Supply Chain vs. Uncertainty

We are currently in a time of uncertainty where the pandemic, situations in the global context and endogenous country factors, affect supply chains, generating a series of risks: demand variability, fuel price increases, commodity and labor price increases, and uncertainty in product imports.

But how does this affect companies? Demand variability affects our ability to meet service levels to our customers, while increased freight, fuel and labor costs increase our operating costs.

How do we manage uncertainty and changing scenarios? The main concept that companies must work on is to achieve a resilient supply chain, which allows them to quickly and efficiently deal with the changes generated by the environment, in order to maintain/improve service levels and customer experience in the most efficient way possible.

According to an article in Logistec [1], having good S&OP, Sales and Operations Plan, processes in place is one of the processes needed to maintain a resilient supply chain.

A robust and reliable S&OP process is capable of aligning strategic, tactical and operational business input and operations planning and resources.

In the first instance, it is necessary to generate an aggregate sales plan that will allow the Operations area to define a production plan and, with it, identify infrastructure or asset restrictions that will allow us to meet commercial requirements.

At the tactical level, we must generate a production plan downstream through master scheduling, with visibility ofMaterial Requirements Planning and production resources (personnel, assets, systems) and logistics (warehousing, transportation). At the operational level, we must be able to effectively manage the short-term planning of purchasing, production, resources, inventory, distribution and transportation.

Some of the tools we work with at Dux:

1.-
Demand Planning
Demand Planning: is one of the most important activities/processes of the S&OP process, because thanks to it we generate and agree on the sales forecast to satisfy customer needs. To generate the demand planning it is important to know very well the seasonality, trends and to validate with the commercial team all the market inputs . Good demand planning is critical to take care of our inventories, avoid stock-outs and avoid losing sales.

Inventory and Replenishment Model: the inventory and replenishment model has the input of demand planning, inventory policies must be defined to meet the desired service and/or experience levels.

At Dux Partners we work on simulations that allow our clients to evaluate different inventory policies that allow them to meet customer service standards in the most efficient way.

3.- Production and scheduling plan: Once the Demand Planning process and the inventory and replenishment policies have been defined, it is necessary to generate the tactical plans, on a daily and monthly basis in a disaggregated manner, that allow us to respond to customer demand.

At Dux, we have implemented the tools and processes, as well as a performance management model with adherence, cost and risk indicators for the efficient development and execution of the plan.

Then, we must take care of the management of our resources through other types of initiatives such as asset management, capacity management, personnel shifts with a focus on meeting previously defined production plans and schedules.

[1] https://www.revistalogistec.com/scm/estrategia-logistica-2/4045-s-op-planificar-para-ser-mas-eficiente-sigue-siendo-tendencia

The implementation of an S&OP process requires both advanced analytical tools to achieve demand projections, identify resource constraints and generate efficient operating models, as well as a performance management model, where each area has a clearly defined role and responsibilities to align the company’s objectives. At Dux Partners, we develop, together with our clients, both requirements so that the organization meets the needs of its clients in a timely manner.