A Demand Capacity Planning FAQ
Nick Ostdick - November 14, 2017
Imagine trying to walk a tightrope. You must have incredible balance, be extraordinary nimble, and understand the nuances of each step as you complete your journey from one side to other. You also have to account for the context in which you’re walking the tightrope: weather or climate conditions, barriers or impediments along the wire, or other significant hurdles along the way. In short, to successfully negotiate such a challenge, the tightrope walker has to execute a number of tasks in quick succession (or sometimes simultaneously) to make it from Point A to Point B.
The same is true for demand capacity planning in today’s manufacturing and logistics landscape. Particularly in variant-rich industries, the proposition of balancing demand and capacity - the amount of product or component parts needed to successfully fill orders and maintain efficient production schedules versus the sheer volume of components and parts required on-hand at all times - is intricate and complex. Many supply chain analysts and manufacturing industry insiders believe, even given today’s technology via integrated planning systems, that this issue is at the core of supply network logistics, especially given expansion and growth into emerging markets in new parts of the world.
However, differences of opinion aside, there are a number of widely agreed upon, concrete aspects of demand capacity management and planning that help emphasize and remedy the challenges and complications many companies face in using demand capacity management strategies to combat bottlenecks and ensure on-time production and order fulfillment. With this in mind, let’s examine a handful of FAQ’s about demand capacity planning and how companies can leverage demand capacity planning and its associated benefits.
FAQ #1: Demand capacity planning allows a space for a robust forecasting and predictive analytics element.
Any good planning or production strategy must include some aspect of forecasting in order to ensure fluidity and efficiency across all touch points in the value chain. But demand capacity planning solutions, in part to provide enhanced levels of supply stream agility and flexibility, incorporate more robust forecasting and modeling applications that allow companies to actually incorporate real-life complications into existing orders in real-time to assess the impact and create solutions to combat these disruptions. Through this high-performance information processing and scenario generation, ‘what-if’ situations can be played out on the demand and capacity planning sides of the spectrum to simulate the effects and appropriate responses to supply bottlenecks and disruptions, the results of which can be shared in real-time with those across the supply chain to enhance overall communication and coordination.
FAQ #2: Demand capacity planning can increase the overall visibility of a company’s supply chain management down to the parts level.
We’ve discussed in prior blog entries the importance and value proposition of BOM management and BOM explosion in terms of ensuring the right parts and resources are allocated to the right facility for the right planned production scheme. With this in mind, it’s not difficult to see how BOM explosion can cut through the complexities of demand capacity management by providing planners and managers with real-time insights into the factors and restrictions associated with certain planned productions at certain facilities at certain times. Utilizing BOM management strategies, companies can leverage demand capacity planning to assess customer orders down to the part level, which not only allows for greater insight into the correct inventory and production levels for each order, but also allows for reverse calculations of part capacities and volumes to help identify order scenarios that could be problematic in the future.
FAQ #3: The likelihood and impact of potential bottlenecks or breakdowns in production or logistics scheme is greatly reduced via a demand capacity planning platform or strategy.
Whereas many optimized planning solutions allow users to create, evaluate, analyze, and share data resulting from simulations, demand capacity planning provides the power to actually insert what-if scenarios into existing orders to review and analyze the potential implications and disruptions in real-time. This increased visibility into how supply or production disruptions could impact real-life orders not only provides planners with actionable data relevant to actual scenarios, but it also offers greater insight into how future orders - whether from the same customer or new customers - could be impacted or damaged by the variables of the ‘what-if’ scenario. Part forecasting and part real-time modeling, this mode of simulation is more comprehensive and precise in terms of creating a more response supply stream.
FAQ #4: Demand capacity planning can be a critical tool in helping companies monitor and secure their inventory processes and management.
Demand capacity planning, as we’ve seen, has its roots in mitigating the impacts of modifications and alterations in orders and volume in all stages of production and supply. Concerns about the relationship between product necessary for planned production of certain projects versus overall inventory and the ability to respond to changes in orders are significantly reduced as planners and managers can review and analyze in real-time this relationship between parts dedicated for production and inventory to ensure on-schedule production and delivery.