Editor's note: This is the second article in a two-part series examining how a supply chain planning system model can improve customer service and drive total value creation.
Supply chain complexity has increased exponentially over the past several decades because of globalization, consumer demand for increased product customization and the development of multi-functional business processes to address these challenges. To achieve peak customer service; drive total value creation; and decrease complexity, a holistic supply chain planning process is needed.
To that end, the University of Tennessee, Haslam College of Business’ Global Supply Chain Institute (GSSI) has collected data on the critical planning systems that successful businesses are using to drive end-to-end supply chain total value. With this data, the GSCI has developed a supply chain planning system model that reflects best practices in managing a global supply system. Here are the key elements of GSCI's supply chain planning system model.
The supply chain should be planned consistently with the operations strategy. Traditionally, planners built a wall around the operational units, attempting to lower cost and improve internal efficiency. Operational requirements with long lead times, long planning windows, long fixed zones and large minimum order quantities (MOQ) were the norm.
Modern supply chains eliminate these walls and build supply chain capability to match business requirements. This shift has created a focus on time. Fixed zones, planning windows and lead times are reduced to the absolute minimum. MOQs have been eliminated or significantly reduced. These time-based changes create more responsive supply chains.
The foundation is the most important part of successful planning systems. Without a strong foundation, all remaining system elements perform with an unstable base. The foundation has three essential parts:
- End-to-End (E2E) Total Value – The GSCI planning system is based on a supply chain that encompasses the supplier’s supplier to consumption (end-to-end). This ensures that the system optimizes customer service, inventory and cost for the entire value chain. A foundation focused on total value across the end-to-end supply chain forces every supply activity to holistically manage planning and focus on end-to-end measures.
- Business Understanding – Excellent planners have a deep understanding of the business, business strategy, competitive strengths/weaknesses, shareholder needs and the E2E supply chain strategy. This enables them to utilize planning systems and every planning process to deliver short- and long-term business needs.
- Accurate Data – Data accuracy is vital to planning. The critical databases in end-to-end supply plans include bill of material, ERP parameters, inventory accuracy and customer master data tables.
The GSCI Supply Planning System Model incorporates best practices from benchmark organizations. Following it can help you orchestrate your supply chain to optimize value to end-customers and maximize the supply chain’s economic profit.
A more detailed presentation of the planning model, as well as a planning framework, real-world examples, planning maxims, a case study and a review of emerging issues in the field can be found in GSCI’s new white paper, “End-to-End Supply Chain Planning Framework and Key Concepts.” (https://haslam.utk.edu/whitepapers/global-supply-chain-institute/end-end-supply-chain-planning-framework-and-key-concepts)
Michael Burnette is the Director of the Global Supply Chain Institute at the University of Tennessee at Knoxville.
Chad W. Autry is the FedEx Endowed Professor of Supply Chain Management and Head of the Department of Supply Chain Management at the University of Tennessee, Knoxville, as well as past Editor-in-Chief of the Journal of Supply Chain Management.