Why You Need Supply Chain Planning Software

In this article, we will explain basic planning of supply chain and reasons why you need to improve your operations using a software for supply chain planning.

Supply Chain Planning Concept

Many companies use the word "supply chain planner" to describe an entry-level job dealing with the demand forecasting and material scheduling to improve customer service. Is this the scope of the planning? According to the article "How to do strategic supply-chain planning", it is the time-based decision-making process which can be illustrated as below,

- At the strategic levels (AKA strategic planning), a company tries to figure out the best strategy to deal with long-term capacities, facility locations, inventory stocking points, management of distribution channels for the next 2-3 years or even lean manufacturing and six sigma initiatives.

- At the tactical level, the planning process starts with the annual budgeting. A company makes a sales projection for the next fiscal year, identifies required investment, material procurement, capacity, and labor and tries to bridge the gap between the demand side and supply side.

- At the operational level, a company deals with day-to-day operations such as supplier negotiations, Material Requirement Planning (MRP), material scheduling, production planning, sequencing, order release, order promising and vehicle routing.

Planning of supply chain can be done manually, but there are signs you might need a planning software as below,

Why You Need Supply Chain Planning Software?

1. ERP is not the Holy Grail
The expectation is usually high when a company decides to invest in a new enterprise software project. However, many of them find out later that a standard ERP system only enables them to manage the enterprise information in a big database. The much-complicated analysis must be done outside the system. If you already have an ERP system in place, good planning software can a very good addition.

2. Route planner can't take a day off
If you're still doing the vehicle routing manually, you'll notice that the quality of the route is not very good. The reason is that many route planners have developed their own unique ways to handle real-world constraints such as time windows, truck ban time period, vehicle capacity limit, rush order and so on. The process is so complicated that nobody can imitate the planning logic, that's why a planner can't take a day off.

3. The production plan is changed every morning
In some industries such as Electronic Industry Services (EMS) in Asia, changing a plan every morning is the way of life. The reason contributing to this problem is mainly from the negotiation power of big customers who can ask for order insertion, deletion or cancellation at any time. Then, you need software that helps you create a plan quickly.

4. Each planner manages too many SKUs
How many SKUs should a planner manage? A generic answer is something around 500 SKUs. If your planner is currently dealing with 2,000 SKUs or more, using a spreadsheet analysis can be problematic.

5. Nobody is accountable for forecast errors
A demand forecaster usually feels a bit lonely because he/she is to blame for the errors. The good S&OP software can be the ideal solution that brings marketing, production, logistics and finance department together and creates a realistic demand and supply plan.

6. Batch size is huge
It goes without saying that a big production batch drives cost down a lot due to lower machine set-up and higher yield. The drawback of big batch size is the lack of responsiveness. Good planning software can help to create a more flexible plan without sacrificing too much of the economy of scale.

7. There is no long-term planning
Have you ever wondered what you should do for the next couple of years to come? Most companies do strategic planning such as industry analysis, competitor analysis, new product development road-map and so on. The problem is that supply chain people usually don't take part in this kind of initiative. Then, the implementation of planning software is highly recommended.

Are there any other reasons why you might need a supply chain planning software?

- Sodhi, M. S. (2003). How to do strategic supply-chain planning. MIT Sloan Management Review, 45(1), 69.

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Last review and update: December 11, 2021
All contents are written by Ben Benjabutr unless marked as [Guest Commentary]

About the Author and Editor:
Ben Benjabutr is the author and editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in supply chain management. You can contact him via e-mail.