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Supply Chain Planning for Dummies

An easy-to-understand guide to getting started with demand planning.
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The single biggest frustration a customer will have with any business is waiting. The need for on-time fulfillment, to generate high customer satisfaction levels, is key to supply chain management. Delays can do a lot of damage to the reputation of a company, so cleaning up any areas in the supply chain that are lagging should be priority one.

An example of a well-known supply chain failure was Target expanding into Canada. Instead of rolling out slowly, province by province, they chose to open everywhere all at once to take advantage of a real estate opportunity. But it was too much, too fast, and the supply chain couldn’t keep up. The result was empty shelves and disappointed customers.

“A pink Barbie-branded SUV that seats two toddlers offers a surprising glimpse into the myriad problems that jammed up Target Corp’s supply chain…The toy was one of many products that piled up in bewildering volume at Target’s new distribution centers…Goods were coming into the warehouses faster than they were going out.” (SOURCE)

There were a lot of supply chain problems that caused the company’s entry to Canada to fail (they pulled out in January 2015), to the tune of $2 billion in losses. Long lead times, with retail choices made in the U.S. that weren’t popular in Canada, contributed to those losses. If they had, among other tactics, maintained shorter lead times, they could have carried less inventory and then been stuck with less obsolete inventory when the customer decided that the Barbie SUV was no longer the ‘it’ toy.

This is a simplification to illustrate the point that shorter lead times mean less inventory, less risk, and less frustration for the end customer. Other benefits to reducing lead time?

● Flexibility when the market shifts
● Faster output makes for a stronger competitive position in the marketplace
● Fast stocking to ensure customers aren’t empty handed
● Improved cash flow because of increased efficiency in order fulfillment

With these benefits in mind, what can you do to reduce your lead times?

Automate your inventory management processes

Relying less on manual data entry to manage supply is essential to speed up inventory management processes and reduce errors. Furthermore, integrating software for inventory management into your supply chain processes will help keep the whole chain visible, making it possible to anticipate disruptions or changes that will need to managed.

Provide accurate sales forecasts to your suppliers

If you can give your suppliers a head’s up as to what they might be expected to supply to you in the next quarter, you have a better chance of shortening the lead time to receive the items you need. They can manage their fulfillment process more effectively, which is a win-win.

Increase the frequency of your orders

Instead of leveraging a bulk order, which might save a little money but takes much longer to provision and creates longer lead times, try doing smaller, more frequent orders and then check the numbers. You might find that there is a cost savings, but you will definitely find that the shortened lead times make supply management simpler and more efficient, which is also a positive.

Use incentives to sweeten the deal

If your suppliers are providing lead times that you would like to shorten, make it worth their while! A bonus structure for early to on time delivery, based on your lead time requirements, might just get the job done!

Use domestic suppliers, where possible

Obviously, if your orders don’t come from overseas, you can cut your lead times significantly. Distance and shipping delays are two big factors in lead times from foreign suppliers. The cost of the goods relative to the shortened lead times need to be weighed in the balance to see which will benefit your supply chain, inventory management and ultimately your customer, more.

Make sure your reputation stays clean! If you are able to reduce lead time before provisioning, you will be able to deliver to your customers, on or ahead of time, every time. This is a huge plus for customers. And remember that a happy customer is a repeat customer!

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