Tool

Supply

planning

– in Integrated Business Planning

What is supply planning – and more importantly what are your supply capabilities?​

Almost 60% of companies are dissatisfied with the fit between their supply planning objectives and supply planning capability. This is shown by research from Gartner.

When you do supply planning, the goal is to meet the current and future level of the demand in the most efficient way and identify all gaps between demand and supply.

Supply planning takes place in three steps

Step one

Define the available supply

What are your supply capabilities in terms of available production capacity and inventory?​

Step two

Create a supply plan

Based on the demand plan, what are the required capacities within your supply chain?​

Step three

Conduct a supply review meeting

With the identified gaps between demand and supply, can we solve the gap? Should we raise it to the executive decision meeting?​

Step one: Define available supply​

In the first step, you define the available supply, covering production capacity, inventory capacity and supplier capacity.​

You need to understand the availability, but also how the availability can be exploited in order to make the correct decisions in your IBP/S&OP process.

Typically, you will spend most time on establishing the production capacity (as explained in the following), but depending on the type of your company, similar exercises should be made for inventory or supplier capacity​.

Example

Capacity = Time x Utilisation

Your capacity is dependent on the amount of available time and the output your resources can provide. 

Time

You need to understand how much time your production resources are available.

  • How many hours?
  • How many days per week?

Moreover, you need to be clear on how much of the available production time that is actually available for production.

  • What is normal available capacity versus extra available capacity (possible scalability)? 

This is an essential input for the scenarios in your decision-making process.

Utilisation

You also need to understand how much output your resources provide. In essence, you can break utilisation down into three elements​:

  • Availability is the total time the resource is planned to run minus both planned and unplanned downtime.​
  • Performance is the actual resource run rate vs. the theoretical run rate.​
  • Quality is the accepted output from the resource minus the rejected output.​

You can refer to the three elements as the resource's Overall Equipment Efficiency, or OEE, and you can use the OEE as an input for your supply plan.​

Step two: Creating the supply plan​

You create your supply plan in order to convert an unconstrained demand signal into requirements in the supply network. This means that you allocate the demand plan throughout your entire supply chain to all relevant but critical bottleneck resources. Moreover, you convert the demand plan into capacity consumption and production hours (or similar), which enables you to create the initial supply plan.​

With the initial supply plan, you can now identify potential, significant demand-supply imbalances for bottleneck areas – imbalances that need to be discussed at the supply review meeting.​ ​

Step three: Supply review meeting​

On the supply review meeting, your main activities are:​

  • To identify major gaps (both supply shortages and capacity opportunities)​
  • To evaluate options to close gaps from supply perspective​
  • To make decisions to close gaps within mandate​

​Supply Planning (e.g. Supply Planning Manager) will lead the supply review meeting and the focus of the meeting will be the supply capabilities to close the identified potential gaps. ​

Other participants will typically be operations (production capabilities), product management (product prioritisation), procurement (impact on raw materials/components) and finance (cost impact).​

Some gaps cannot be closed within the mandate of the participants. You moved these gaps forward to the next step in the process: Balancing and Decision Making​