| The main goal of any business concern is to meet | | | | core challenge is the speed of re-planning. It is difficult |
| the two broad objectives of reducing cost and | | | | for the companies to close this re-planning cycle with |
| obtaining the maximum customer satisfaction. If the | | | | its current Supply Chain Planning processes. Expect |
| business world was a quiet and fully predictable | | | | for a very select club of the few companies that |
| environment, these objectives can be met easily. | | | | have reached a good level of Supply Chain |
| The challenge in meeting the objectives are | | | | Management optimization, probably for total |
| maintaining a permanent balance between demand | | | | re-planning the cycle time may range from 5 to 20 |
| and supply as shown in Figure 2. Any company in the | | | | days, depending on the magnitude of supply chain. In |
| world faces unexpected events every day in its | | | | other words, a company is not capable today of |
| supply chain operations. Analyze the "domino impact" | | | | permanently maintaining an optimal balance between |
| of an unexpected event by using the example of a | | | | demand and supply. |
| supplier calling to inform that a delivery scheduled for | | | | A delay in the re-planning process can dramatically |
| the next day will be 10 days late because of an | | | | hurt the balance between demand and supply as |
| internal problem (a strike, a quality issue, or | | | | illustrated in Figure 3. Such an imbalance eventually |
| whatever). First of all, once the problem has been | | | | results in excess inventory, misused capacities and |
| acknowledged, the company needs to check the | | | | poor customer service. |
| consequences of this late supplier delivery on the | | | | The unexpected events are plentiful, and can be |
| production schedule. Because of the delayed | | | | grouped into two separate categories, manageable |
| component, some of the production orders probably | | | | and unmanageable. A company can minimize the |
| will need to be started at a later date than previously | | | | frequency and the magnitude of the unexpected |
| scheduled. This postponement can actually generate | | | | "manageable" events by applying continuous |
| simultaneously five different types of imbalances | | | | improvement programs. Manageable events include |
| between demand and supply: | | | | material quality problems, cycle time variation, yield |
| The late supplier delivery creates an unexpected | | | | variation, production quality problems, capacity |
| volume of available capacity during a certain period. | | | | problems, engineering changes, etc. (In industries |
| It also creates a capacity shortage in the following | | | | where the manufacturing process is unpredictable, like |
| period, where the delayed orders will be competing | | | | the semiconductor industry, the steel industry and |
| for the capacity that may be already allocated to | | | | the chemical industry, some of these events are |
| other orders. | | | | actually unmanageable.) Some companies have done |
| The delayed production orders may end up affecting | | | | a very good job with TQM initiatives to reduce the |
| the distribution plan. | | | | impact of these unexpected events, but in any case |
| These delays in the distribution plan may force the | | | | perfectly predictable supply chain operations will not |
| company to break the delivery promises made to | | | | be attained anytime soon by any company. The |
| customers based on the original supply plan. | | | | "unmanageable" category includes events on which |
| Finally, the purchasing plans for the components that | | | | companies have no control because they come from |
| were supposed to be consumed in production orders | | | | the external marketplace. The most disruptive |
| together with the supplier's delayed component | | | | unmanageable events are order modifications |
| specify purchases that will arrive at the company's | | | | requested by the customers on delivery dates, |
| docks too early, compared with the updated need. | | | | quantities, and specifications, as well as the periodic |
| This is a challenging situation. Because of one single | | | | sales forecast updates, promotions, product listing |
| unexpected event, the company is now faced with a | | | | and de-listing, etc. |
| complex re-planning situation, where a large number | | | | The unmanageable and manageable categories are, |
| of decisions have to be taken to restore the balance | | | | large complex supply chains having hundreds of |
| between demand and supply at every level. | | | | unexpected events occuring every day, generating |
| Unfortunately these decisions cannot be taken | | | | the need to trigger hundreds of re-planning cycles to |
| sequentially, because they are all inter-related. For | | | | maintain a constant balance between demand and |
| instance, the decision to anticipate some production | | | | supply. With this perspective in mind, probably the |
| orders to solve the capacity issues must be based | | | | magnitude of the gap that exists between current |
| on a material availability check to ensure that this | | | | Supply Chain Management processes and full Supply |
| decision is feasible. Also, the financial impact of these | | | | Chain Management optimization is very high. |
| re-planning actions must systematically be assessed, | | | | The author is an expert in wiring custom essays |
| or else the company's profitability may suffer. For | | | | dissertations in the field of marketing and operations |
| instance, if the company has to decide which | | | | management. He has been with the company for |
| customer delivery will be postponed, it should base | | | | some years as a senior writer. |
| this decision on the profitability of each order. But the | | | | |