|View From The Ridge: 02|
March 27, 2015
Vice President, Product Strategy
The processes and tools that help us achieve our goals in supply chain management are ever changing. As processes and technologies evolve, the roles and responsibilities for you, the practitioner, evolve as well. All of this change is driven by the never-ending need in your business to be more profitable. At Blue Ridge we are truly dedicated to improving your business profitability through technology, to blur the lines of traditional supply chain planning silos, and make your job easier. Supply chain planning encompasses many critical areas of your business, including replenishment optimization. However, supply chain planning is significantly more than replenishment. One critical area is collaborative planning with your supplier partners.
Collaborative Planning... Who Cares?
Do you frequently experience incomplete order receipts from key suppliers? Would you like to exert better control over your supplier’s fill-rate to you? These are just a few reasons to put additional effort into collaborative planning with your most important suppliers. The idea of you, the consumer-facing partner, engaging in a collaborative forecast with the supplier has been around for a long time. The benefit to you is obvious. If you can provide your supplier partner with better forecast information, theoretically the supplier partner can provide a better fill-rate. It takes two to make this work, but why does the supplier partner care? Aside from being a good partner, their ultimate goal is to make their operation more efficient and profitable by better synchronizing production and capacity planning.
One Way to Do It...
Historically, collaborative demand planning started with a time-phased demand forecast. In other words, a projection of the seasonal forecast projected period-by-period into the future usually aggregated by SKU across your enterprise. Some consumer-facing partners even managed to insert their event plan. While that is a good start, it leaves out important information. The supplier still has to translate the forecast (what you think you are going to sell) into a production plan. The Blue Ridge solutions can provide tools and apps that start you on your way to tighter, easier collaboration with your supplier.
Time-Phased Joined Order Projections
Being able to give your supplier partner a time-phased forecast is one approach, but limiting their view to only the demand forecast can be ineffective. You need to share additional segments of the “forecast” or demand plan such as event or promotion uplift and daily profiles. Your Blue Ridge solution can provide aggregate, time-phased order projections that are adjusted for joined ordering logic. In other words, driven by all segments of the forecast, you can deliver a real picture of what you are likely to order in the future. This takes into account all inventory drivers like committed quantities, expected receipts and projected on-order and on-hand quantities. It also includes strict ordering constraints like buying multiple, min/max and lead time. All of these components are then balanced for service and profitability. The resulting SKU order projection is a very precise number. You can easily export the order projections to send to your supplier partner at the appropriate level of aggregation. Using these order projections, your supplier will know the entire picture of your future demand plan. This allows for better manufacturing planning (capacity) and scheduling decisions.
The reality of this approach is that significant effort is required, particularly on the supplier side, and that makes it difficult to sustain. The supplier needs input that is readily actionable and meaningful. The retailer must have a process in place to generate that input, such as order projections. The effort on both sides is essential. But even if the supplier has a better understanding of the customer forecast, they might not be able to use it in a meaningful way.
An Even Better Way
Let us think about it from a different perspective. Do your orders represent a significant portion of your suppliers’ volume? What if you could plan orders into the future with significantly better precision? Taking that idea a step further, what if your orders were automatically adjusted so that they still maintained your customer-facing service goals and were also within the supplier’s production capacity? If your orders were synchronized with their capacity, this would enable suppliers to guarantee better fill rates. It’s a win-win.
It is possible using the Blue Ridge Supply Planning Bundle. Driven by the same precise Blue Ridge time-phased order projections using joined ordering logic, Supply Planning compares future orders to supplier capacity thresholds. This way future orders are automatically adjusted to fit within the supplier’s production capacity. Holidays and other known supply-chain disruption events are also accounted for automatically. It is end-to-end collaboration made easy.
Let’s look at the collaborative supply planning steps:
- First, you and your supplier need to want to collaborate. This process is pretty easy but you and your supplier should agree to touch base periodically in case there are changes that should be accommodated in the supply plan.
- Confer with your supplier on their capacity to make or assemble goods to fill your demand. The following are inputs to the supply plan in the Blue Ridge solution:
- The supplier will need to tell you how they measure a capacity period. For example, how do they plan production capacity? Is it by week? By month? Every 90 days? It is completely definable by you and your supplier partner?
- Ask the supplier for the capacity minimum and maximums. Are they the same for each period?
- Establish whether the capacity plan refers to one item or a group of items.
- Configure the Public Holiday Calendar in the Blue Ridge solution to ensure any holiday closures or other known disruptions to the supply chain are identified.
Once the capacity plan is established, the Blue Ridge solution will automatically adjust the future supply plan. Quantities on future orders that would be outside the established capacity thresholds are moved into earlier orders in the most profitable way possible. The result is better supplier fill-rate to you, better service to your customers and more efficiency for your supplier partner.