Why Supply Chain Optimization is a Value-added Proposition
Nick Ostdick - February 23, 2016
Supply chain managers (SCMs) today are facing a seemingly contradictory problem: sifting through large pools of available data and analytics to discover the actionable data necessary to drive value-added supply chain decision-making.
Essentially, due in large part to the proliferation of supply chain management trends such as Big Data, Industry 4.0, and The Internet of Things, SCMs have the ability to capture massive amounts of data yet still lack the solutions necessary to put that data to use in reducing costs, increasing visibility and transparency, and promoting growth.
The inability to actualize this data – whether in terms of warehouse or port holdings, transportation reporting, or customer relationship analytics – can prevent SCMs from utilizing data to leverage intelligent planning decisions, troubleshoot potential supply or transportation bottlenecks, and prevent supply disruptions or anomalies throughout the supply chain network.
Supply optimization and synchronization is an SCMs best bet in creating a competitive supply chain advantage and exploiting key performance indicators (KPI) to ensure early identification of supply chain disruptions; real-time reporting and analytics to facilitate on-the-fly decision making; greater collaboration between supply chain partners; and easier integration of those outside the traditional supply model to foster more effective communication across all channels of a supply network.
The Importance of Supply Chain Optimization
Before we discuss the benefits of supply chain optimization (SCO), we must first understand it as a concept and its importance in today’s supply landscape.
Simply put, SCO is the implementation of processes and tools – through computing and reporting software – to ensure peak performance throughout manufacturing, distribution, and supply streams. SCO incorporates intelligent software and solutions to capture and process large amounts of data to help SCMs make informed decisions about supply levels, warehouse holdings, and how to best leverage transportation or freight options.
Companies without integrated SCO solutions often suffer from three major issues in capitalizing return on investment (ROI) by operating as lean and efficiently as possible:
- SCMs lack the capability to recognize potential disruptions or bottlenecks quickly enough to create adequate solutions in order to ensure supply fluidity.
- The ability to view supply chain logistics on a macro level and from multiple channels or angles is greatly diminished.
- There is little room to identify and exploit advantages or value-added opportunities stemming from anomalies or unexpected events in the supply chain network.
Each of these concerns not only hampers an SCMs capacity to maintain efficient supply chain practices, but also greatly reduces the possibility of containing costs, increasing production, and maintaining a coordinated network, especially as supply chains become more complex in an increasingly global industry.
Benefits of SCO
The obstacles related to the lack of SCO solutions directly relate to an SCMs inability to capture, analyze, and act on those large pools of data SCM’s need to make well-informed supply decisions. The lack of available data, gaps in the data created during transfers of product through a supply chain network – the movement of products from an OEM to a distributor to the customer – and incompatible data in terms of format are hurdles SCMs face without the implementation of SCO solutions. These roadblocks can result in missed growth opportunities, increases in cost and resource waste, and disruptions in supply chain fluidity.
So how can SCO function as a value-added proposition and alleviate the problems uncoordinated supply chain processes present?
On a macro scale, SCO creates a unified, coordinated supply chain structure to boast communication and collaboration between all partners in the supply chain network. The instant availability and shareability of advanced data and reporting leverages visibility and transparency, and as a result, SCMs will have a greater ability to:
- Identify supply chain anomalies and potential bottlenecks early in the supply chain process to create intelligent planning solutions to ensure end-to-end efficiency.
- Faster and more powerful processing of supply and transportation data without interruptions in parallel data processing.
- Instantaneous processing and alterations of product orders, modified invoicing, and updates to inventory and warehouse reporting data as supply decisions are made.
- Easier integration of those previously outside the supply chain network without data disruptions.
Impact of SCO
These advantages clearly make SCO solutions a value-added proposition for SCMs looking to stay competitive in today’s rapidly evolving supply chain industry. With companies across the board establishing ports and warehouses in new locations across the globe, the ability to create and track inventory data, monitor transportation and holdings costs, analyze costs and other metrics in real-time, and communicate data with all partners within a supply network will be essential in ensuring supply fluidity, robust ROI, and sustainable production and growth through 2016 and beyond.