The impact of improved supply chain planning on upstream operations

This paper addresses the synchronization of a supply chain with two different production processes through improving the visibility to downstream plans. Dynamic demands and hard competitive situation make it increasingly necessary for companies in the food supply chain to seek for efficiencies and more responsive modes of operation. In this study it is studied how the different supply chain planning phases can be integrated to support the upstream dynamics of supply chains. A case study involving a grocery manufacturer and a package material supplier was carried out. Three changes were recently implemented in the supply chain: a new forecasting process was launched, responsibility of the management for material inventories was shifted to the material supplier as vendor managed inventory, VMI, mode was adopted, and the manufacturer has set a target to reduce its finished goods inventory levels. The two first changes improve the planning quality and make integrated planning possible as the third requires more agility from the upstream operations. To find out if it is possible and profitable to execute agile operations upstream in a supply chain, a three-month project concerning four stock-keeping units was piloted. The target of the pilot was to measure the impacts of the changes on production, production planning and inventories. In addition, the supplier was willing to test the scheduling of its production very close to need and producing smaller batches than before. The case indicated that in addition to changes in demand, the upstream operations suffer from a number of other uncertainties, such as machine breaks, variable lead times, processing variations or price changes. Multiple sources of flexibility, such as those offered by production, inventories, and lead times, are required to manage the different sources of uncertainties in the chain. Shared good-quality planning data enable the supplier’s responsiveness. However, scheduling deliveries very close to need preclude the efficient use of shared VMI information.