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The Seven Principles of Effective Supply Chain Planning

Executive Vice President, APICS

Wednesday May 20, 2015

Question: Is best practice supply chain planning simply a function of incorporating more leading practices?  

Answer: No.

Leading practices in supply chain planning abound. A simple Google search yielded more than 54 million results. Those practices include everything from sales and operations planning to material requirements planning and demand management to vendor-managed inventory. And new principles in supply chain planning are constantly emerging, including demand shaping, demand sensing, and agile response.

Rather than incorporate as many leading practices as possible, the best supply chain planning organizations pick appropriate leading practices as dictated by the markets they serve. Those practices are integrated together with the organization’s chosen technology platform to achieve desired competitive performance.

Sustained results from the best supply chain planning organizations include

  • 15 percent stockkeeping unit mean absolute percent error (MAPE) (for high profile products) and 20 percent weighted MAPE (covering the entire family)
  • 10 percent improvement in manufacturing cost (labor productivity and product yield)
  • 15 percent improvement in inventory turns
  • 25 percent reduction in excess and obsolete inventory
  • 20 percent improvement in delivery reliability
  • 90 percent of new products launched on time
  • 50 percent faster response to significant unplanned demand events
  • 99.5 percent or more volume fill rates.

While not incorporating all leading practices, there are seven basic principles that the best planning organizations adopt:

  1. Systematic management of “master data,” including key data fields for items, customers, manufacturing resources, and suppliers
  2. Synchronized long-term, tactical, and execution planning processes, planning horizons, and intervals for data refresh
  3. Mature collaborative processes for both key customers and suppliers reconciling forecast, orders, and usage or sell through
  4. Data-oriented understanding of the inputs to the forecast including forecast error, cumulative bias, lift, new products, and year-end volume variation
  5. Intense focus on “point-of-sale” or “sell-through” data (as opposed to sales orders and “sell in”)
  6. Disciplined product lifecycle management process bridging the gap between product development and supply chain
  7. A continuous improvement approach to understanding consumer or user behavior.

You can learn more planning insights from Bolstorff and other experts during the APICS and IBF Best of the Best Sales and Operations Planning Conference, June 18–19, 2015, in Chicago, Illinois. Visit for more information or to register. 

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Leave a comment
  1. June 11, 2018, 12:47 AM

    I am also new student of CPIM , I like the blog shared above. Looking forward for more articles on related topics.

    Regards, Latif Jaf

  2. December 18, 2017, 02:13 PM
    Adding a point of re-using/Interchangeability of parts for liquidation of obsolete/Excess inventory can also increase the profit margin.
  3. December 03, 2017, 03:45 AM
    This is a good article. Look forward to further update as mentioned till Q1 2018.
  4. November 22, 2017, 12:08 PM
    Great question, Chris!  Supply Chain Insights and APICS are collaborating on a research project which aims to correlate supply chain talent development investments with overall supply chain performance leveraging their Supply Chain Index.  We suspect that the 7 principles listed in the blog, may need to be tweaked relative to the roll in the end-to-end supply chain but that the theme remains constant.  We will have more to say on this subject as the research finalizes and we begin publishing in Q1 2018.
  5. Chris November 07, 2017, 09:58 AM
    Are there any examples of industry-specific leaders? Wholesale, Mfg, Distro, etc.?? I would think that the list of top performers may require different KPM focus as a result of their industry role. It would be insightful to see how MFG X used Fill Rate to improve their performance, whereas Distributor Y used on-time to launch metric to ID process improvement that created value.
  6. Nancyrodwin June 09, 2017, 04:04 AM
    I truly value investigating and taking after your post as I discover them to a wonderful degree supportive and fascinating. This post is equivalently enlightening and moreover enrapturing . Appreciative to you for data you been putting on making your site such an intriguing.Nice blog post you have shared, I appreciate your efforts, Keep it up
    [External links removed.]
  7. Mary Molina February 12, 2017, 04:09 PM
    I am a new student for the Certification of CPIM
  8. Gerardo January 12, 2017, 08:33 AM
    Look forward to reading this article. Thank you.
  9. Siraj May 27, 2015, 06:20 AM
    Gowri... Dell is one of the best SCM planned organization...
  10. Gowri May 22, 2015, 03:03 AM
    can we get any examples of best supply chain planning organizations ?

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