Brazil has the largest economy in South America. It has a diverse industrial base, making it a major manufacturing hub in the region. Its manufacturing sector experienced 3.1% growth in industrial production last year, contributing around a fifth of the GDP.
Operating a manufacturing firm in Brazil is not an easy feat due to challenges such as high operational costs and a complex regulatory environment. When the pandemic hit, this critical stress test revealed the vulnerabilities of traditional supply chain models.
Operating in this environment, companies need to manage their supply chains effectively. One of the primary challenges for many Brazilian manufacturers is managing excess inventory and ensuring product availability.
The challenge of balancing excess inventory and unavailability
Overstocking is a common issue in manufacturing firms, and this issue ties up working capital that could have been invested elsewhere. It also leads to higher inventory carrying costs, including warehousing fees, insurance and taxes. On the other hand, understocking can be equally damaging. Stockouts result in lost sales and drive potential customers to competitors.
The key to achieving operational excellence lies in finding a balance between these two extremes, ensuring that manufacturers have sufficient inventory to meet demand without incurring excessive surplus costs.
MCS improves company’s OEE and maintenance management
Removing Supply Chain Inefficiencies for Enhanced Performance
Better Manpower Planning and Work Order Processes for x4 ROI
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How To Start: Integrated Demand Planning for an Effective Supply Chain
Implementing Integrated Demand Planning (IDP) can solve this dual challenge, as this cross-functional approach unifies several company units, including sales, marketing and operations, around a single plan for future demand. An effective IDP strategy must not only optimise internal processes but also account for and mitigate other non-controllable factors, such as optimising transportation routes to reduce costs and delivery times.
Here are the key components of IDP and approaches to get started:
Demand Forecasting
This process involves analytical tools and models to forecast future demand by analysing historical data and market trends. To get started, manufacturers can implement advanced forecasting and planning models that address complex challenges such as determining optimal run lengths and managing product variety. By shifting from experience-based to data-driven production planning, they can improve accuracy and better align production with available capacity. Additionally, incorporating manpower calculator tools allows for precise estimation of staffing needs based on anticipated demand.
Demand Sensing
This advanced element relies on real-time data from multiple sources to identify demand influences and disruptions swiftly. For example, the adoption of daily or hourly monitoring systems combined with actionable variance reports allows organisations to detect deviations from planned targets almost immediately. Thereafter, businesses can take prompt corrective actions to address these issues. Additionally, the implementation of Short Internal Control (SIC) mechanisms along with visual management tools on the shop floor facilitates immediate responses to challenges such as productivity gaps and machine outages or deficiencies.
Inventory Management
IDP ensures optimal inventory levels by balancing demand and supply. This balance can be achieved by redefining minimum stock thresholds and improving vendor management programmes to prevent both overstocking and stockouts. Additionally, implementing material request systems such as Kanban, alongside optimising material delivery processes, helps guarantee the timely arrival of essential components to production. During comprehensive stocktaking, it is also beneficial to consider rearranging warehouse layouts. This not only facilitates verification of ERP data but also streamlines material flow throughout the facility.
Supply Chain Coordination
Effective coordination with suppliers and logistics partners is essential to meet forecasted demand. This process should start by aligning departmental workflows horizontally across the organisation, enhancing collaboration and eliminating bottlenecks. Building on this foundation, a strategic sourcing and vendor management programme should be developed and implemented to integrate suppliers directly into performance planning. Finally, optimising material delivery processes and supply chain logistics will ensure that materials arrive at the production area promptly and reliably.
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Implementing integrated demand planning using the above steps can help you to achieve the following benefits: significantly reduced inventory levels, freed-up capital, improved availability and order fill rates, lowered operating costs, and increased operational predictability.
Renoir has more than 30 years of experience in analysing existing planning deficiencies and implementing specific tools for forecasting, scheduling and capacity management. Renoir can also drive the behavioural and cultural changes necessary for these new systems to deliver sustainable results across the entire manufacturing value chain.
If your planners still debate forecasts instead of delivering results, it’s time to act.
