In my last post we explored the advantages of centralizing supply chain planning. Perhaps you’ve concluded that centralized planning is the way to go. After all, what’s not to like about increasing revenue, cutting costs and improving responsiveness?
So what should you do to ensure that all those benefits are actually realized?
Well, there is a critical success factor.
If your planners are struggling now, relocating them to a central planning facility isn’t going to make things better. In fact it will almost certainly make things worse.
Real centralization is about centralized supply chain planning – not just centralized planners. Without an intelligent planning system that supports planning across multiple production facilities, planners may be physically co-located but they will still be planning locally.
Here’s why intelligent decision support is crucial.
(1) It helps answer critical tactical questions such as “How will relocating production affect my KPIs?”
Consolidating production at a particular location may seem like a good idea – but is it really?
For example, in the case of a company with high volume, low value products, the resulting increase in transportation costs could well outweigh any gains in efficiency. And transportation costs are just one of the many factors that need to be considered.
To arrive at informed decisions that are aligned with your business goals, planners need to explore demand-supply scenarios. These scenarios should incorporate all relevant factors such as transportation costs, lead times, required delivery performance, production capacity and anything else that might affect your ability to achieve your business goals.
With the support of an intelligent system, your planners will know where to produce what in order to achieve your business goals.
(2) It enables planners to schedule orders across multiple facilities in order to maximize the overall efficiency of your virtual factory
Over the years I’ve seen many companies take up the challenge of centralizing their supply chain planning. Those that succeeded approached it as a journey rather than a leap of faith.
It’s often helpful to begin by centralizing tactical planning while maintaining local scheduling. This is followed by progress towards the most appropriate combination of centralized planning and local scheduling. As I mentioned in my previous post, a facility with complex operations and/or a large number of day of operations disturbances may benefit from local – rather than centralized – scheduling.
(3) It provides sales personnel with answers to time-sensitive operational questions such as “What delivery date should I promise this customer?”
Selling from your entire product portfolio opens up huge sales opportunities – and challenges. Chief among them is the challenge of quoting an accurate, profitable due date when sales personnel don’t even know where the product will be produced.
An intelligent planning system will consider all relevant factors before recommending a date that’s profitable, accurate and as close as possible to one requested by the customer –within seconds.
So should you or shouldn’t you centralize your supply chain planning? My answer here is exactly the same as the one I offered those two companies (in my previous post) with very different cost structures.
The vast majority of companies benefit enormously from centralizing their supply chain planning – but that doesn’t mean yours will too. Any decision should be backed by a rigorous evaluation of the impact of centralization on your business goals.
To explore how much your business stands to gain from centralized supply chain planning, drop us a line at [email protected]. Look forward to hearing from you.