Definition

supply chain planning (SCP)

Contributor(s): Sarah Lewis

Supply chain planning (SCP) is the component of supply chain management (SCM) that develops a strategy for balancing supply and demand, predicting future requirements and monitoring fulfillment. Supply chain planning and supply chain execution (SCE) are the two overarching categories of SCM. SCP covers a range of supply chain processes such as manufacturing, production scheduling, predictive modeling  and  sustainability.

The SCP process begins with creating a demand plan that takes past sales and future customer forecasts into consideration. Once the demand plan is approved, it is translated into corresponding planning, execution and shipping actions. For example, it will pinpoint ship-from locations and customer records to identify geographic fulfillment needs. This translation is then used to generate a master production schedule, or supply plan, by item and location. The supply plan will also cover the required inventory, order, production time and minimum order quantity data.

SCP is a tactical planning method that prepares organizations for the future. When done correctly, SCP coordinates assets to best optimize the operations, manufacturing and delivery of products. These planning processes can be used to lower production cost, streamline sales and manage relationships with suppliers.

SCP can also be considered a component of the sales and operations planning (S&OP) process.

Key supply chain planning elements

  • Data collection- Having access to precise,  real time  data can be used to improve decision-making processes and manage just-in-time.
  • Inventory management- Having updated inventory can enable lean production principles and lower overhead.
  • Inefficiency identification- Having an accurate supply chain production plan can enable organizations to find inefficiencies such as waste, miscalculations, missing inventory and unnecessary costs.
  • Consumer forecasting- Having a way to document and track customer sentiment and product demand can improve profitability and margins.
  • Supply collaboration- Having a model of all stakeholders and steps involved in the supply chain will define processes between customers, suppliers and third-party vendors.
  • Product lifecycle management- Having a preapproved demand plan will bridge the transition from product development to product deployment.

Supply chain planning software

There are software tools available to aid organizations with supply chain planning. Most SCP software programs offer a supply chain dashboard that displays critical information such as the inventory of raw materials, orders processed and finances. These tools make it easy to generate flowcharts or diagrams to visualize supply chain components and share with relevant executives accurately.

SCP software can be used to proactively address supply chain constraints or changes as well as provide real time data updates. Applications can be integrated into existing transactional or enterprise resource planning (ERP) systems and can perform what-if scenario analyses. Typical SCP software tools include network design, capacity planning, demand planning, scheduling and distribution and deployment planning capabilities.

This was last updated in February 2019

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