Planning and Scheduling in the Supply Chain

Before relying on an ERP system to manage planning and scheduling activities, all companies should first make sure that the right processes are in place, standardized and uniformly used across the enterprise. Robust processes and policies will allow the company to generate accurate and timely data. Only then will a company be in a position to use an ERP system to improve planning and scheduling activities.

Major companies have invested heavily in ERP implementations and have suffered business disruptions whilst implementations have taken place. Despite good intentions, most companies haven’t come close to realizing the value achieved by those featured in various ERP case studies across the globe. Revenues have not increased by 20%. Operating costs have not fallen by 15%. Finally, on-time deliveries have never reached record highs of 95%.

So what is stopping companies achieving ROI? In my mind it is very clear that companies lack understanding and commitment! Firstly, the understanding that business value is inherently linked to business change, not systems change. From the commitment side it’s all about executing a good plan. However, this is another story! What we are confronted with now is that we have an ERP that is implemented which may or may not have achieved its ROI. Now we have got to get down to the operational level and try and recover what may have been lost or disrupted during the implementation however long ago it was.

The opportunity we are now presented with covers the whole enterprise and should allow the company to gain post implementation value, this area I am referring to is the whole Supply Chain, starting at the front end with Planning and Forecasting all the way through to settlements (including cash flow management). The area that we will concentrate upon here of course is replenishment planning, which by its very nature covers nearly all aspects within Supply Chain Management. This is where a company’s supply meets its demand!

Companies that plan well are more likely to:

·         Anticipate demand and respond nimbly to unforeseen market shifts

·         Have higher customer satisfaction rates

·         Have less cash tied up in obsolescing inventory

It’s where forecasts are converted into purchase and/or production orders. Planning activities influence inventory levels and, by extension, cash flow. The sad truth is that most companies’ ERP systems issue poor planning recommendations – ones that, if acted upon, would lead to a huge mismatch between supply and demand. Because those system-generated recommendations don’t reflect true operating realities; planners, purchasers, materials managers, production managers and others often ignore system-generated planning signals and advice.

Almost always, however, poor planning advice has little to do with the software itself. Software is made up of a bunch of 0s and 1s, and simply generates outputs from formulae and rules. In all likelihood, the formulae and rules were programmed just fine. Rather, poor recommendations are usually the result of inaccurate and untimely base data.

The good news is that any company can significantly improve its planning and scheduling activities. And, if it does, it’ll go a long way to generating that seemingly elusive ERP-related business value. From a high level, there are three key success factor to planning. They are:

·         Accurate Item and Movement Data – The system needs accurate data to simulate a company’s operating reality. Key data requirements include item-level order modifiers), bill of materials and routings.

·         Accurate Inventory Data – If inventory counts and movements are not accurately reflected in the system, the planning engine will either make recommendations that cause the company to 1) prematurely order inventory or 2) deliver items beyond the due date. The former case constrains cash flow and unnecessarily increases the value of a depreciating asset class. The latter case leads to higher rates of customer dissatisfaction and turnover. In our experience, a planning engine will only be capable of issuing meaningful planning recommendations when a company:

o    Has accuracy rates of 95% for its on-hand inventory

o    Maintains accurate demand and supply forecasts

o    Knows its minimum inventory level requirements (safety stock)

·         Timely Recording of Material Movements – The status of purchase orders and production orders varies over time, as materials flow through supply chains and production. To ensure that planning signals and recommendations are meaningful, the company needs to update the system promptly. Businesses can choose to do this a couple of ways – through manual input or in an automated fashion.

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