ERP Supply Chain Management: Balancing Supply and Demand

We can control the balance of supply and demand to a large degree in-house by using ERP supply chain management to add and remove weights on either side of the see-saw. However, we must also ask for help from suppliers and customers when we put in the difficult positions of supplying products missing from our inventory.

Its Not as Simple as Orders in, Product Out

Let’s begin with the demand side. If we use a forecast to drive our ERP supply chain management, we need to consume that forecast as orders flow in from customers. Most ERPs will offer different mechanisms for this consumption. One mechanism might exactly match our incoming order pattern, but it is vitally important to also consider other external factors as our supply chain doesn’t exist in a perfect environment.

Customers might not pay attention to our posted lead times when placing orders. We might have encouraged that practice by accepting these orders without communicating with the customer; instead we expedite the order to compensate, leading to production overtime. Orders flowing into our ERP should be reviewed and approved or returned to the customer with an alternate delivery date that we can meet. This new delivery date can now feed back into ERP supply and demand forecasts.

Recommended Reading: Manufacturing ERP - 10 Steps to Success

We should all have a good idea of the pattern of incoming sales orders. They might arrive evenly timed or seasonally. We might be expecting them because the client requested a quote, or they might just show up. Regardless of our own pattern, we should recognize when an order doesn’t fit the pattern and manage the unexpected order with intelligence. Our ERP should include data from all past orders, which we can use to identify these “order anomalies”. Once identified, these orders can be placed in a section of your ERP demand management module where they can be reviewed.

Small and Continuous Adjustments

The supply chain see-saw can also become imbalanced because of issues on the supply side. If a supplier can’t deliver, *can we meet demand from an alternate source or switch to in-house production? If the supply comes from our own production, can we use alternate routing when a necessary tool is unexpectedly out for repair? Do we have a well-run, statistically sound cycle-count process? These are all questions that your ERP supply chain management module should be able to answer once it contains accurate data and well-programmed workflows.

If you watch gymnasts closely, you can see their legs and body making small adjustments continually; our supply–demand balance requires our ERP to make similar small and continuous adjustments.

Our supply chain involves more than us and our immediate suppliers though. The chain extends all the way back to the earth, where the basic raw materials are mined or grown. The chain extends beyond our customer to their customers and eventually to the person who consumes the final product. We must involve all the players in the chain to keep the supply-demand balance just right. If you watch gymnasts closely, you can see their legs and body making small adjustments continually; our supply–demand balance requires our ERP to make similar small and continuous adjustments.

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Tom Miller

About the author…

Tom completed implementations of Epicor, SAP, QAD, and Micro MRP. He works as a logistics and supply chain manager and he always looks for processes to improve. He lives near San Francisco Bay in California and can be found on the water in his kayak or on the road riding his motorcycle. Contact Tom at customerteam@erpfocus.com.

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Tom Miller