Best Practices in Demand and Inventory Planning - Managing the supply chain is critical to a manufacturer's overall operations and to the bottom line. - BioPharm International


Best Practices in Demand and Inventory Planning
Managing the supply chain is critical to a manufacturer's overall operations and to the bottom line.

BioPharm International
Volume 19, Issue 5

Warehouse replenishment is based on the frequency and volume of shipments from the plant to the warehouse. This function is typically performed by a distribution requirements planning system. Distribution requirements planning systems plan the transportation frequency among the network of distribution centers, while considering the plant capacity established in the production planning system. By varying the frequency and capacity of transportation, the projected inventory availability at the outlet can be simulated.

Distribution requirements planning systems help reduce transportation costs; improve customer service levels; reduce stock-outs at distribution locations; improve communication between sales, distribution, and production; increase stability of plans; and ensure the right product is at the right place at the right time.

Short-term changes in demand are always a reality, but the combination of better forecasting with a formal process of warehouse replenishment leads to fewer disruptions, less contention, and lower overall costs.


High-quality planning is simply not possible if the inventory data are inaccurate or out of date—or if the formulation information is incomplete. The forecasting system requires accurate sales history. The distribution requirements planning system requires accurate inventory balances. The capacity planning system requires meaningful plant capacity and product structure (recipe) information. Such data are generally available in most of the better ERP systems available today.

Supply chain planning systems are available in various forms of delivery: stand-alone, an APS server connected to the ERP host machine via a network, and hosted solutions (software service). The supply chain planning system receives information updates from the ERP system periodically (weekly, daily, etc.). Planning and scheduling issues are resolved through systematic processes that involve simulation and modeling.

Planning is generally done periodically, according to the task at hand. Therefore, forecasts may be updated weekly or monthly, the production plan may be updated weekly or daily, and the finite schedule may be run at the end of a shift or a day.

The supply chain planning system needs to be refreshed with new status information. This might include dynamic data such as on-hand inventory of finished goods, intermediates, and raw materials; updated demand (forecast and orders); expected purchase receipt timing; and planned downtime.

In addition to the dynamic data, the planning system must be updated periodically with static information, such as new products recipes and operations, new plant resources with their operating characteristics, and new warehouses or new transportation options.

Because the ERP system will be integrated at several data points, careful consideration must be taken to ensure all data are up to date and accurate. Interfaces become very complex if the underlying ERP system is highly customized or spread over multiple servers and databases. Therefore, the best results are usually achieved through an integrated ERP system that covers all the underlying business functions.


To make sound tactical and strategic decisions that impact profitability, decision makers must have better control over the planning function. Manufacturers must invest in supply chain planning education, systems, and practices that empower decision makers. Planners should have enough supply chain management understanding to know where to look, what questions to ask, and how to interpret information. They don't need to know all the underlying statistical techniques. But they do need an easy-to-use system that can perform the calculations quickly and generate credible results. The combination of an effective system, along with forecasting and planning know-how, can yield significant results.

Chris Taunton, Ph.D, is the Director of Product Management for Ross Systems, 2 Concourse Pkwy, Atlanta, GA 30328, tel 678 259-8582,

Jonathan Feinbaum is Senior Supply Chain Consultant for Ross Systems, tel 678 259.8794,

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