Businesses should stop assuming infinite capacity and look to integrate their supply chains

 (Source: Pexels)
(Source: Pexels)

In complex supply chains, one of the foremost issues that businesses deal with is managing their economies of scale. While nearly all of them are concerned about having a detailed schedule of their daily activity on the shop floor, a lot of them lack the insight of having visibility across their complete supply chain.

Mark Reissig, Solution Architect at Quintiq, spoke in a webinar organized by IndustryWeek about the need to have more visibility in complex supply chains and how planning for infinite capacity is not as efficient as it sounds.

Supply chains of today are hard pressed for time and capacity, and as manufacturers run towards making them more efficient, the complexity of the process might overwhelm them. Many organizations have multiple production sites with variability within sites and throughout the supply chain. “Companies have to deal with rapidly changing supply chain situations, suppliers being late with their delivery, equipment going down – all of those things add complexity to supply chain planning,” said Reissig.

Reissig believes that manufacturers are under pressure to increase rates, as they are dealing with the growth in demand. To handle complexity and growth, it is vital for companies to devise strategies that account for finite capacity and constraints throughout the supply chain. But a lot of businesses try circumventing capacity issues by assuming they have infinite capacity.

“There are several pitfalls associated with infinite capacity planning,” says Reissig. “Quite often, this type of planning results in infeasible plants. Without taking into consideration the capacities of parts of the supply chain, what you end up doing is overloading some parts while the others are not operating at full capacity. This results in increased labor overtime and a cost trying to resolve the shortfalls in the supply chain.”

The problem with planning for infinite capacity is that it is idealistic and can make supply chains sluggish. Imposing finite capacity capability helps with a more realistic picture of fulfillment, and gives visibility into spotting bottlenecks in the supply chain and how the business is fairing against its KPIs – specifics that are integral to running a tight supply chain. “This takes into consideration the actual capacity of a supply chain and what performance we can expect out of our supply chain,” said Reissig.

To plan for finite capacity, companies need to work towards integrated supply chains. Integration between every planning level is essential for understanding and navigating through bottlenecks. Planning across all different time horizons is vital – be it a long-term tactical plan or working out a strategy for daily operations.

Alongside this, there also needs to be equal emphasis on horizontal integration between business functional areas. “You need to understand transportation and how you are moving your materials throughout your supply chain. You need to consider your workforce and how you are going to employ the right people and give them the training they need. All of this is important when you are talking about supply chain planning and optimization,” Reissig said.

Reissig also iterated the need for companies to be wary of heuristics by not disregarding any potential options, and to keep a tab on all key business drivers before trying to address a certain situation. “It is important to be able to use true optimization versus just rules of thumb to be able to give you the best picture and the best result,” said Reissig.

He concluded by mentioning the need to leverage technology to overcome supply chain challenges and maximize output. When working out a strategy for the future, it is imperative to use tools to aid in understanding all the different possibilities. “As you get further away from today’s time frame, you see that the number of options get increasingly more complex and varied,” he said. “It gets to a point where eventually the number of options are far more than a human planner can consider.”

This is precisely where optimization technology can help companies gain the edge, with its ability to solve for all different possible and potential options and variables – considering the key goals, objectives, and performance indicators that are important to scale the business.

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Vishnu Rajamanickam, Staff Writer

Vishnu writes editorial commentary on cutting-edge technology within the freight industry, profiles startups, and brings in perspective from industry frontrunners and thought leaders in the freight space. In his spare time, he writes neo-noir poetry, blogs about travel & living, and loves to debate about international politics. He hopes to settle down in a village and grow his own food at some point in time. But for now, he is happy to live with his wife in the middle of a German metropolitan.