The Problem With Frequently Updating the Supply Planning Process

Executive Summary

  • There is a false belief of responsive supply chain and the frequently updating the planning process.
  • We cover this problem in thinking around planning.

A False Belief of Frequently Updating the Planning Process for Responsive Supply Chain

In many companies, a mantra has developed that it was important to be able to reflect the most recent updates to the planning process. What this results in are frequently last minute updates to the forecast and a very short or non-existent frozen period. This is promoted as forward thinking when in fact it is quite regressive.

The History of Supply Chain Planning

Planning has always existed in one form or another. However, it developed in conjunction with the rise of computers. There is no doubt in my mind that grain warehouse managers in ancient cultures performed some planning for managing the creation and inventory management of anything from grain stores to stones at a quarry. There is no doubt that planning took on enhanced capability with computers providing the ability to manage large amounts of data necessary to perform detailed planning.

However, while many companies purchased supply chain planning software, far fewer internalized the concepts and discipline of planning. For this reason, the vast majority of supply chains are reactively managed, and many people in high levels of companies such as Vice Presidents and Directors of Supply Chain do not appreciate or have even studied supply chain planning at any level of detail. For many of them, the planning systems they are merely things to be manipulated to meet their short-term goals.

Responsive Supply Chain Concepts

Many think that the more they interfere with the system and the more responsive they make the system; the better the results will be. Thus, few organizations make much progress with their supply chains from year to year, because they lack the knowledge and discipline among their leadership ranks of how to effectively manage the systems they have purchased to achieve the organizations’ supply chain objectives.

The Issue of Lead Times and Responsive Supply Chain

The problem with this idea is that it can be easily contradicted by looking at lead times. That is changes to forecast cannot realistically be expected to be managed efficiently if they come in within total manufacturing or procurement lead times. However, the response one gets is that materials can be expedited.

What would seem desirable is for companies to build in flexible lead time capabilities into their products so that different lead times could have different costs associated so that the model could pick the best most appropriate lead time.

The problem with this is most companies don’t know the actual costs of expediting products, and secondly, they have a big enough problem managing the master data of the lead times that they already maintain.

Conclusion

The concept of planning systems with regards to lead times is simple. The lead times entered are to be the company’s best guess as to the time required to perform different tasks. Planning systems are deterministic in that they produce a plan based on these lead times, and they need a sufficient lead time to do their job. If you interfere with their operation by forcing a broken and undisciplined forecast process onto the supply and production planning system, negative consequences will occur.

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References

Replenishment Triggers Book

Replenishment Triggers

Getting the Terminology Right

The terms make to order and make to stock roll quickly off of people’s tongues regardless of their knowledge of other supply chain conditions. Many executives speak about “moving to make to order environment.” For most companies, this simply is not realistic. And many businesses that say they do make to order/configure to order/engineer to order are doing assemble to order planning.

The Universality of The Manufacturing Environment Type

These terms are specific types of manufacturing environments. They are embedded in almost all supply planning applications ranging from the most basic ERP to the most sophisticated advanced planning system. However, each manufacturing environment leads to some implications, implications that are most often not completely understood.

Getting Clear on Requirements Strategies

Requirements strategies are what control what drives the replenishment of supply in systems. In most cases, the need strategies control whether the forecast or the sales order triggers replenishment.

This book cuts down the amount of time that is required for people in companies to understand the relationship between manufacturing environments (the business) and requirements strategies (the technology setting in the supply planning application).

By reading this book you will learn:

  • What are the major manufacturing environments and what determines which manufacturing environment a company follows?
  • How do the different manufacturing environments impact how inventory is carried?
  • How are the various production environments configured in software?
  • What is mass customization, and how accurate is useful is this concept in real life?
  • What is the interaction between variant configuration and the manufacturing environment and the bill of materials?

Chapters

Chapter 1: Introduction
Chapter 2: The Different Manufacturing Environments
Chapter 3: Triggering Replenishment
Chapter 4: Requirements Strategies
Chapter 5: The Make to Order Illusion
Chapter 6: The Limitations to the Concept of Mass Customization
Chapter 7: Forecast Consumption
Chapter 8: Variant Configuration in SAP ERP
Chapter 9: Conclusion