PD16

Supply Chain Flow Planning

Standards

– V2
AO/QUA/0044AO/QUA/0044 – V2 1
 PD16
Supply Chain Flow Planning

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AO/QUA/0044 – V2 i
 Supply Chain
PD16 Flow Planning

Unit purpose and aim

The aim of this optional unit is to cover the main principles, concepts and practices of
planning supply chain material flows. The unit deals with the issues of identifying the
demand for products and then balancing this with the appropriate supply. The key
issues involved with determining the level of demand are addressed. Aspects of
supply planning are then explored highlighting the need for different strategies for
different products. The use of inventory to balance the flows between supply and
demand is then covered, together with the management issues surrounding the
attainment of a consensus supply chain plan. A key element throughout is the
development of repeatable, cross-functional processes. Finally, the opportunities of
collaboration are covered.

Elements
PD16-1 Demand Planning

PD16-2 Supply Planning

PD16-3 Inventory Planning

PD16-4 Supply Chain Planning

PD16-5 Collaboration

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Element Demand Planning
PD16-1
Learning Outcomes Assessment Criteria
The learner will: The learner can:
1.1. Know how to calculate a 1.1.1. Use a repeatable cross-functional
consensus forecast with cross- process to obtain a consensus forecast.
functional components.

1.2. Understand the different 1.2.1. Apply different forecasting

demand forecasting techniques. techniques to obtain baseline forecasts for
different demand patterns.

1.3. Understand the impact of 1.3.1. Evaluate the impact of demand

different demand features on a management techniques for creating and
forecast. shifting demand.

1.4. Understand the way in which 1.4.1. Analyse the effect on demand of
different policies and actions shift proposed policy changes.
demand.

1.5. Understand the process of 1.5.1. Monitor forecast performance and

monitoring forecast performance and take corrective action when appropriate.
know how to take corrective action.

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 Indicative Content

The calculation of a consensus forecast Why forecasts are needed. Impact of the
with cross-functional components supply chain decoupling point on the
forecasting process. Determination of
appropriate data to input into the
forecasting process including data
cleaning to remove unusual effects. Use
of a statistical forecast to provide a
baseline for forward projection.
Awareness of the impact of business
plans and the influence of external
events on future demand Influence on
future demand. Advantages and
disadvantages of processes that can be
used for demand management.
The different forecasting techniques Applicability and use of forecast
methods such as; time series, causal
models, simulation and qualitative
methods. Impact of using aggregation
techniques for demand at product and
geographical levels. Use of profiles to
forecast events such as seasonality and
promotional activity. Use of product life
cycle curves for new product
forecasting.
The impact of different demand features The impact of trends in demand on
on a forecast forecasts. The impact of seasonality and
cycles on forecasts. Forecasting issues
surrounding fast and slow moving items.
The way in which different policies and Impact of trade terms such as credit
actions shift demand periods; company policies such as
incentive schemes, minimum order
quantities; pricing and promotional
activity; positioning within supply chain
relating to demand amplification;
collaborative techniques such as CPFR.
The process of monitoring forecast Clarity over the objective of forecasting.
performance and taking corrective action Determination and reduction in forecast
error. Recognition that average demand
is being forecasted. Determination of
forecast error. Use of bias as a control.
Use of standard error or mean absolute
error as a control. Use of MAPE as a
control. Use of tracking signals.
Monitoring forecast consumption and
using available to promise and forecast
rollover. Handling abnormal demand.

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Element Supply Planning
PD16-2
Learning Outcomes Assessment Criteria
The learner will: The learner can:
2.1. Understand the segmentation 2.1.1 Evaluate customer requirements.
factors that determine supply chain 2.1.2 Segment customers into different
combinations. supply chain combinations.

2.2. Understand the strategic 2.2.1. Evaluate supply chain strategic

requirements of the supply chain. requirements to determine cost to serve
objectives.

2.3. Understand the configurations 2.3.1. Configure a supply chain to achieve

of supply chains to achieve strategic strategic fit between the supply chain and
fit. customer requirements.

2.4. Understand the different 2.4.1. Identify opportunities and implement

definitions of time that impact on actions to compress time within a supply
supply chain activity. chain.

2.5. Understand the scope and 2.5.1. Use a repeatable cross-functional

value of cross-functional processes process to determine supply requirements.
that determine supply requirements.

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 Indicative Content

The segmentation factors determining Factors based upon product volumes,

supply chain combinations demand, customer characteristics, product
handling requirements and technology and
information. Factors to segment customers
into viable supply chain and allow
assessment of implied uncertainty.

The supply chain strategic Understanding of business objectives

requirements and their evaluation related to different strategic options eg:
cost, product and service leadership.
Determination of cost to serve for product
/market combinations. Methods to assess
supply chain responsiveness.

The configuration of supply chains to Combining of customer segmentation

obtain strategic fit analysis with cost to serve analysis to offer
strategic fit. Applicability of techniques
related to agile and lean supply chains.
Ensuring fit between supply chain
objectives and corporate strategic
objectives. Impact of product life cycles on
strategic fit. Identification of obstacles
which hinder strategic fit; factors that pull
the decoupling point downstream towards
the customer; factors that push the
decoupling point upstream towards the
suppliers. Performing trade-off analysis to
determine desired decoupling point
position.

