Uncomplicating the Supply Planning Process

The supply planning function requires knowledge of the organization’s short- and long-term production and development plans. This knowledge helps set priorities for the purchasing group and lets them know what new suppliers or materials may be needed. Potential suppliers can be sourced and assessed in preparation for planned projects. It also prepares the food safety and quality functions that must research specifications and hazards related to new materials.

The planning function should include food safety and quality personnel as part of the risk assessment management process. For a supply planning team to succeed, it must identify and understand potential hazards, threats, and vulnerabilities to the materials, the suppliers, and the supply chain. The planning process should then develop plans to mitigate any high-risk issues. For instance, the best price for an item may be linked to a specific single supplier that is geographically remote. The supplier may have several customers, and competition for the material is increasing, and continuity of supply is not predictable. Supply planning might recommend that having a second supplier available and purchasing some material from this second supplier is a robust strategy that offsets the risk of being shorted by the low-cost supplier. An alternative supplier is sourced and approved. Supply planning analysis may come to the opposite conclusion if there has been a long-standing arrangement with two suppliers. By going through the analysis and risk assessments, a switch to a single supplier may increase service and reduce costs without affecting the risk of running out of materials because the industry conditions that dictated the need for two suppliers have changed.

The supply planning function thus integrates information on risk to food safety, quality, operational efficiency, and costs. Parts of this risk assessment may also be—and often are—driven by external standards such as Global Food Safety Initiative (GFSI) certification or regulatory requirements.

Risk Assessment

Risk assessment first identifies hazards. Food safety hazards identify biological, chemical, and physical hazards associated with the material that could potentially harm human health. Quality threats include material variations that cause failure of finished product to meet specifications and expectations. A relatively recent addition to GFSI certification requirements is assessing the risk associated with each supplier—something that the supply planning function should already include.

Low supplier risk usually requires a history of satisfactory delivery of safe material that meets specifications, so initially, new suppliers may be high-risk. Estimating the risk of new suppliers may involve researching recall or other reported databases to determine if there have been any issues with a supplier. Getting references from a new supplier and talking to their existing customers may also be a way to set an initial risk level.

Supplier risks include inability or failure to supply the ordered quantities in the promised time frames, shorted deliveries, damaged goods, and unexpected price increases or lack of effective technical support when needed. Supply and supplier risks are those which disrupt the capability of the operation to maximize efficiencies and meet customer demands, including last-minute orders and special sales.

If supply planning is starting to sound like a huge, time-consuming, and hard-to-manage activity, it doesn’t have to be. The list of materials and suppliers that undergo the supply planning process can be filtered down to the “significant few.” These might include problem performers, problem supply chains, suppliers affected by unusual crop conditions, new proposed suppliers of significant materials, high-cost materials of significance to finished product costs, new product or packaging offerings, planned product development activities, and newly identified “opportunities.” The selection of materials and suppliers to be incorporated in supply planning analysis might also be informed by new or emerging hazards, and recently identified frauds or vulnerability threats.