Network planning in supply chain management is a complex task that involves coordinating different individual companies, integrating several processes and activities in the supply chain network to improve the value of products or minimize system-wide cost while satisfying the demand of consumers.
What is network planning in supply chain management?
Supply chain network planning is the process of modelling and building the supply chain to understand the time and costs to bring the goods and services to market within the available resources of the organization.
Effective supply chain network planning can minimize the cost while maintaining a good service level, however, to achieve them both it needs a lot of effort. For instance- there exists an obvious tradeoff between these two objectives-if supply chain requires to maintain a high service level, its system-wide costs will rise, or if the supply chain requires its system-wide cost to decrease- then the service levels need to be reduced. Therefore, balancing the tradeoff is a complex process in supply chain network planning.
Supply chain network plan can be divided into three steps –planning, positioning, and allocation. According to Simchi-Levi et al (2008), network design provides physical infrastructure and coordination for the supply chain.
Planning the supply chain network is a complex yet important process, it includes a set of strategic-level decisions that would impact the future overall performance of a supply chain.
Factors that influence network planning in supply chain management
Rapidly changing consumer preferences, volatile markets, constant ambiguity and uncertainty have made traditional linear supply chains obsolete. These shortcomings are obvious in their inability to meet the needs and keep pace with diverse consumers. Fragmented supply networks and operational inefficiencies that hamper scalability have further compromised the responsiveness of businesses.
Benefits of supply chain network planning
An effective network plan in the supply chain can improve competitive advantage. These advantages help in decreasing the inherent risks of purchasing raw materials and selling goods and services. There are several benefits of supply chain network planning.
Effective supply chain network planning can reduce costs in key areas such as improvements to your inventory system, improvements to system’s responsiveness to consumer requirements, optimization of storage space for finished goods, eliminating deteriorated or damaged resources, improved relationships with both distributors and vendors.
Having the capability to include supply chains, innovate product strategies and integrate logistics can give businesses an advantage to predict demand and make corrective actions. Having a solid supply chain plan will help the companies to adjust dynamically to fluctuations in demand, the short life cycle of certain goods, and emerging markets.
Improvements in the supply chain network planning can result in improved output. It results in optimized collaboration and coordination with organizations that handle transporting and shipping, as well as suppliers and vendors.
When companies incorporate state-of-art technologies and better collaboration between various business areas, it will improve productivity and efficiency. Thus, resulting in increased profits for the business in the long run.
Having superior coordination is one of the fundamental features for most successful businesses. When there is a lack of coordination; distributors, vendors, and employees struggle to have an idea about the plans. Effective supply chain network planning can yield a huge advantage of improved cooperation between various entities. Moreover, when businesses open their door to new technologies such as supply chain management software, they can take the advantage of not even having to be in the same location with people to collaborate and communicate effectively.
With improved communication between various areas of business, organizations can have quicker access to accurate reports, forecasts, statuses, quotes, and several other plans.
With an effective network plan, businesses can eliminate or lessen delays in supply chain processes. With everyone more aware of their role in the business, issues like logistical errors, late shipments, and hold-ups on production lines can be mitigated.
Achieving an optimal supply chain network planning is not a simple process, but it is vital for the growth of the business. Supply chain network planning includes planning implementation and control of supply chain operations. It aims at finding the best possible configuration so that all possible operations are performed efficiently.
Effective network planning in the supply chain can help the organizations to balance the tradeoff among inventory, manufacturing, and transportation. It also aids in creating a balance between demand and supply under uncertainty through effective inventory positioning and management. Besides that, network planning can balance the available resources to choose the most suitable product sourcing facilities.