Production Planning: 2020 Has Turned the Supply Chain World Upside Down

By Alessandra Giovanelli, Lena Schneider und Sonja Telscher

In light of growing complexity and dynamism, successful corporate management requires a departure from traditional thinking. The markets are becoming increasingly volatile and are characterized by fluctuating demand. In the following blog post, we provide insight into the new dynamics that make a rethink of current procurement, production and distribution processes necessary. What has changed compared to the past? What has remained the same? And what does the future of the supply chain look like – from the procurement of raw materials to variable warehousing and the management of material flows?

Even in the past, companies recognized that the clever coordination of production capacities has a crucial impact on the business’s profitability. As Benjamin Franklin once said: “If you fail to plan, you are planning to fail.” Material and capacity bottlenecks, difficulties in meeting delivery deadlines, and unnecessarily high production costs can only be avoided with well thought-out, flexible production planning and controlling.

Greater demands on production can increasingly be observed on the market. Everything has to be faster and faster, better and better, cheaper and cheaper. Customer inquiries must be answered promptly, adherence to deadlines must be ensured, and throughput times must be reduced. Production processes should also be as defect-free as possible in order not to generate rejects and avoid reworking. In addition, the pressure on costs is growing as the diversity of global suppliers depresses prices and impacts profit margins.

In view of the increased expectations, it is essential to adequately calculate personnel and material resources. Due to market volatility, this requires a high degree of flexibility, which must be integrated into supply chain planning.

The supply chain is extremely complex and only as good as its weakest link. One of the greatest challenges in supply chain management is, above all, sales planning, which has recently been compounded by the problem of raw material shortages. Demand is increasing but it can no longer be met by supply due to a lack of the necessary raw materials. More and more countries are taking protectionist measures and closing off their markets in order to promote production and processing in their own countries. The shortage of raw materials pervades all areas of manufacturing. Many companies are complaining about supply bottlenecks especially for materials such as steel, copper, aluminum, polymers, semiconductors, insulating materials and components. This is particularly being felt by consumers who are at the end of the chain and do not receive their orders on schedule or are even unable to place them.

While not all current challenges can be met with an optimized supply chain, the basic principle is: Efficient and timely processing of production orders can only be guaranteed if the interaction between available resources, good planning and scheduling is effective.

In addition, an economical supply chain depends to a large extent on smart warehouse and inventory management. Several questions have to be asked in relation to this:

• Does it make sense to produce on-stock to deliver orders in the expected, competitive time frame?
• Should semi-finished or finished products be stocked?
• Which raw materials and supplies are needed and in what quantities?
• Are there any best-before dates, minimum order quantities or delivery periods that need to be observed?

In all these considerations, it is always important to bear in mind how much capital commitment is still healthy and where volume-induced cost degression and consumption horizons need to be weighed against each other.

Today, trouble-free production and the digital monitoring and controlling of the entire intralogistics are also part of the tools for successful business. On the move towards the smart factory, collaborative information systems, self-controlling replenishment processes, automated manufacturing and predictive maintenance are crucial factors. The merging of OT and IT using modern sensor technology and powerful software ensures that the idea of a horizontally and vertically digitized supply chain becomes a reality. This makes it possible to adapt the planning process to real conditions on a rolling basis, react flexibly to unforeseen events, and still keep an eye on costs. Resources and tools are planned with foresight, processes are streamlined through a systematic flow of information, and the available big data is harnessed. Reliable sales planning, which has an impact on every subsequent stage of the process, is of key importance here. All the important information and variables must be taken into account and coordinated with each other for the key players on the demand, supplier, and provider sides to be able to come together to form a synergetic network. 

Would you like to discuss the challenges in your supply chain with our experts? Then don’t hesitate to get in touch with us!