Synopsis Consulting

Supply Chain Planning vs. Supply Chain Execution

Supply Chain Planning (SCP) is one discipline of Supply Chain Management (SCM), the other being Supply Chain Execution.

  • Supply Chain Execution deals with the actual data of an enterprise and is typically the domain of Enterprise Resource Planning (ERP) systems.  These systems are transaction oriented and critical in order to track and consolidate daily events.  Based on  their architecture and contradictory to their name, their ability to  plan the future is limited.  
  • Supply Chain Planning is always future-oriented.   Most Supply Chain Planning applications take a snap-shot  of the relevant enterprise data and use sophisticated methods to develop  capacity constraint plans.  They also allow interactive scenario analyses in order to evaluate different options from a cost and profit optimization point of view.

 Planning Dimensions

Based on planning horizon and data granularity, Supply Chain Planning activities can be categorized as follows.

  • Strategic Planning (1 - 5 years, monthly or quarterly buckets)  
  • Tactical Planning (3 - 9 months, daily or weekly buckets)  
  • Operational Planning (2 - 6 weeks, minute or hourly precision)

Typical questions that are analyzed during Strategic Planning from a cost minimization and/or profitability optimization perspective are the following.

  • (De-)Investment decisions  
  • Product to plant allocation  
  • Sourcing decisions  
  • Inventory strategies   
  • Changes to the distribution network  
  • Make-or-buy decisions  
  • Key supplier selection

Operational Planning has a short-term focus and is used to facilitate the following activities.

  • Capacity constraint production scheduling
  • Order batching and/or sequencing  
  • Change-over and waste minimization  
  • Manufacturing bottleneck scheduling  
  • Manufacturing process specifics

Tactical Planning links Strategic with Operational Planning.  One of its most important functions is the determination of pre-build requirements because of seasonality and the refinement of Strategic Planning results in case of unforeseen changes in the demand pattern or the Supply Chain.

Functional Areas

Supply  Chain Planning spans across multiple departments of an enterprise.  It  is very typical that Supply Chain Planning projects are introduced  sequentially rather than as a "big-bang" across the entire enterprise.   In this context it is advantageous that most software vendors offer  software modules that are focused on one specific planning activity.

The following list contains common Supply Chain Planning functions, together with their typical users.

  • Strategic Network Optimization (VP Supply Chain, VP Operations) 
  • Sales and Operations Planning (VP Supply Chain, VP Operations,  VP Marketing) 
  • Demand Planning (Forecast Planners, Sales Directors, Sales Managers and other via collaboration) 
  • Tactical Planning (Purchasing Managers, Warehouse Managers, Inventory Managers, Production Managers, Sales Managers) 
  • Transportation Planning (Transportation Planners) 
  • Production Scheduling (Production Schedulers)

There  are several functions, especially in the tactical and operational area,  where the line between planning and execution becomes blurry.  ERP  systems now include functionality that was historically only available  in planning systems, such as Order Promising and real-time alerts.    Since the nature of this functionality is transaction based, we did not  include it in the list above.