In the dynamic landscape of modern supply chain management, meticulous planning is the cornerstone of ensuring the seamless flow of goods from factories to suppliers, distribution centers (DCs), warehouses, and retail stores. To achieve this, companies rely on multi-echelon network planning, a strategic approach that harmonizes the different tiers and levels within the supply chain. In this article, we’ll explore the nuances of multi-echelon network planning, including its definition, significance, inputs, daily procedures, and the essential elements that constitute the network.

Understanding Multi-Echelon Networks

A multi-echelon network is a comprehensive system that encompasses various levels and tiers within the supply chain. It typically includes factories, suppliers, distribution centers, warehouses, and retail stores. This expansive network comprises a multitude of elements, such as items, locations, Stock Keeping Units (SKUs), modes of transportation, source and destination lanes, shipping lead times, and calendars.

The primary goal of multi-echelon network planning is replenishment planning. This process involves the art of strategically placing the right product in the right place at the right time, leading to several advantages, including reduced inventory levels, enhanced customer service, minimized costs, and improved communication within the network.

Inputs into Replenishment Planning

Effective replenishment planning relies on a combination of critical inputs:

• Product and Network Data: This category encompasses details such as SKUs, locations, the distribution network structure, and bill of materials relationships. This data serves as the foundation of the planning process.
• Dynamic Data: Dynamic data includes forecasts, customer orders, current inventory levels, quantities on order, in-transit shipments, and manufacturing schedules. These variables are pivotal in understanding the current demand and supply conditions.
• Extra Parameters: Additional parameters like planning rules, demand rules, safety stock rules, and deployment rules are applied to fine-tune the planning process and align it with overarching business objectives.

Essential Elements of a Multi-Echelon Network

To navigate the complexities of a multi-echelon network successfully, companies must be well-versed in the core elements that compose it:

• Items: Items are the products a business sells, which can include finished goods, intermediate products, and raw materials.
• Locations: Locations within the network encompass vendors, distribution centers, stores, and factories.
• SKUs (Stock Keeping Units): SKUs represent specific items at particular locations, categorizing them as finished goods at a location, intermediate products at a location, or raw materials at a location.
• Modes of Transportation: This term refers to the various methods used for transporting goods, which can include different types and sizes of trucks.
• Source and Destination Lanes: These lanes delineate the movement of goods, such as the route from a vendor to a distribution center or from a distribution center to a store.
• Shipping Lead Times: Shipping lead times encompass loading, transportation, unloading times, and the associated paperwork requirements.
• Calendars: Calendars are used to regulate product flows at different times, specifying periods when a distribution center allows deliveries.

Daily to Strategic Planning

Replenishment planning operates at various levels within the supply chain:

• Execution Planning (Daily): This level ensures that daily tasks are completed and includes recalculating plans nightly, addressing stockouts, and identifying overstocks.
• Operational Planning (2 weeks to 6 months): It involves short-term planning, assessing current supply, short-term demand, and allocation strategies.
• Tactical Planning (6 months to 1 year): This level focuses on inventory strategies and ensures alignment with strategic goals. It assesses the need for stock buildouts, temporary storage capacity, or safety stocks.
• Strategic Planning (1 to 3 years): This phase focuses on long-term capacity planning, network optimization, and setting the direction for the supply chain network.

Execution and operational planning are addressed briefly here, while the topics of tactical and strategic planning warrant separate discussions.

Daily Procedures in Multi-Echelon Network Planning

On a daily basis, several critical procedures are carried out to maintain the network’s efficiency:

• Import Daily Changed Data: This step involves importing data daily, including updated forecasts, changes in locations and items, and sales data. It ensures that planners work with the most current information.
• Run Planning: The planning process includes multiple steps, such as calculating unconstrained plans, optimizing orders, generating constrained plans, building transportation loads, and identifying SKU exceptions. These steps are vital for ensuring the efficient movement of goods throughout the network.

Results of Multi-Echelon Network Planning

The culmination of these planning procedures yields various recommendations at a tactical level:

• Purchasing Recommendations: These recommendations guide businesses on when and how much of a product should be purchased to meet anticipated demand.
• Logistics Recommendations: These recommendations facilitate the movement of items throughout the network, ensuring the efficient flow of goods.
• Manufacturing Recommendations: For companies with manufacturing facilities, these recommendations determine whether items should be produced earlier or later based on demand patterns and other constraints.

Conclusion

In today’s rapidly changing and interconnected business environment, mastering multi-echelon network planning is essential for ensuring the efficient flow of goods and maintaining a competitive edge. By understanding the intricacies of this approach, businesses can reduce inventory levels, improve customer service, minimize costs, and enhance communication throughout their supply chain network. Careful planning and execution are the keys to thriving in the ever-evolving world of supply chain management.

Here are the other supply chain processes we support including demand planning, master planning, and fulfillment provided by our partners like BlueYonder, o9, and Kinaxis.

• Category: Supply Chain