Supply planning: committing capacity, materials and stock

Unconstrained first, constrained second

The first pass ignores limits deliberately: it shows what supply would look like if nothing were scarce. The second pass applies the binding constraints — supplier allocation, tooling, qualified capacity, labour, cash — and produces a feasible plan. Keeping both visible is what turns a shortfall into a business decision, because the gap between them is precisely the argument for extra capacity, an alternative source or a revised commercial promise.

Lead time is the planning currency

Every element of the plan is anchored to how long it takes to obtain. Long-lead components must be committed while the demand signal is still soft, which means the firm is buying an option on a forecast it does not yet trust. Shorter-lead items can wait for better information. Segmenting the bill of materials by lead time, rather than treating it as one horizon, is often the single largest improvement available to a supply plan.

Time fences and who may break them

Inside the frozen horizon, changes cost more than they save: material is committed, slots are booked, and a substitution ripples. Beyond it, the plan is meant to move. Naming the fences and the authority required to breach each one prevents the common failure where every request is treated as urgent and the schedule loses meaning. Exceptions should be logged, because a fence broken weekly is not a fence, it is a fiction.

Publishing what will not be met

A supply plan that quietly absorbs a shortfall is worse than one that declares it. The valuable artefact is the exception list: which items are short, by how much in units of unmet demand, from when, and what the options are. That list drives allocation conversations with sales, expediting decisions with suppliers and, where the shortfall is structural, a sourcing review rather than another round of firefighting.

Frequently asked questions

What is the difference between a supply plan and a production schedule?

The supply plan sets quantities and periods across the planning horizon and reconciles them with demand; the schedule sequences specific work on specific resources in the near term. A schedule executes inside whatever the supply plan has already committed materials and capacity for.

How should allocation be decided when supply falls short?

By an agreed rule set before the shortage, not by negotiation during it. Common bases are contractual commitments first, then historic share, strategic customers or margin contribution. Whatever is chosen, writing it down beforehand removes the incentive to escalate every order.