Tackle Supply Uncertainty with these Five Planning Strategies
Supply delays, logistics constraints and inflation, oh my! It’s the story of our lives today, as the enormous bullwhip effect of COVID continues. Much of the world has moved past lockdowns and are demanding finished products from their usual suppliers; but dwindling cargo space, skyrocketing transportation costs and component delays make it difficult to keep shelves stocked. Here are five ways you can minimize supply risk while still meeting your business objectives with smart supply chain planning.
- Put Your Available Inventory to the Best Use
Chances are you do have some inventory–make sure it’s being put to the best use. This is where an advanced supply chain planning system can really shine, by allocating the stock you have on hand according to your business goals, e.g. profitability, sales maximization or others. In more buoyant times, more companies may be optimizing to reduce cost or maximize revenue to grab market share. In the current climate, with severe supply shortages, companies are interested in optimizing for margin. You can also detect and correct possible stock imbalances by re-distributing excess stock in the network to other locations.
- Get Your Product Portfolio in Shape
When COVID hit, manufacturers scrambled to meet demand, but there was a nasty surprise in store in the form of a radical shift in consumer buying patterns and behaviors. However, this demand shift presents a unique opening to rethink your product portfolio and rationalize it to ensure you’re focused on the more critical subsets. Here are some places to get started:
- Identify the products that are surging in demand versus dwindling
- Determine the strategic value of each product in your portfolio
- Assess potential opportunities to collaborate with business partners to bring new products to market
- Re-evaluate What You’re Ordering
There’s no guarantee that the supply you normally order will be available, so it pays to be smart about what you order to maximize service and profitability.
Analyze which supply orders will contribute to higher margin sales, which are most likely to sell, or what’s needed to fulfill backorders quickly. You can also evaluate equivalent items that may be good substitutes for those in short supply. You may be low on Item A, but Item B is an equivalent alternative item available to order. Of course, this tactic is ideal for lower margin, commodity type items–not for higher margin, specialized items.
- Stress-Test Your Supply Chain with S&OP Scenarios
Scenario planning is nothing new to businesses, but when a major disruption occurs, it’s both highly and newly relevant. One of the ways to ensure your supply chain is ready for the next crisis is to test its resiliency by leveraging S&OP. With the right simulation tool in place, your S&OP team can make “on-the-fly” calculations to show the supply chain and P&L impacts for a variety of scenarios including the impact of price increases, promotions, purchasing requirements, and production plans. You can also create new scenarios to address inbound import shipments stuck in ports with parts, components or finished goods by shifting suppliers from Asia to other locations–the possibilities are truly limitless.
- Try Production Planning to Adapt to Supply Changes
The impact of current material shortages is compelling companies to re-evaluate their production strategy. You can use production planning to adjust to uncertain supply by pre-purchasing supplier bill-of-materials components with the longest lead times, partnering with suppliers to identify components with the extended lead times or high supply uncertainty, and much more.
Need practical guidance for building a supply chain that’s ready for anything? Download the eBook, Game On: A Planner’s Playbook for Rapid Response to Supply Chain Disruptions.
Bobby Miller is Sr. Director of Customer Success at ToolsGroup, where he works with customers to maximize their results and progress in their supply chain planning maturity. Prior to his role at ToolsGroup, Bobby held various product management, supply chain, and sales and marketing leadership positions with LLamasoft, ORTEC, Georgia-Pacific, and Kraft. Bobby holds a B.S. in Information Systems from Chicago State University.
