Challenges and considerations of rate-based supply planning

When it comes to the everyday maintenance of a well-oiled supply chain operation, managers need to have all the information in front of them in order to make informed decisions. This is especially important when planning how much of a product to stock in the warehouse and how much to ship to endpoints (both retailers and individual consumers).

When resources are based on a specific capacity, rate-based planning can be used to constrain based on the production rate of the facility in question. This method can help organizations meet requirements and enhance efficiency for the long term, along with improving resource allocation and supply chain planning in general.

Essentially, organizations can’t create products from thin air – they can only use the resources available to them at any given moment. So companies need to figure out a way to predict resource constraints based on production rates – in other words, they need to utilize rate-based supply planning.

What’s the challenge?

Let’s say a company that produced a high volume of thousands of small-end products needed to come up with an effective supply chain planning strategy. Over a 10-year period, this organization established the preferred production rate for a given facility and laid out specific product mix profiles that reflected both production and ergonomic constraints.

The goal here was to use these rates to determine the number of resources available based on actual production rates. However, the company, which needed a solution that would encompass discrete manufacturing activities and incorporate specific rate-based and product mix constraints into the strategy, controlled all production planning via spreadsheets instead of efficiently modeled in supply chain planning software. This solution would be cumbersome and inefficient.

Supply chain planning and execution is a critical part of running a business.Supply chain planning and execution is a critical part of running a business.


Supply and demand is king

Supply chain planning isn’t just about resource allocation – it’s also about taking stock of how long it takes to produce certain materials given time and mix constraints, especially in a discrete manufacturing situation. An effective supply chain planning operation brings several specific advantages to the table.

“A well run S&OP process can also prevent the business from overselling its installed capacity to produce finished goods,” wrote IndustryWeek contributor Tony Verlezza. “By understanding both the demand and supply details of the business, it can better control both revenue and cost profiles.”

Failure to accurately assess supply and demand, however, can mean bad news for the company as a whole.

The solution is…

With tight deadlines and tighter resourcing restrictions, enterprises simply don’t have time to waste trying to figure out and synchronize complicated spreadsheets. According to TechTarget, effective supply chain planning and execution software will consider the physical status of goods, management of materials and financial information of all players along the supply chain.

With Advanced Supply Chain Planning tools from Inspirage, organizations can effectively strategize around production rates and resource availability instead of relying on outdated scheduling methods and spreadsheets. For instance, for the hypothetical company from the above example, a solution would be to create constraints within the software based on resources available – both on the labor side and the product mix side.

Get in touch with the experts at Inspirage today for more information.

Richard Rodgers

Richard Rodgers | Key Contributor

Richard is a Solution Architect for Inspirage where helps drive the adoption of manufacturing best practices and related business processes for Inspirage customers. He evangelizes the use of the integrated Oracle solution for manufacturing and helps customers understand how to deploy these processes. Richard joined Inspirage after a 14-year career at Oracle where he served as the Product Manager for Flow Manufacturing and then the Product Manager for all of EBS Manufacturing, with an emphasis on Configure to Order process and mass customization. Later, he joined the Industrial Manufacturing, Industry Business Unit (IBU), where he focused on architecting solutions from quote to service for Oracle’s manufacturing customers and prospects. Finally, he served as a member of the Application Global Sales Support (AGSS) team, where again worked with customers and prospects to help them understand and implement best practices for manufacturing.