Supply chain planning: Keeping promises, no matter what

Wholesale distributors are known for obsessing about delivering superior customer service. It can be what distinguishes them from the competition, enabling them to build long-term, successful customer relationships. This requires excellent order fulfillment rates, along with accurate supply chain planning.

Operating mostly on razor-thin margins, the art of supply chain planning for distributors means ensuring the right quantities, at the right time, and the best possible total cost point. But as former world heavyweight champion Mike Tyson once said, “Everyone has a plan until they get punched in the face.”

Let’s examine how wholesale distributors are rethinking their approach to supply chain planning to deliver on customer expectations despite whatever challenges arise.

Supply chain planning is already hard in normal times 

Wholesale companies play a vital role in the economy, keeping businesses running by delivering items required for operations, whether that’s providing food to restaurants, heavy machinery to construction companies, drugs to pharmacies, or toilet paper to retailers. The key to success for distributors is ensuring the right amount of stock is available and that orders can be fulfilled as quickly as possible.

The process to achieve this supply chain nirvana is known as intelligent order promising, and it consists of several steps. The complex process requires information about inventory, network constraints, lead times, financial aspects, and available transportation options. And while doing all this in real-time, companies must continue to protect business interests and profitability.

At the end of this intelligent, integrated cycle, wholesalers can make an accurate and real-time order promise. Keeping these promises in alignment with operational processes will be the basis for success and long-term customer business.

When a pandemic changes the rules of the game

COVID-19’s massively disruptive impact on the supply chain is well documented: The surge in demand due to panic buying, frequent supply shortages, and empty shelves. As we saw in 2020, companies that were able to stock up in the early phases of the pandemic could avoid stock-out situations and maintain a sense of business continuity.

While many companies dealt with the effects of demand surges and disrupted supply chains, there was also the flip side of the coin for many subsegments: significantly smaller demand due to widespread lockdowns. As restaurants closed, many food wholesalers saw a major part of their business break away. You may have also seen headlines of breweries dumping excess beer.

So, as the pandemic continues, companies are faced with the challenge of business outlook uncertainty. With disrupted or slowed lead times, how do you plan for future business, avoiding overstock as well as being ready for business to pick up again?

Supply chain planning: Effective order promising 

Wholesalers need to be efficient in handling such unexpected and volatile demand and supply situations by ensuring urgent priority demands to be fulfilled. This is done by orchestrating the supply network and prohibiting the unfair distribution of stocks.

Key elements in achieving these goals are:

1. backorder processing
2. product allocation
3. supply protection
4. alternative-based confirmation

Backorder processing allows companies to decide which customer orders have higher priority, and which of the orders can be delayed.

Advanced technology is available to help with the order fulfillment process. These solutions provide accurate and reliable order promise dates considering the relevant stock in real-time while protecting companies’ business priorities and profitability goals.

Using these kind of tools, companies can restrict confirmation of orders beyond a limit based on business priorities during stock outages. That prevents situations where their big customers take up all the stocks, leaving the smaller companies high and dry.

If a product isn’t available at a location, order fulfillment managers can find alternatives either by looking at substitutable products or fulfilling the order from connected back-up warehouses.

Thriving during the best and worst of times

In a 2002 press conference, US Secretary of Defense Donald Rumsfeld talked about the “known knowns” and the “known unknowns” ending with the “unknown unknowns.” While he was talking about a completely different topic, these terms describe the challenge businesses are facing today quite well.

On top of the uncertainty in planning, wholesale companies also have to find intelligent and powerful ways to handle exceptions, unexpected events and ensure agility to changing demands. Wholesalers who take the right steps to manage supply chain planning will build resiliency to weather whatever crisis comes next.

Sujeet Acharya, Solution Owner, SAP Available to Promise (ATP), is a co-author of this post. He has nearly 20 years’ experience holding solution management and software developer responsibilities.  His primary focus resides within the digital supply chain and manufacturing solution family, owning the SAP Available to Promise (ATP) solution’s go-to-market and customer co-innovation initiatives.