Supply chain network optimization has recently become a hot topic among industry enthusiasts. Seeing the life-changing advancements in various supply chain management aspects is alluring and disruptive.
But what does the term supply chain network optimization (or just network optimization) mean and how does it apply to your business?
What is Supply Chain Optimization?
To break it down, the term ‘supply chain optimization’ means analyzing product pipeline infrastructures to enhance efficiency while reducing cost. The analysis process includes running supply chain network optimization scenarios to understand and enhance the processes well.
Modern-day supply chain organizations are quite complex and they need more agility to perform with high efficiency. Network Optimization is the way forward for modern supply chain organizations to stand out in the dynamic and competitive business landscape. Network optimization leverages technology trends at their best and entails using advanced mathematical and analytical techniques to enhance performance & determine optimal solutions. This results in delivering delightful customer experiences at reduced operating costs. Aside from learning about network optimization, let’s stay updated on the latest supply chain trends.
As the lifeblood of any business, a supply chain ecosystem is a crucial cog in the gears. Evolving technology aims to make supply chain operations more efficient, yet investing in the wrong technology hinders productivity and profitability, causing supply chain challenges.
Key Challenges of Supply Chain Optimization
Post the COVID-19 crisis, supply chain optimization is in a state of flux, and being quickly responsive is an ideal approach. The primary step is to determine problem areas that may include:
Inability to manage & locate inventory: The latest survey reveals that 43% of small businesses don’t track their inventory, which makes it difficult to serve customers in an efficient way. Markets are expanding, and there are an increasing number of channels. How best do you place your inventory to cut transportation costs? You may be able to cut/reduce last-mile delivery costs by storing inventory in warehouses at nearby locations of your customers.
Operational inefficiencies: Siloed data, manual practices to keep track of inventory, changing customer attitudes, and inaccurate demand forecasting result in a lack of visibility across operations and are detrimental to achieving optimization. Faster supply chains typically result in lower costs. Look for opportunities to remove bottlenecks and reduce delays utilizing analytics for supply chain.
Cyber Risk: With enormous data and new technologies taking over the supply chain world, cyber security remains a top concern for businesses. The remote workforce system has elevated risk due to less device control and increased areas of potential data exploitation caused by at-home assets used by employees. With the right tools, adequate forecasting, and reliable third-party logistics (3PL) connections, you can strengthen the resilience of your supply chain processes. Multiple management systems can be integrated using 3PL-based technologies via API and the cloud.
Inaccurate demand forecasting: An important factor in the strain on supply networks to cater to changing customer demands. With the onset of the COVID-19 pandemic, demand forecasting has raised the bar for supply chain management at many organizations. For a large number of CPG retailers and suppliers, lockdown restrictions destroyed the projections, leaving them without a guide as to how much inventory to stock or manufacture at a given time. By leveraging new forecasting models, you can better source and distribute items in a timely, cost-effective manner by anticipating demand with optimal supply.
5 Best Practices to Optimize Supply Chain
’ve listed below the five best techniques you can implement to improve the efficiency of your supply chain.
Improve planning: The dynamic planning process includes the use of innovative technology to create capacity plans and future forecasts and ensure that teams work with a precise picture of a potential scenario. Advanced contingency planning and scenario modeling will lessen the need to hustle & find substitute suppliers in case of cancellations or delays.
Cost-cutting & Negotiation: Benchmarking and ongoing pricing and terms improvement are key components of the supply chain's objective to reduce costs. Every new or renewed supplier contract should include regular provisions for effective negotiation. Maintaining an assessment process ensures features and pricing remain competitive over time.
Evaluate existing SCM practices: By 2024, it is predicted that the supply chain management market would be worth $8.95 billion. It's best to start where you are if you want to get better. Analyze the key components of your supply chain management system, including warehouses, distribution networks, and sourcing. Determine areas for improvement and take a phased approach to incorporate new practices.
