The Characteristics of Supply Network Planning

When SAP released Advanced Planner and Optimizer (APO) more than 10 years ago, it named the supply planning module as Supply Network Planning. In today’s competitive, fast-changing business environment has change the supply chain and the management of its functions. The traditional supply chain is a “chain” of functions from sourcing, production to distribution and retails linked in a linear and simple fashion. It is no longer suitable to today’s global business. In fact, we need a “supply network” rather than a “supply chain”. The new approach to supply chain management (SCM) reflects the complex nature of supply chains and requires improved communication and two-way (or multi-dimensional) information flow that involves customers, suppliers and business partners.  What are the key characteristics of Supply Network Planning vs. traditional Supply Chain Planning?

Information Flow

Companies are often limits the information flow within the boundary of the company. However, an effective Supply Network requires collaboration between customers, suppliers and business partners in the network. At a Japanese consumer electronic company, retailers provide the weekly sales information which forms the basis for accurate statistical forecast. Marketing and Sales adjust the forecast based on market intelligence and promotions.  Distribution Centers then generates replenishment plan and send it to the oversea factories. The factories plan the production, procurement and transportation accordingly and provide the feedback to marketing company. The Available to Promise is send to the retails. All these are done in automated and collaborative fashion. As the results, the company can response to market condition quickly and effectively. Information sharing benefits all partners in the supply network: improved customer services and reduced supply chain costs.

Network Integration

A collaborative supply network requires integration of partners’ legacy systems. Many companies believe that the integration effort are large and expensive. In fact, the technology advances have made the integration easier and affordable to small and medium sized trading partners in the supply chain. The most recent trend in SCM is so-called Business Communication Platform (BCP) or Portal. The BCP or Portal acts as independent layer between back-end ERP systems and the front-end applications.

Planning Not Managing

Oftentimes we are trying to manage the supply chain. Supply Planners are loaded with non-value-added and administrative tasks. The supply planning system is loaded with non-value-added and administrative functions as well. For example, a supply planner has to know the dollar value of the purchase requisition. He/she has to constantly adjust the forecast. In Supply Network Planning, the focus is planning not managing. The forecast provides the baseline of initial supply plan. The actual demand triggers pre-defined business rules that response to exceptions. The responsibility of the supply planner is to define and optimize the business ensuring that the supply network is responsive and flexible.

Advanced Planning

The traditional stepwise approach will not be meeting the needs of a complex supply network. This approach is simple but  cumbersome, and does not readily adapt to changes in demand, resource capacity or material availability. Materials and capacity are planned separately, and many systems do not consider limited material availability or capacity constraints. Thus, this approach often results in plans that cannot be executed.

Many companies are implementing advanced planning system (e.g. SAP Optimizer, CTM). However, the implementations are still based on traditional SDLC (Software Development Life Cycle) approach. As the results, the business requirements are mostly coming from old planning approach. The benefit of Advanced Planning cannot and will not be achieved. Therefore, Benefit Realization approach become the vital to a successful implementation.

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