14. Supply, Manufacturing and Distribution Planning

Supply, manufacturing and distribution planning. Now that we have our forecast we have to decide what we can do with it. There are three important questions that we need to answer, how much raw materials are we going to buy? How much are we going to make? And finally, how are we going to move product out to our customers?
These three questions can yield conflicting objectives, so we have to come up with a strategy that takes all of these objectives into account and creates a situation that’s in the best interest of the whole organization. We don’t want to just optimize one area and make other areas worse off.
Now, supply planning. The goal is to make sure we have the raw materials to meet production goals that are set. So we need to know what to buy, when to buy it, and how much to buy. To determine exactly how much raw materials we need, typically you would use a system called Materials Requirements Planning. It breaks down the final product into its subcomponents, the value of materials, and then we get to manage each raw material or input by ensuring adequate inventory is available when it goes into production.
All the stuff that happens behind it is fairly complex but the general idea is as simple as I just explained it. Now that we have our final products we have to get them to the customers. That requires setting up our warehouses with adequate inventory and planning our transportation. We can achieve that by having a system called Distribution Requirements Planning. And that will set inventory levels at specific warehouses at specific points in time and prepare the transportation network. In meeting our demand, there are three different strategies that we can follow. We can use the Level Demand Strategy, that means we set up for an average inventory over time, and we’re going to build up inventory when we don’t have that much demand. And we’re going to draw from that inventory as we have more demand. But production in going to remain constant.
The opposite of that is the Chase Strategy, which means we’re going to ramp up production and produce more as we see an increase in demand. And then we’re going to decrease production as demand goes down.
And then finally, there’s the Peak Demand Strategy, which means we will have capacity for the highest level of demand possible, but most of the time we’ll be under, but it does not require us to ramp up or ramp down.
Now regardless of which strategy you pick, you see that forecasting is a critical success piece in every business. If you get the forecast right, everything else will be much easier. So you have to work as hard as possible to maintain the best forecast possible. If you get the forecast right, everything else will be much easier. You will be able to buy raw materials better, you’ll be able to plan manufacturing better, you’ll be able to plan your distribution much better. And your company, overall, will be much more successful, because there’s less waste and you’ll be much more efficient.

Jim Rohn Sứ mệnh khởi nghiệp