How Planning Can Rescue the Supply Chain Improve Your Planning Process and Reap the Rewards

How Planning Can Rescue the Supply Chain

Improve Your Planning Process and Reap the Rewards
Published: March 1, 2022

Author: Mark Temkin, Director of NY Division, ASCM NYC LI
Editor: Melissa Freeland, Director of Digital Content Management

The current array of supply chain disruptions are a strong impetus to improve our core supply chain processes. A good place to start is with our planning functions. A few things we recently encountered are shared below. We offer several questions you can ask yourself as you evaluate your planning processes.

1. Improving forecasting accuracy by 5-10 points with better inputs and exception management can have a multiplicative impact on improving service and reducing excess inventory.
2. Regularly updating key item parameters like transportation lead times can greatly improve your available to promise accuracy.
3. Moving from a monthly to a weekly S&OP planning process can increase reaction time.

How do I know these steps can help?  Because I have been adopting these practices over the past two years.

Demand Planning

Let’s start with demand planning and some basic questions to help do an assessment of your current state. 

1. Are you measuring forecasting accuracy at the time you procure raw materials and build finished goods, and do you know what is causing forecasting errors and bias?
2. Are you collecting POS (point of sale consumer sales) and retail inventory data and collaborating with your major customers on forecasts?
3. Do you know which products are forecastable (via an algorithm) and which are not (requiring more human intervention)?

Coming out of the 1H of 2021, we discovered that we were over-forecasting our business by 10% and that customer forecasts lagged consumer trends.  What did we do?  We developed our own forecasts for those accounts in place of the customer forecasts and aligned with the customer on them.  We also created a weekly item exception process and a weekly planning meeting to increase our reaction time.

Our accuracy improved by an average of 15 points in the 2H of 2021 and our over-forecast bias was reduced.

Procurement Planning

Improved forecasting accuracy won’t yield full benefits unless it helps procurement and supply planners make better decisions.  We discovered two major issues that had to be fixed:

1. Procurement did not have accurate PO placement to raw material receipt lead times
2. They did not have adequate safety stock to buffer demand volatility, transportation delays and supplier performance issues.

The solve was to have the logistics function review all lead times and provide updates in real time into our ERP system.  While we had new supply gaps as lead times moved from 60 to 90 to 120 days, we also gained a more accurate understanding of what could be produced when.

Safety stock was focused on long lead-time, highly-volatile raw material supply from overseas.  Finished good safety stock targeted “A” SKUs with a goal of a 95% fill rate.  The process was started in Q4, but we expect to see service improvements in 1H of 2022.

Supply Planning

We redefined the role of a supply planner from production scheduling to a more strategic role leading the organization to achieve service targets while optimizing inventory. 

1. First, we had to improve training on our ERP system and leverage tools such as rough-cut capacity planning.
2. We had to improve collaboration on service recovery actions and communication across the organization.
3. We developed a weekly tracking of inventory levels (days of supply) separating inactive from active and developing action plans.

Over the course of 2021, we reduced our inventory levels by 27% while improving service as we focused on disposition of inactive and reducing the drivers of obsolete inventory in the future.  Supply planners had new tools to evaluate demand/supply balance and evaluate the accuracy of their item parameters. 

S&OP

How do you make sure all the planning functions are working in harmony and achieving the service, financial and cost goals the organization sets for them?  The S&OP process, which has gone through numerous iterations, renaming conventions and consulting paradigm shifts, is that vehicle. 

At its simplest, it is just a way to get planning, sales, finance, marketing and the executive team together to review the business plan and decide where corrective action is needed. 

1. Does your organization review the building blocks and key assumptions of the demand plan?
2. Does your organization identify where we have potential supply gaps well ahead of time and work on countermeasures?
3. Does your organization have a set of KPIs to evaluate each function’s effectiveness and where they need to improve?

Do your S&OP meetings create positive friction (debate of ideas and alignment on direction) vs being informational and presentation-oriented?  Is the business getting better at its core functions over time?

The purpose of this blog is to highlight the benefits of improving the planning process. This is an effort that should be concurrent with improving production efficiencies, sourcing options and transportation lead times all of which tend to get the headlines in the news. More and more research is showing that improving the upstream planning process (tip of the spear) will have disproportionate benefit to  downstream execution. Why don’t you lead the change at your organization? 

Carpe diem.

Mark Temkin, Board of Director, NY Division , ASCM NYC LI Mark Temkin has extensive experience leading demand and supply planning and S&OP processes in the CPG, high-tech, food and apparel industries.  His focus has been on increasing service levels, optimizing inventory and driving cost savings.  His focus on team building includes fostering a continuous improvement and highly collaborative culture. Currently, Mark is Senior Director of Demand Planning and S&OP at Radienz Living, a privately held cleaning products company based in Melville, NY.  Prior to that Mark led demand and supply planning at Harry’s Inc, a personal care products company, and managed demand, inventory and S&OP at Hain Celestial Group, Inc, a natural and organic products company. Mark holds a BA in political science from Johns Hopkins University and an MBA from NYU.  He has spoken and written on a variety of topics including supply chain planning during COVID, best practices in S&OP and CPFR, and vendor-managed inventory.