This video is from the Supply Chain Forecasting and Planning online training course. Click here to view full course: www.knowledgecity.com/en/library/L373353699/supply… Imagine you're planning a party and you need food for dinner. You plan to grill hamburgers, but when you get to the store, you find they are sold out of buns. Many different factors throughout the supply chain enable product availability on grocery store shelves when you need it. In this instance, there was a breakdown in the anticipated number of bread buns needed versus how many were manufactured and shipped to the store. In other words, the supply or number provided by the manufacturer did not meet the demand or quantity required by consumers. Supply chain planning is an intricate process of optimizing the production of goods or services from the supplier source and delivering them to the customer when they are needed. This process balances the supply and demand of the product by minimizing production overages and limiting shortages of goods. Both of these problems result in decreased profits for the manufacturer. Overages produce waste because unused goods are disposed of without generating sales revenue. The company is still burdened with the cost of producing the goods, driving down profitability. Shortages don't meet consumer demand, which results in lost sales dollars for the manufacturing company. Consumers may also choose alternate products due to outages, leading to permanent switches from one product to another. The intricacies of managing inbound raw materials, production timelines and on-time delivery to the customer are cumbersome and require expertise in supply chain planning to be executed well. Supply chain managers or individuals responsible for facilitating the end-to-end supply chain planning process, synchronize what, when and how they produce goods to align with the needs of their customer networks. The process is driven by customer demand to ensure that supply is available at the customer's disposal. The purpose of supply chain planning is to create a balance between supply and demand to optimize sales revenue at the lowest possible cost. By understanding the holistic picture of demand, supply chain planning enables production to be scaled up to leverage high-volume cost savings. And overhead and indirect fees are amortized over a larger number of individual units. For supply chain planning to work well, it is important that you use planning horizons or specific periods designated to define the future operational, tactical and strategic efforts of the supply chain. Short-term planning focuses on operational tasks in the upcoming hours days or weeks. It looks at current customer order quantities and the timing of delivery to create an operational schedule to execute the commitment. Short-term planning requires constant management and flexibility due to changes in overall operation. For instance, if a piece of equipment breaks in the facility, the planning team shuffles customer orders to other equipment or works with the customer to move the delivery date out. Customers may also decrease volumes or cancel orders altogether if they have changes within their networks. Supply chain planners must constantly update their plans to keep production lines operational. Medium-term planning focuses on one to two years following the current date. The purpose of this horizon is to identify upcoming demand from customers and create a holistic model of what, where and how a product will run within a production network. For instance, if two customers have requested products that are manufactured on the same equipment six months from now. This modeling enables you to identify dual sourcing plants, equipment and ways to execute for both of your customers, even if that means producing one early and holding inventory until the product needs to ship. Long-term planning focuses on the strategic plan for the following one to five years. It reviews supplier agreements, production capabilities and capacity, innovation and required investments to grow the business. It involves input from a variety of key company stakeholders who are part of the decision-making process for strategic initiatives. A few financial and performance measures help define success within supply chain planning. These are associated with reducing costs and increasing profitable production output.
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