Planning your Supply Chain

Ensure Your Inventory Moves Smoothly In 2016

Any business that deals with physical goods needs a robust plan for the year ahead, often even two years in advance. A lack of supply chain planning can result in delays, surplus stock and even loss and damage. Key to this problem is the word ‘chain’, because of the inevitable domino effect that such issues can have on multiple stakeholders.

The year ahead should be seen as a journey, encapsulating all the peaks in activity, preparing for each trading season. For example, a company selling gifts should plan out their year as a collection of peaks; from the colossus that is the Christmas period, to lesser occasions like Valentine’s Day. Let’s take the busiest time of year for most retailers and couriers. The consumer expects to be able to buy Christmas presents within a period spanning about 6 weeks at the end of the year, with the bulk of activity happening in a 10-day period at the beginning of December. That stock has to be on the shelves or in the storerooms ready to sell by the middle of October, or there is a real risk of missing the sweet spot.

Similarly, a typical supermarket has to plan for the scenario of a long hot summer every year, through increased inventory of beer, wine and barbecue food. It is these commercial peaks that make or break any profit plan. The warehousing and transport chains must be well-versed and ready to act on any changes in demand, in order to maximise efficiency.

Supply Chain Planning

Every step of the way from manufacture to consumption must be planned to precision. This includes importing or fabrication, then transporting to and from at least two storage facilities before ending up in front of the consumer. On the production side, one good technique for non-perishable items is to process a surplus for the first 9 months of the year, then set aside that extra amount to be used in the peak season. This may appear to be an inefficient use of warehousing for most of the year, but the alternative would be to massively increase production at short notice.

The surplus method ensures a more even, consistent spread of activity and can lessen the negative impact of a huge surge in volumes. For example, if you plan on increasing activity tenfold in preparation for the peak period, all that recruitment and overtime may be too significant an outlay. Transport and storage can be used strategically to lessen the impact of seasonal spikes in demand.

Whichever strategy you use, every logistics decision must be based on data. Those who rely on guesswork are exposing themselves to huge risk.