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by Laurus Nobilis
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Supply Chain

Supply Chain Management:

Demand and Supply Planning (E)

Supply Chain Management


What was the evolution history of supply chain management? What are the main components of supply chain? How big is the importance of supply chain integration?


Posted: Jul 2011

The supply chain planning includes both forecasting and production planning. In some cases the supply chain planning involve also the import planning and subcontracting. Supply chain planning is associated with the manufacturers, retailers, and customers as parts of the supply chain.

Supply Chain Management

Manufacturers do majority of the work in both forecasting and production planning. Still, retailers can provide valuable information related to forecast of their sales. In production planning, manufacturers must collaborate closely with suppliers, in order to ensure that the right materials are delivered, as prerequisite for the production.

Demand and Supply PlanningForecasting involves estimating of customer demand. Forecasts indicate the required amount that will be sold, per SKU, for the specific period. Accurate and timely information is needed to do accurate forecasting. Companies are tracking Forecasting Accuracy, as one of the most important business indicators. Inventory management is directly relying on the forecast. Therefore, forecast accuracy is important from perspectives, demand fulfillment and inventory management.

Supply chain management plays a very important role within the company. The supply chain generate most of the costs of the company, due to the width and complexity of the function (manufacturing, warehouse, distribution). Any inefficiency can create tremendous negative impact to the company. On the other hand, good supply chain management can bring huge benefits and competitive advantage to the company.

Production planning is closely related to forecasting. The planning of the production involves balancing product supply with product demand, while taking into considerations, production and warehouse capacities, quarantine time, inventory levels and promotional plans. After a forecast is developed and the current inventory at hand and usage rate is determined, production managers can determine how many units of a specific product should be produced to meet consumer demand. Their main concerns are as follows:

  • Number of units of a specific product to be produced

  • Time span over which production will occur

  • Availability of materials, machines and production staff to produce the number of units required within the specified time frame

The production planning can be very complex, considering the wide and diverse portfolio, dense marketing grids, inventory and capacity constrains, changeover time, maintenance plans and other factors. Lines within a manufacturing plant have to changeover for different products, requiring additional time during which no products at all can be produced. Too high production plans can create huge inventories with risk of write off of product, or obsolescence of product. Therefore, having accurate product planning is essential to minimize inventory cost, write off cost, production downtime and reduce costs per unit.


Continue Reading:

Overview of Supply Chain Components
Historical Development of Supply Chain
Traditional and Modern View to Supply Chain
Supply Chain Activities
Order Processing
Demand and Supply Planning
Inventory Management
Customer Care
Integrated Supply Chain
Financial Resources
Integration vs. Non-Integration

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