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Home : Articles : Supply Chain : Supply Chain Planning

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SUPPLY CHAIN PLANNING

For decades, supply chains have been viewed as simply a way to reduce costs and to get goods to the right people at the proper time. While these ideas are still possible and are true of supply chains today, they also have the potential to achieve greater importance with the companies who use them effectively. First, these companies must be willing to implement supply chains in the business and/or to improve their existing supply chain in order to really reduce costs, receive materials more quickly, and get products out the door on time.

Creating an efficient supply chain can be quite difficult and requires complex software. Implementing this software is often not cheap. Integrated, Internet-based supply chains, for example, also require the installation of costly hardware. Training for employees so that they can use the software is also a critical, and costly, element in the supply chain picture. All employees who will be using the system need to be thoroughly trained so that they understand how to use the supply chain planning system in the more optimal manner. Furthermore, there may be a period of adoption to the system that may cause a slight reduction in profits or an increase in expenses. Even with these initial expenses, supply chains are a wise long-term investment for companies.

Regardless of these costs, many companies already have a supply chain in place. However, the supply chain may need some improvements if it is to help them achieve additional benefits and to drive the overall value of their business. One of these changes is that all vendors, suppliers, and related businesses need to be included in the supply chain. If even one element is missing from the puzzle, then the results will never reach their maximum possible potential. Another improvement is that the supply chain needs to be brought onto the Internet. Web-based supply chain management allows the business to work on a more global level that can further drive down prices and increase profit margins.

Once the supply chain software is either implemented or upgraded, the company can then use it to achieve even greater benefits. As the business's use of the supply chain gets better, the company will gradually see even greater benefits. For example in the beginning, the supply chain may simply help the company achieve stability. Their demands and their supply become more predictable but the supply chain itself only plays a minimal role in the company's overall strategy.

As things progress, the company should eventually reach a point where the supply chain is almost fully integrated into the business's overall strategy. Every element of the supply chain comes together in a seamless pattern of efficiency. For instance, the members of the supply chain will be able to communicate through real-time methods so there are no delays in the delivery of information. The elimination of delays in the transfer of data means that the overall cycle of production is more expedient. Also, “pull” systems allow companies to automatically notify the other members of the supply chain when the inventory needs to be replenished. Again, without the delays of traditional methods where a human has to physically place the order, the entire cycle speeds up.

Additional benefits of the more advanced supply chain include sharing technological knowledge with everyone involved in the chain. Because the chain is mutually beneficial to all parties, there is no need to be competitive or to keep such knowledge for the sole use of only one element of the chain (although companies should still keep confidential business information internally). After all what benefits one aspect of the chain will cause a ripple effect that will lead to benefits for all aspects of the chain. Improved approaches to supply chain metrics can also be implemented since the advanced supply chain's focus will be more on collaboration and cooperation. Accurate measurements will give a clearer picture of the actual results of the system and will more accurately predict areas for improvement.

The bottom line is that while the supply chain is worth the investment, companies may not see the full potential of its benefits until the right web-accessible software has been implemented for some time and until all parties come to see a share of those advantages.

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