ensure timely delivery of materials. Companies may review sales forecasts, production capacities, and inventory turnover rates to optimize resource allocation and minimize stockouts or excess inventory. Monthly planning also provides an opportunity to assess the effectiveness of supply chain processes and identify areas for improvement.

4. Weekly or Daily Planning

As production schedules become more granular, companies may engage in weekly or even daily planning activities to coordinate day-to-day operations and respond to immediate production needs. This involves scheduling production runs, allocating resources, and monitoring inventory levels in real-time to ensure smooth execution of production plans. Daily planning allows companies to address any unexpected issues or disruptions promptly and maintain continuity of operations.

Throughout the year, the supply planning process typically remains dynamic and iterative, with continuous monitoring and adjustment of plans based on changing market conditions, customer demand, and internal capabilities. Companies can more effectively manage their supply chains, optimize resource utilization, and enhance overall operational efficiency by spreading the supply planning process over the year in a structured, recurring manner. 

Managing data with the proper tools

Supply planning is an extensive process that consumes a large amount of data to be effective. It also requires the participation of several departments within the organization and the sharing of their information. The collaboration aspect combined with the volume of data all but requires purpose-built software to manage properly. For most small and medium sized manufacturing organizations, that solution is Material Requirements Planning (MRP) software.

Using MRP software for supply planning offers several significant benefits to manufacturing companies. These systems automate and streamline the process, enabling companies to efficiently manage their inventory levels and production schedules. By analyzing demand forecasts, current inventory levels, and lead times in one integrated system, MRP software generates accurate and detailed plans for the materials needed for production. Planning tools provided in the MRP software combined with the company’s data in one system ensure the right materials are available at the right time and in the right quantities. This minimizes the risk of stockouts and excess inventory, optimizing inventory turnover and reducing carrying costs.

MRP software also enhances visibility and transparency across the supply chain, facilitating better decision-making and improved coordination with suppliers. With real-time access to inventory data and production schedules, companies can proactively identify potential bottlenecks or supply chain disruptions and take corrective actions promptly. 

Additionally, MRP software like Aligni MRP enables better supplier collaboration by automating communication of production requirements, monitoring supplier performance, and facilitating timely procurement of materials.

Getting started with supply planning

Integrating a supply planning process at the level we’ve outlined above can turn out to be an extensive process. The first step is to get buy-in from every department that will have to contribute to the process. Even before that step, it’s best to make sure you have the tools you need to collect and operate on the data required. It’s time to sign up for the foundation of the supply planning process, Aligni MRP!