Aligning Resources with Requirements

Supply chain plans are built around goals, or requirements. Anything you use to

make a supply chain work is a resource. People are resources. Facilities are

resources. Machines are resources. Inventory is a resource. Every resource has

constraints — things it can’t do. The constraints may be physical limitations, or

they may be limits imposed on the supply chain by financial, safety, and policy

rules. Here are some examples of constraints that may exist for your supply

chain resources:

» Employees can work only 40 hours per week unless you pay overtime.

» A machine needs to be serviced after every 1,000 hours of operation.

» Operators must be certified on a piece of equipment before using it.

» Finished-goods inventory can’t be stored outside during the winter.

Each of these factors limits the capacity of your resources, so your supply chain

plan needs to take these constraints into account. A plan that assumes a 45-hour

workweek but doesn’t include the additional cost of overtime will cause you to

miss your financial targets. A plan that involves storing inventory outside may

work during the summer but not during the winter. Constraints are not always

obvious; it takes research and judgment to understand all the constraints that

affect a supply chain’s performance. Identifying and managing constraints is

critical for effective planning.

The plan you create explains how you intend to meet your requirements while

taking your resources and constraints into account. Suppose your requirement is

to make 100 widgets per day. You will need manufacturing equipment, skilled

employees, raw materials from your suppliers, and many other resources. Each of

these resources is subject to constraints. Perhaps the manufacturing equipment

can produce only ten widgets per hour, the raw materials won’t be delivered for

five weeks, and your employees are available only on Tuesdays. Your supply chain

plan needs to explain how you will meet your requirements with the resources you

have available.

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