Managing the supply chain is one of the most time-consuming and challenging tasks for any products-based business, and it’s only become more difficult in the face of rapidly rising costs and global shortages. But technology can alleviate many of those challenges. In a recent session at SuiteWorld, two NetSuite solution consultants explained how the system can automate many of the steps that go into the planning and execution of production, inventory management and order fulfillment. Mastering supply chain management requires a strong linkage between long-range forecasting, medium-range planning and short-range execution. Getting those connections right can reduce costs and set the right expectations with customers to avoid costly last-minute adjustments.
Before the Budget
Businesses usually start supply chain planning with long-range forecasting six to 12 months out. The forecast is critical to budgeting, because a company can only build a budget once it has an idea of expected sales and revenue. NetSuite’s Demand Planning module can handle basic forecasts based on historical sales by item and future-dated transactions in the CRM system. It then uses that information to produce bottom-up forecasts. The NetSuite Planning and Budgeting module builds on those capabilities, enabling users to create forecasts by channel, specific customer and other dimensions. The solution can also combine multiple forecasts from different departments to create a master forecast for those that take a collaborative approach to forecasting. NetSuite Planning and Budgeting supports both bottom-up and top-down approaches. But developments over the last 18-plus months have been anything but normal, so using purely historical data can be problematic. That’s where NetSuite Planning and Budgeting’s scenario planning capabilities come in. It has scenario planning tools that use machine learning to create best-case and worst-case demand forecasts based on demand volatility, seasonality and other relevant trends. The solution then highlights the most likely outcome. Both NetSuite Demand Planning and NetSuite Planning and Budgeting pull transactional data directly from NetSuite, so users can frequently and easily update these predictions with the latest numbers. By eliminating the need for the finance team to manually enter or update this information, forecasting becomes a much less time-intensive process.
Striking the Right Balance with Supplies
The forecast, once finalized, then becomes the basis for the supply planning phase. At this stage, the company is trying to ensure it has the right parts, materials or finished goods in the right place, at the right time, to satisfy demand. NetSuite’s supply planning engine, powered by the Material Requirements Planning (MRP) and master production scheduling modules, assists with this piece of the equation by breaking down forecasted demand by item and location for each month. The solution can then consider all available demand and supply data to determine when the company is expected to run out of certain inventory in a specific location. A decision-maker could then reallocate supplies to different locations or adjust purchase orders based on those stockout dates. The planning engine can also optimize the timing involved in supply planning. It will account for manufacturing, purchasing and transfer lead times in order to calculate the ideal time to place purchase orders or start production. Users can even set up demand time fences that, for example, tell the system to look at actual demand if it’s within 30 days of the sales order but use the forecasted number for timeframes beyond that. All of this helps get the ideal amount of inventory in the right location to meet expected demand. Once a manager reviews and validates the plan, they can release recommended orders. If the system spots any issues, like a shortage of a key component or a delayed order from a supplier, alerts appear on NetSuite dashboards. Employees can also take other actions from there, like cancelling requests for certain items after predicted demand didn’t materialize.
Once those orders are released and it’s time for fulfillment, NetSuite’s supply allocation feature and Advanced Order Management module drive additional gains. The supply allocation feature allows companies to set allocation rules around order type, customer, sales channel, date needed by and other factors so products are split up in a way that makes the most sense for the business. For example, the system could automatically prioritize inventory for its ecommerce site because leadership decided it’s critical for customers to have a positive experience there. Businesses can prioritize individual orders based on revenue or gross profit margin, as well. The supply allocation solution also allows the purchasing team to allocate from not only on-hand but also incoming inventory. If a company requires 500 units of a finished good for an upcoming sales order but only has 300 in stock, the supply allocation tool will automatically pull the remaining 200 items from a purchase order slated to arrive soon. Users can click into outstanding purchase orders to see how much is already allocated and where. Supply allocation can be configured to use the soonest available supply to meet demand (as soon as available) or the supply received as close to the sales order shipment date as possible (as close as possible). Depending on the exact situation, one option may be more cost-effective or provide a better customer experience. NetSuite Advanced Order Management can choose the ideal fulfillment location for an order based on user-defined rules via a feature called automatic location assignment. A business can choose to fulfill from the facility closest to the final destination based on either zip code or longitude and latitude (useful if there are multiple locations near one another). Users can also set up locations to only ship to certain regions. For example, a West Coast warehouse may not ship east of Kansas or a smaller fulfillment center may not be equipped to handle international orders. Alternatively, they can create rankings for different regions, perhaps so more orders go to the primary warehouse instead of a smaller outpost to capitalize on economies of scale. With Advanced Order Management, users can assign rules for individual inventory or assembly items or even a certain class of goods. Items above a certain weight, for instance, can be assigned a limited shipping radius since they’re more expensive to transport. Employees can also limit the number of locations used to fulfill a single order, as shipping a three-line order from three separate locations may be inefficient and costly. All of these features mean sales reps can now enter an item, quantity and channel into NetSuite to quickly tell customers the earliest available date they could receive their order. Taken together, these capabilities within NetSuite can help leaders make better decisions with much less effort. A unified system ensures employees across different departments are all looking at the same plan and that all assumptions are made from the same data. There is much less opportunity for errors or confusion when everything is in one place — the forecast is the basis for the supply plan, which in turn gets everything in place for the execution phase. A system that can autonomously manage inventory forecasting through fulfillment can reduce carrying costs, money tied up in inventory and time spent solving these puzzles. The end result is increased profitability and less waste, especially as warehousing and transportation costs skyrocket. Relying on the operations team to consider all of these variables when making time-sensitive decisions is simply unrealistic. Story by Ian McCue