The different definitions of time that Defining and measuring customer order
impact supply chain activity cycle and supply chain flow (response)
times. The relationship between order
cycle time and flow time. Setting time
fences and planning horizons. Defining and
measuring process cycle times and supply
chain acceleration and deceleration time.

The use of cross-functional processes Preparation of assumptions and

to determine supply requirements determination of appropriate data to input
into the supply planning process.
Determination of demonstrated product
and material capacity and linking resources
together in the supply plan. The use of
what-if analysis. Advantages and
disadvantages of supply management
planning and scheduling processes.
Measuring supply planning performance.

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Element Inventory Planning
PD16-3
Learning Outcomes Assessment Criteria
The learner will: The learner can:
3.1. Understand the factors that 3.1.1 Determine appropriate points to
affect the positioning of inventory position inventory within a given supply
within the supply chain. chain.

3.2. Understand the development 3.2.1. Specify and monitor target stock
of business rules to manage inventory levels throughout the supply chain.
at each stock point.

3.3. Understand the parameters 3.3.1. Analyse the risk of stock-outs due to
involved in the calculation of safety inherent uncertainties.
stock levels. 3.3.2. Calculate safety stocks, taking
account of inherent uncertainties.

3.4. Understand the range of 3.4.1. Use appropriate inventory

different systems used to manage management systems to control inventory
inventory. levels.

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 Indicative Content

The factors affecting the positioning Identification of formats of inventory within

of inventory within the supply chain the supply chain; demand side
requirements for availability level, batch
size and lead times. Calculation of the
impact of different availability levels, batch
sizes and lead times on inventory levels.
Identification of supply side requirements
for lead times and production batch sizes.
Calculation of lead times and production
batch sizes on inventory levels.
Understanding how inventory moves
between supply chain echelons and the
impact of tax points. Balancing of demand
and supply side constraints to determine
an affordable inventory policy.

The development of business rules to Use of fixed order cycle and fixed order
manage inventory at each stock point quantity policies. Determination of time
fences and planning horizons.

The parameters involved in the Identification of demand side risks, supply

calculation of safety stock levels side risks and the risk multipliers.
Calculating safety stocks in conditions of
reliable and unreliable lead times.
Recognition of different definitions of
service level on safety stock. Use of the
square root law for planning multi-site
safety stock levels.

The range of different systems for Use of fixed order quantity (continuous
managing inventory levels review) systems. Use of fixed order cycle
(periodic review) systems. Use of
requirements planning systems.

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Element Supply Chain
PD16-4 Planning
Learning Outcomes Assessment Criteria
The learner will: The learner can:
4.1. Understand the factors 4.1.1 Use a repeatable cross-functional
involved in sales and operations process to balance supply and demand.
planning.

4.2. Understand the need to 4.2.1. Implement an aggregated demand

aggregate demand to assess supply plan to determine supply requirements by
requirements by location. location.

4.3. Understand the need to 4.3.1. Perform “What if?” analyses to

conduct a “What if?” analysis to determine plan sensitivities.
develop plan sensitivities.

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 Indicative Content

The factors involved in sales and Characteristics of an integrated sales and

operations planning to balance supply operations planning process. Impact of
and demand make to order and make to stock policies.
Incorporation of product plans into the
process. Understanding the relationship
between the process steps of demand,
supply and product planning.
Reconciliation review to include
vulnerabilities and opportunities, issue
resolution, major changes.

The determination of aggregated Recognition of different types of demand.

demand to assess supply Reconciling top-down and bottom-up
requirements by location demand plans.

The process of conducting “what-if” Doing financial gap analysis. Documenting

analysis to develop plan sensitivities changes and assumptions, vulnerabilities
and opportunities. Interpretation of key
performance indicators. Review of
business trends. Aligning tactical and
strategic plans.

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Element Collaboration
PD16-5
Learning Outcomes Assessment Criteria
The learner will: The learner can:
5.1. Know how to select 5.1.1. Identify potential partners within the
appropriate partners for supply chain supply chain with whom to collaborate.
collaboration.

5.2. Know how to quantify the 5.2.1. Quantify the benefits that accrue
benefits accruing from collaborative from a given collaborative relationship.
relationships.

5.3. Understand the use of cross- 5.3.1. Establish and implement a cross-
functional processes to progress functional process for developing collaborative
collaborative relationships. relationships.

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 Indicative Content

The selection of appropriate partners for Identification of reasons for supply

supply chain collaboration chain collaboration and factors that
support such collaboration.
Recognition of supply chain maturity on
the collaboration decision.
Identification of the features of
productive collaboration and the key
processes involved.

The quantification of benefits accruing Quantification of benefits in areas such

from collaborative relationships as; forecast accuracy, service levels
and sales growth.

The use of cross-functional processes to Understanding of process steps such

progress collaborative relationships as; developing collaborative
arrangements, creating joint business
plans, creating sales and order
forecasts, identifying and resolving
exceptions to forecasts, generating
orders and executing delivery.

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