Starting a new business can be overwhelming, especially when you delve into the complexities of running a successful supply chain. Fortunately, this guide to supply chain planning has everything you need to create a winning supply chain plan for your new business.
What is Supply Chain Planning
Supply chain planning (SCP) is the forward-looking process of coordinating assets to optimize the delivery of goods, services, and information from supplier to customer, while balancing supply and demand.
Often included with the mention of supply chain planning is supply chain management (SCM), which encompasses the broad range of activities required to control and execute a supply chain plan in the most economical, and efficient way possible. You will need both SCM and SCP to meet customer demand in the most efficient way possible.
Supply Chain Planning Strategies and Methods for New Businesses
Supply chain planning for new businesses is an immense subject, with dozens of complexities and applications. Though it seems confusing, you can tackle this complex field by breaking it down into a series of simple steps.
Define Your Supply Chain Goals and Key Results
Start by considering your business model, as well as that of your competitors. List your key goals and results you wish to achieve. A typical example might look like:
- Maintain On Time Delivery Performance greater than or equal to 95%.
- Reduce Lead Time of 70% of products you sell by 25%.
- Improve Supplier On Time Delivery to greater than or equal to 85%.
- Improve ERP Planning Parameters to achieve On Time Delivery Performance 95% level.
- Manage Working Capital – $3.8M < 68 DOH (Days on Hand) as Inventory Target.
- Reduce total logistic cost as percentage of sale by 6% from previous year.
Define Key Tactics and Initiatives To Achieve Supply Chain Goals
The next phase explores the individual aspects of your framework, i.e., your supply chain tactics. Think of your supply chain tactics as a set of short term initiatives you utilize to achieve your short term goals, and enable your long term strategy. A typical example of initiative could look like:
- Conduct ABC analysis with all strategic suppliers (Min/Max stocks, Lead-time reduction).
- Implement Direct Line Feed (DLF) with high running manufacturing cells.
- Deliver Cost Out projects committed in freight & warehousing spend.
- Support Part Transitions via ramp up/ramp down to support cost out.
- Develop Individual Personal Development Plans for each Supply Chain team member.
- Develop advanced project management skills.
- 2 x CPIM & 1 x MCIPS certifications to support the Supply Chain team in 2021.
Outline Your Supply Chain Strategy
Every item you sell requires supply chain planning at every phase of its life cycle. This phase is where you outline the supply chain strategy for each item. Supply chain strategy outlines typically include:
- Demand planning and management – Supply chain forecasting for a product improves your chances of producing and stocking adequate inventory to meet customer needs on a timely basis, without the need to store surpluses.
- Supply management – Supply management involves sourcing and procuring trusted sources of raw materials, components, software, and other goods that go into making your product or service.
- Production management – Production management, a.k.a. capacity planning is when you address production issues in terms of machinery, staff, and efficiency. The key question in this phase is “How much can we realistically produce during the planning period?”.
- Inventory management – Inventory management is how to manage inventory levels with supply chain partners, and keep stock on hand at an optimal level while ensuring reliable customer service.
- Pricing strategy – Pricing strategy is how you set an optimal price for your goods and manage the balance between supply and demand. One example of pricing strategy is a price cut designed to stimulate sales during periods of low demand.
- Crisis management – Event management in regards to your supply chain involves identifying all possible supply chain bottlenecks, breakdowns and delays at every link in the chain, and developing contingency plans to stay in business should you lose a supplier.
- Integrated business planning (IBP) – Integrated business planning is how you link supply chain planning with the rest of their business, like sales, operations, and finance. Because IBP gathers information from across the enterprise, it also helps companies perform better predictive analysis.
Combine Goals, Tactics and Strategy into Your Supply Chain Plan
This phase of supply chain planning is where you combine everything, and decide on how your supply chain plan is going to be effective. Here’s where the process gets tricky, as you will have to corral your managers to agree on short term and long term actions, due dates and expected results.
When working on this stage of your supply chain plan, it’s a good idea to decide on a figure that you’re willing to spend to achieve your goal. Keeping that figure in mind will make it easier to select the tactics that provide the most advantage.
Outsource Supply Chain Fulfillment to a 3PL
The last and final step in the supply chain planning process for new business is to invest in supply chain fulfillment. Unfortunately, many small businesses are strapped for cash and unable to invest in costly new technologies. Fortunately, there is still hope for those who outsource their logistics to a third-party logistics firm like Flowspace.
With a presence in every market in the country and the latest technologies at our disposal, Flowspace is uniquely situated to provide our clients with extensive supplier monitoring capabilities. Contact us today to get started!