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The 10 key elements for a Best Practice Supply chain 1. Have a clearly understood and agreed service level agreement (SLA) with your customers The SLA should be a detailed understanding of the service to be offered, particularly in relation to lead time, minimum order qty and stock holding requirements. It should also articulate the parameters that define exceptional demand (e.g. a promotion) from normal fluctuations in demand that can be accommodated as ôbusiness as usualö. 2. There should be a robust, regular channel of communication with your customer, in order to measure and improve performance levels defined in the SLA. Most enlightened businesses now have some kind of Sales & Operations Planning (S&OP) processes. Many however are very inwardly focussed and donÆt include sufficient or any direct input from the customer. This is the opportunity for the customer to communicate significant future demand changes for which the supply chain needs to be re-calibrated. 3. Proper supply chain planning must consider total business cost including Demand, Capacity, Supply & Inventory Planning. Another common failing of many S&OP processes is that they do not cover all the elements of cost. Typically the debate can be around manufacturing efficiency and capacity and ignore the costs associated with poor customer service or resultant inventory. A good S&OP process understands the service model agreed and then determines the least cost way of delivering this. 4. Know when and when not to use a Forecast Forecasts, no matter how inaccurate, are the best tool that we have to determine future capacity requirements. Therefore we should have a toolset ôA common mistake here is to confuse Demand Variability calculated entirely from the historical demand pattern with Forecast Variability, which is the variance between history and forecast. The former is correct the later is meaninglessö that enables us to easily access this information. Forecasts are typically not bad at determining how much of something we will need, i.e. is demand increasing or decreasing, but very poor a predicting exactly when the demand will occur. Therefore never use a forecast for order generation, to do so flys in the face of any Demand Driven Lean approach. 5. Segment SKUs based upon their demand volume and variability and then select the appropriate replenishment rule for each segment The same service level and/or replenishment rule is rarely appropriate for