An Overview of Supply Chain Planning

In everyday life, planning is essential to success. We do financial planning to prepare our coffers for the extended human lifecyle. Players plan for the next game and corporates plan for the next financial year. Similarly, supply chain planning is a key enabler of operational efficiencies in the corporate supply chain. Indeed, significant benefits accrue out of careful allocation of shipments to various resources considering the capacities, routes, constraints and service levels than random allocation of shipments to resources on a FIFO basis.

The above is a very generic illustration of transportation planning. However, supply chain planning is much more than just transportation planning. A typical manufacturing supply chain consists of a firm which sources materials from suppliers, converts them to a finished good at some facility, delivers goods to the customer and in some cases accepts returns for the same.Effective planning is essential at every stage of the supply chain. Demand planning, supply planning, production planning, material planning, transportation planning are absolutely essential functions that help sustain an efficient supply chain. In addition, periodic inventory planning and network planning are critical operations, which when performed accurately, provide firms with a distinct competitive advantage. We will start with a brief description of the above terms, and in subsequent articles, will cover them in greater detail.

Drawing inferences from customer buying behaviour, demand planning seeks to predict future buying behaviour. Demand plan specifies the quantities of each product that is expected to be sold in the market. Once this is done, the firm proceeds to identify the facility that will manufacture the products. This activity is known as supply planning. After identifying the manufacturing location of each product, the firm creates a production plan & a detailed manufacturing schedule. The production plan, also known as master production plan (MPS) , lists the quantity of each product that needs to be manufactured, after netting off the current stock position. The manufacturing plan is a trigger for material planners to arrange for materials to support the continuous manufacturing operations. Material planning helps procurement place upstream purchase orders to various suppliers. After the products have been manufactured, they need to be shipped to various destinations using various resources on multiple modes – truck, rail, road, air and water. The act of optimally allocating products to resources on each mode is achieved by transportation planning.
The above 5 planning activities are continuous in nature, preceeding execution steps on a daily,weekly or monthly basis. Typically an activity is termed as operational in nature when it spans the immediate horizon of a few days to a few weeks. Activities that span few months to a year are tactical activities while activities further out in the horizon are strategic in nature. Accordingly, the planning processes described above can be classified as either tactical or operational planning activities. In addition, supply chain network planning and inventory planning are two strategic planning activities that also fall under the realm of supply chain planning. These activites extend further into the horizon – SCNP activity is undertaken once every 5 years while a inventory planning exercise is undertaken once every year.

Like most supply chain activities, planning is heavily dependant on technology. There are several tools available in the market jostling for space, claiming to de-stress the life of a planner. HOwever all these tools do come with their share of inaccuracies and assumptions. In the later sections we will look at some of the technological innovations that spur this field.