AI & ML Adoption: With the use of advanced reporting and data visualization, the most successful supply chain optimization removes all uncertainty from procurement and production. The value of the global AI in the supply chain market is likely to reach USD 20,196.6 million by the year 2028, growing at a CAGR of 20.5%, according to a recent study by BlueWave Consulting.
The best way of maximizing productivity and minimizing risk is with robust reporting, supported by AI and machine learning capabilities.
Automation: The Global Logistics Automation Market is anticipated to expand at a CAGR of 12.4%, which might drive it to reach $82.3 billion by 2026. Utilizing supply chain optimization software can help users check supply levels, track deliveries, improve transportation, and other tasks. AR technology improves multitasking for employees and can also be used by businesses to improve product development processes by foreseeing prospective product usage in a real-world environment.
Building Resilience: Addressing Supply Chain Optimization Issues
Let’s learn about how an effective supply chain optimization process addresses the following concerns:
Silos: Data silos prevent supply chains from gaining the necessary information, and their inability to meet customer demands is ultimately hampered by their lack of end-to-end visibility. An ideal way to overcome information silos is through a supply chain that has been streamlined through connected technologies.
Client needs: Supply chain networks must constantly develop and improve to keep up with ever-evolving customer demands. Organizations that wish to keep exceeding customer expectations must prioritize streamlining the supply chain and leverage analytics for supply chain.
Agility & Sustainability: How fast can your supply chain respond to change, whether customer demands, competition, or supply disruptions? Modern supply chains must be agile to maintain a competitive edge. Also, today’s customer wants to know if their goods are produced in a sustainable and ethical way, with zero or minimal environmental impact.
Further, let’s learn about the benefits hosted by supply chain optimization.
Benefits of Supply Chain Optimization
With a responsive supply chain, you can adapt easily to logistics trends and demands without bearing high costs and enjoy various other benefits as listed below:
Improved inventory management: To ensure you respond quickly to changing customer demands while reducing costs, it is crucial to have a precise understanding of inventory levels. According to a BCI report, 19.6% of retailers plan to have more inventory. With effective inventory management models, suppliers will be well-positioned to avoid out-of-stock situations and prevent themselves from buying extra products, incurring higher shipping expenses and additional fees for extra inventory storage.
Enhanced order fulfillment: Streamlined operational processes result in faster delivery times and satisfied customers. You can improve order fulfillment while reducing costs by determining faster transport ways and highly efficient delivery methods.
Better collaboration & supplier relations: Oracle estimates that 76% of businesses lack an automated information flow throughout the supply chain, and 50% of businesses claim that fragmented information results in lost sales opportunities. Integrated software solutions enable the easy interchange of information and the elimination of bottlenecks, giving a comprehensive perspective of the whole supply chain. Lean supply chains entail working together with key suppliers to cut inventory, speed up delivery, and ensure product availability through third-party logistics.
Minimize operating costs: A well-designed supply chain optimization process helps you save costs in different areas that include planning, team management, sourcing, transportation, last-mile delivery, and more.
Effective supply chain management is hard - especially if it’s still going through the COVID recovery process. However challenging, It's a crucial business process that is a key determinator in enabling customer satisfaction.
Businesses must improve their supply chain with an emphasis on execution-oriented apps and real-time decisions in order to stay competitive, or perhaps to stay afloat. To increase productivity and revenue, they must use cutting-edge technologies like blockchain, AI, and IoT aligned with professional expertise. Choosing Polestar Solutions as your supply chain partner can help you unlock business value across the chain using supply chain analytics to achieve operational efficiency and determine enterprise-wide exposures that hamper business growth.
Supply chain optimization begins with utilizing the right tools.
We at Polestar Solutions help you increase the efficiency of your local and international supply chains by establishing accountability and transparency throughout the process. Using data analytics for supply chain, we streamline repetitive tasks, centralize data for better visibility, manage purchases through flexible workflows, and instantly visualize complex data for better decision-making.
Get in Touch with our Experts today to learn how automation can speed up your goals and streamline your supply chain.