Production Planning | S&OP

When it comes to production planning, there are many factors that influence the overall production plan. Using the growth of the UK bicycle industry as an example, Sam Phipps, explores what challenges manufacturers should prioritise in order to exploit growth and get ahead of the pack. 

Bicycle production in the UK has undergone a resurgence in recent years. Since 2007, output has more than doubled and in the last year alone, exports have increased by an impressive 13%. However, UK-based manufacturers have a lot of work to do before they can compete with the Far Eastern powerhouses that dominate the industry. So how can British brands break away from the competition to exploit the accelerating growth in the market?

Boosted by the current buoyant market conditions, all of the major bicycle brands have recently announced plans to achieve substantial growth over the next few years. However, while the current weak pound may have helped manufacturers to increase both output and exports, the good times can not last forever. With Brexit looming, businesses must take steps now to ensure their operation are able to attack the growth opportunities that lie ahead.

Forecasting: maintaining a well-oiled chain

From hubs and spokes to nuts and bolts, even the most basic of bikes are comprised of a vast number of components. While some components are unique to particular products, others are shared across a broad number of products. To add further complexity, consumption rates, minimum order quantities, supplier reliability and most importantly, lead times will differ for each raw and semi-finished component. Consequently, supply chain team’s face a huge challenge in ensuring that every item is available when required!

Regardless of whether a business operates in a make-to-order or a make-to-stock environment, supply chain teams depend on accurate forecasts in order to determine which products to buy in what quantity. Without this insight, operations can quickly become inundated with excess stock as the business invests precious working capital into components and finished goods that simply not required. Or, worse still, the whole operation could become subjected to bottlenecks and delays as the items that are required to meet customer demand are simply not available!

By putting in place tools that enable accurate forecasting, manufacturers can develop robust demand plans which in turn can be used to underpin the entire manufacturing operation. With this additional visibility, supply chain teams can ensure that both the right products are being made but also that all of the required components are ordered at the right time in the optimal quantity.

S&OP: It’s a team sport

When it comes to exploiting growth opportunities, it is evitable that there will always be a degree of risk. After all, to satisfy additional demand, there will be a greater requirement for raw materials, semi-finished components and even finished goods: all of which require investment and tie up invaluable working capital!

However, each business division is likely to have a very different opinion on how this risk should be managed. For example, with the potential to win new customers, sales teams will most likely demand a big investment to ensure that the manufacturer’s operations can keep up with demand. However, on the other hand, finance teams may be more interested in budgetary restraints and thus preventing any financial fallout in the event that growth fails to materialise will be a bigger a priority. Operational and supply chain teams have the difficult task of balancing these perspectives.

In order to synchronise key supply chain decisions around product portfolio management, demand planning & sales forecasting, production planning, inventory & purchase planning, manufacturers must have a well-defined S&OP process in place. However, in order to effectively encompass finance, sales, marketing, and operations teams into the decision-making process, the business must have the required level of knowledge and insight to truly benefit internal collaboration.

Even for the best performing manufacturers, there is always a cap on how much they can actually produce. While the new orders that come with growth will place great strain on operations, by bringing the whole organisation together, a robust S&OP process will ensure everyone is heading in the same direction.

Outpace the competition with Slim4

Thanks to powerful analysis and forecasting capabilities of Slim4, some of the biggest names in cycling have utilised Slimstock’s inventory management tool in order to drive the performance of their operations. With a greater overview of the supply chain, OEMs are better positioned to optimise S&OP processes, harness supply chain collaboration and keep stock levels under control. This, in turn, enables supply chain managers to reduce inventory holding and minimise costs while simultaneously maximising service levels and efficiency.

Manufacturers ho use Slim4 typically enjoy the following benefits:

• Reduced inventory of raw, part finished & finished good by up to 30%
• Prevent bottle necks through reducing stock-outs by up to 60%
• Greater control over inventory cost