The 10 key elements for a Best Practice Supply chain
Below is a MRR and PLR article in category Business -> subcategory Marketing.
The 10 Key Elements for an Optimized Supply Chain
Introduction
In the past decade, businesses of all sizes have been updating their Enterprise Resource Planning (ERP) and other supply chain planning solutions. Whether driven by acquisitions or the desire to enhance IT capabilities, these updates aim to support specific supply chain strategies.
Essential Elements for a Best Practice Supply Chain
1. Establish Clear Service Level Agreements (SLA) with Customers
An SLA should clearly define the service parameters, including lead times, minimum order quantities, and stock requirements. It should differentiate between regular demand fluctuations and exceptional demands, such as promotions.
2. Maintain Robust Communication Channels with Customers
Sales & Operations Planning (S&OP) processes should include direct customer input. This helps in adjusting the supply chain to accommodate significant demand changes.
3. Consider Total Business Costs in Supply Chain Planning
Effective S&OP should account for all cost elements, including demand, capacity, supply, and inventory planning. It should identify the most cost-effective way to deliver agreed services.
4. Use Forecasts Wisely
Forecasts help determine future capacity needs but are not reliable for order generation. They should indicate demand trends rather than exact timings, aligning with Lean practices.
5. Segment SKUs by Demand Volume and Variability
Different SKUs require different service levels and replenishment rules. High-volume items might need repetitive supply plans, while sporadic items may follow a 'make to order' approach.
6. Choose Appropriate Replenishment Rules for SKUs
Understanding cost drivers and selecting the right replenishment rule enables an effective inventory and production plan. A modern approach uses maximum inventory targets based on demand variability and service level needs.
7. Separate Planning from Execution Activities
Avoid blending planning with daily execution tasks. Set plans, typically monthly, and allow daily operations to follow these without constant replanning, enhancing efficiency and skill use.
8. Use Suitable Execution Tools for Order Placement
Order generation should match the appropriate replenishment rule, requiring either new tools or innovative configurations of existing ERP/DRP systems.
9. Eliminate Forecasts from Execution Processes
Forecast inaccuracies lead to costs. Avoid using them for order execution, but leverage them to understand demand trends and set inventory strategies.
10. Adopt Short Planning Horizons
Reduce lead times to avoid plan changes and streamline order control. This minimizes costs and meets customer expectations, aligning with Lean principles.
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