<!––>It was quite a coincidence. In a single week I visited two manufacturers who shared the same burning question: Should they centralize their supply chain planning?

Both companies had grown through acquisition, and now had production facilities across the region they operated in. One of them specialized in low cost, high volume goods, while the other manufactured high value products.

Of course they were keen to improve efficiency – hence their interest in centralized planning. But as we chatted, it became clear that certain assumptions were holding them back. They both believed that:

• Planners need to be near production
• Sales personnel need to be near planners

Were they mistaken?

Not entirely.

The key to successful centralization lies in knowing what to centralize.

Generally speaking, planners don’t need to be near production. There are, however, two important exceptions to this rule. You should consider co-locating planners and production if:

(i)   The production process is highly specialized and unique to a particular facility

(ii)  There tend to be a large number of disturbances on the day of operations, such as rush orders that require immediate planning intervention

As for sales personnel having to be near planners, quite the opposite is true. But more of that later.

In most cases, supply chain planning can be centralized and there are enormous advantages to be gained from doing so. By treating various production facilities as one big virtual factory you can:

• Drive more revenue

Why should sales personnel be limited to selling products from a local facility? By giving them access to a product portfolio that spans all your facilities, you’ll also be giving them many more opportunities to grow your business.

• Improve production efficiency

It may be possible to improve efficiency by consolidating the production of similar products in a single facility.

• Increase responsiveness

By drawing on the production capacity of all your facilities, you’ll be able to accept more rush orders and improve your standing with key customers.

Centralized supply chain planning certainly has a lot to offer. It enables companies to maximize enterprise-wide profitability and minimize total costs, while improving their responsiveness.

Of course there’s more to achieving these benefits than simply relocating planners and expecting them to get on with it. So what exactly do planners need? Discover the critical success factor behind successful centralization when you catch the second part of ‘Centralized supply chain planning’.