Supply Chain Planning: Why Is It Important?

Raw material shortages, rising supply chain costs, transportation strikes, natural disasters — supply chain and procurement leaders must deal with many unpleasant surprises. The impact of these surprises, however, can be minimized -- with efficient supply chain planning.

In the absence of a plan, the flow of goods lacks direction, and there is high chance of supply getting impacted. And that is exactly what we witnessed in the beginning of 2020 when the pandemic hit.

And now, more than a year and a half into the crisis, things have still not normalized. Growing uncertainty has supply chain leaders scrambling for a solution that can ensure seamless operations and business continuity. 

So, how do you make an accurate supply chain plan? More importantly, how do you seamlessly modify your plan in the face of disruption?

Anticipate demand, build customer loyalty

It all starts with demand planning. By precisely estimating demand, supply chain planning synchronizes supply vis-à-vis demand, thereby preventing unforeseen surprises. As you have a clear, accurate projection of demand, you are better placed to plan production and maintain the right volume of inventory. A sync in supply and demand ensures customers get what they want when they want it. This helps build trust and enhances customer loyalty.

Foresee risk, prepare beforehand

Managing risk was perhaps never more important for a business than today. Planning considers what-if scenarios by looking at existing as well as future market conditions. Advanced supply chain technology mitigates the impact of disruption with well-defined backup plans.

For example, many businesses now plan to have multiple suppliers located in different regions for critical parts. When you have a supplier based in North America and another in Asia, there is little chance of disruption affecting both at the same time. If a hurricane, for example, affects supplies from North America, you have an alternative supplier to fall back on.

Slash costs, boost profits

Optimizing supply based on an accurate estimate of demand simplifies inventory management. This, in turn, slashes storage, warehouse and logistics costs. With no stockouts or surplus inventory, you are in control of operating costs. Profit margins get better as you practice lean production and maintain optimum inventory.

Better collaborate, build resilience

With a supply chain planning software, you can access advanced tools to effectively collaborate with suppliers and deal with a situation in real time. As you and your suppliers see the same data, you are in a better position to make quick decisions and fine tune your strategy based on changing conditions. Close collaboration streamlines supply operations and minimizes the chances of friction.

End-to-end visibility is vital to implement supply chain planning. When you have clear visibility of the flow of goods as well as real-time information, you are perfectly placed to keep your operations running smoothly.