A Comprehensive Guide to Building Supply Chain Capabilities

Supply chains have become a critical part of the business strategy for many companies. Organizations are focusing on supply chain management (SCM) to effectively manage inventory, increase efficiency, and reduce the costs of procuring, storing, and transporting.

With many organizations looking to adopt technology to streamline these processes, they must have a deeper understanding of how to use SCM tools to support strategic initiatives.

This blog post will discuss everything you need to know about different supply chain capabilities as well as examples of how companies are using them today.

Capacity Planning & Demand Management

Capacity planning is the process of predicting how much capacity is needed based on demand. This can help organizations in two ways: It can allow them to decide where to implement new capacity. It can also help them to figure out how to shift production to other facilities.

Demand management helps in balancing supply and demand in the short-term. It is an important part of supply chain management as it helps companies avoid stock-outs and overages. If a supplier is unable to meet demand, the company using its services will be unable to deliver its own goods. This can damage its brand and hurt its reputation.

Demand forecasting is typically part of demand management. This is a method of predicting future demand based on past data. Companies use forecasting to decide how much to produce and when to produce. This helps them to avoid having too much inventory and not being able to sell it.

Inventory Management & Optimization

One of the most important aspects of SCM is the management of inventory. This includes the decisions about what to buy, how much to buy, how to store it, and how to act on that inventory. Companies need to decide what their inventory objectives are and what is their current state. These objectives can vary from one organization to another. They can also vary depending on the industry the company operates in and the type of product they are dealing with. For example, retailers have a different objective from manufacturers.

Some companies use inventory optimization to increase their inventory turnover. Inventory turnover is the cost of goods sold (COGS) divided by the average inventory. This metric helps businesses understand how quickly they are turning over their inventory and how efficiently they are managing it.

Materials Replenishment Planning

Materials replenishment is used in conjunction with demand planning to determine the amount of raw materials that will be needed to produce goods in the future. Replenishment planning is often used in industries such as food and beverage, healthcare, and chemicals. These industries rely heavily on the supply chain to provide consistent and safe products to consumers. While inventory management is about having enough inventory, materials replenishment planning is about having the right amount of inventory. Sometimes you might want to overproduce or overbuy raw materials to avoid disruptions or to take advantage of discounts.

Materials replenishment planning is used when a manufacturer needs to make sure they have enough raw materials to produce a certain amount of goods. This also ensures that the manufacturer isn’t buying more raw materials than they need.

Master Production Scheduling

Master production scheduling (MPS) is a process of scheduling production based on demand, the lead time between when the product is ordered and when it is delivered, and the time it takes to produce the product. It is often used in conjunction with other supply chain capabilities. When companies use MPS, they prioritize work orders to determine which ones should be worked on first.

MPS is commonly used to schedule production at a manufacturing facility, but it can also be used for other supply chain activities. For example, a shipping company can use it to schedule the delivery of goods. Managing production and transportation times and having visibility into the transportation process are important parts of this process. This is because production and transportation are often the limiting factors in the supply chain.

Order Management & Supply Chain Continuity Planning

Order management and supply chain continuity planning work together to make sure that the demand placed on the supply chain is met. Order management is a process of managing orders and making sure they are sent to the right people at the right time. It also includes things like placing the order and making sure it is sent to suppliers in a timely manner.

Supply chain continuity planning is related to risk management. It is used to determine the risk associated with each order and how to minimize that risk. It also helps determine the fulfillment time for each order. This information helps organizations understand how much inventory they need to have to meet customer demand.

Supply Chain Visibility & Supply Chain Network

There are two aspects of supply chain visibility that are important to understand. The first is the visibility of an organization’s own supply chain. This visibility is found in the ERP system when an organization uses a business intelligence system or analytics model.

The second part of visibility is the ability of an organization to see its suppliers’ supply chains. This is important to ensure that the supplier is meeting the organization’s needs and specifications.

Supply chain network is associated with collaboration across the supply chain. This collaboration can be between different organizations or with their suppliers. It can help organizations reduce costs and increase their efficiency.

Conclusion

Supply chains comprise many different functions such as demand management, inventory management, master production scheduling, materials replenishment planning, order management, and supply chain continuity planning. Businesses must streamline all these functions for the efficient operation of their supply chain.