SHIPPING IS CRAZY!



The Influence that Demand-Planning has on Supply-Planning


“We have a backlog on the orders again, Melissa.” Carol, the Head of Fulfillment, looked glum as she plunked down onto the leather-worn chair in the Chief Operations Officer’s office. TugBoat Toys was an up-and-coming toy company with the hottest products in the market. They were getting ready to fulfill orders in advance of the Holiday season.


Melissa looked straight at Carol. “So what are you gonna do about it?” This was the seventh month in a row that Melissa had been hearing complaints but no ideas for a solution. Just a lot of bellyaching and finger-pointing.


“You know, it’s not my fault.” Carol popped open another can of soda. “I’ve been telling Purchasing to order more of our top SKUs, and they just won’t listen to me.”


Jeff, the Purchasing Lead, happened to be walking by Melissa’s office just then. He heard Carol’s voice and knew she was on the warpath – every day he got an email from her asking for more information on inventory arrival dates. Jeff popped his head into the room and sheepishly remarked, “It’s not my fault either!”


“That’s not going to help me,” thought Melissa. The factory was overseas, and the shipments were arriving more slowly than last year. Jeff’s boss had been the VP of Purchasing for over 20 years, and he was immovable on revising the order lead times despite the growing time it took to receive their products.

At the same time, customer orders had doubled, yes doubled, in the past twelve months. Melissa didn’t want to have the conversation with the CEO about shipping delays. While the demand for TugBoat Toys was high, her group was clearly not nimbly getting the product into the hands of the customers.


My job is on the line, murmured Melissa. She’d been told to get a Demand Planning system but hadn't been able to get the Chief Sales Officer and the VP of Purchasing interested enough in the idea to meet with her and make a decision. Melissa was in a pickle.


6 Ways To Save the Day!

In a way, Melissa was lucky because the news media had been hyping the major delays in the U.S. ports for weeks. Talk around the proverbial water cooler was frequently about Supply-Chain delays, especially as they were heading into Gift Season, the busiest time of the year. Even the U.S. President was telling consumers to start buying early for Christmas!

Melissa knew it was time for action. She invited all the vested parties to a luncheon so they could learn how demand planning influences supply planning through predicting future demand patterns.

Melissa was thrilled when many of the company leaders cleared their calendars to participate. Her objective was to discuss the following six ways in which demand and supply plans rely on the accuracy of each other.

She had her fingers crossed that her presentation would lead to a Demand Planning software evaluation and selection initiative!

1. Suppliers / Vendors: Using the demand plan to calculate the number of supplies needed allows supply planners to warn suppliers and vendors who require longer lead times. The technique improves supplier relations and helps both parties negotiate favorable terms.


2. Inventory: Information about the needed raw materials, parts, and finished goods reduces the chance of the supply chain experiencing a bump. Planners can use the information in the demand planning process to ensure there are no out-of-stock or overstock situations without carrying high volumes of safety stock. Also, the less time that inventory spends in warehouses, the fewer the carrying costs.


3. Production: With accurate planning, the company can schedule production based on the current inventory on hand, availability of supplies, and the estimated demand. Effective planning leads to efficient capacity utilization and smart resource allocation. Also, accurate demand plans streamline supply processes, which help to manage challenging situations, such as new product launches, discontinuation of obsolete products, and even supply chain disruptions.


4. Distributions and logistics: Supply planners with access to robust demand plans can efficiently deal with multiple orders and wide distribution networks. They can provide advanced information to transportation / shipping partners to avoid shipping delays.


5. Customer service: Keep your customers satisfied by providing what your customers need when they need it. Demand plans help supply planners to understand customer demand patterns and plan supply accordingly.


6. Profitability and value creation: Reliable demand and supply plans allow businesses to improve availability and stock fill rates. These improvements create immense value for customers, fulfill their demands, and generate more sales.


Melissa looked around the room. Everyone sitting at the table was nodding. It was a miracle. The VP of Purchasing said, “So when do we start using Demand Planning?”


Businesses are setting higher targets and performance standards based on demand and supply plans. A well-aligned supply plan unified with demand planning will support greater results for the company.

 

Let’s talk systems!


If your company is thinking about solutions to optimize your Supply-Chain and you’d like to explore Demand Planning, then give us a call!


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