As we discussed in our last article, the first step in S&OP, demand planning, is accompanied by supply planning. Over the past few years, the supply planning process has become increasingly complicated, as most of the industry has experienced supply chain delays and rising raw material prices. According to the Institute of Supply Management, June 2021 saw the largest price jump for raw materials in 42 years.
Eventually, the market will recover, but these circumstances have proven the value of being flexible and finding creative ways to survive supply chain disruptions. To be successful, effective supply planning is essential across every facet of the business – after all, it’s quite difficult to sell products if you don’t have the resources to produce them at the needed rate in the first place. Keep reading to find out how to enhance your supply planning methods in your own manufacturing plant.
Consult Trusted Vendors
In a volatile time for the supply chain, one of the best ways to stay updated on breaking news is to go straight to the source and consult your raw material vendors. As experts in their specific field, they will likely be aware of all upcoming material shortages, price changes, and other developments before anyone else. By forming a strong relationship with your suppliers, you can tap into their expertise and get their perspective on the market outlook, which will give your business a leg up in preparing for disruptions.
Create Backup Plans
In addition to keeping up with supply chain issues, it’s also important to create several backup plans for a variety of possible situations to minimize any ramifications for your business. To avoid being affected by material shortages or price hikes, consider asking your supplier if they could source a slightly different products that are less susceptible to external disruptions but can still work within your production process. If that’s not a viable option, you may want to develop a list of backup vendors in different locations that you can turn to in the event of sudden delays or shortages that affect only certain areas of the US or the world. These options may allow you to avoid adjusting your total output and continue to meet consumer demand without significantly raising prices.
Know Exactly What You Need to Survive
With supply planning, the ultimate goal is to avoid being caught unaware without the materials needed to meet your demand plan. This will be especially important if you’re unable to come up with backup solutions and you’re forced to work with a limited supply of materials, like many manufacturers during the semiconductor chip shortage this year. To overcome these limitations, you must be able to determine the most effective path ahead while accounting for your plant’s capacity capabilities, as well as the minimum amount of each material required to keep production moving.
A capacity planning tool like VirtECS can be extremely beneficial in these situations. VirtECS allows you to create a virtual model of your unique plant and run sample production scenarios to determine how much of each material you need at each step of the process, and how to make the biggest impact with the resources currently available to you. Armed with this detailed information, those involved in supply planning will be able to make the most informed decisions for your organization.
If you’re interested in learning more about how VirtECS can aid in supply planning, you can download our guide here. In our final S&OP article coming soon, we’ll discuss why manufacturers struggle to implement strong S&OP practices, along with potential solutions to their biggest challenges.
