It seems like all anybody talks about these days is how to optimize this while making that more efficient. The word “optimization” has become one of the more prominent — and, frankly, overused — buzzwords of the last few years. That said, there’s no escaping it. Supply chain optimization remains an important aspect of modern supply chain management and has lasting positive effects.
Proper supply chain management is a critical component of a successful business. It involves almost the entire company and deals with both suppliers and customers. These processes are also responsible for creating the products and services that make up the core of the organization. In other words, it’s kind of a big deal. In turn, this makes supply chain optimization important since it ensures that you get the most out of your supply chain.
Two Types of Supply Chain Optimization
Before jumping into your supply chain and tearing things apart, there are two methods of supply chain optimization that we should consider first:
This type of optimization deals with optimizing a single function without taking into account its effect on other portions of the supply chain. For example, say you decide to fully optimize the number of goods being shipped per truck. This way, your trucks are always completely full when they leave the warehouse; however, you are going to need a larger back stock of goods to keep up.
This method is definitely more of a double-edged sword than a cure-all for the areas of supply chain management that aren’t optimized. Local optimization could be useful for trying new things and seeing how they affect other important processes before making large-scale changes.
Otherwise, I’d stay away from this method as it can quickly cause a domino effect of a single choice causing widespread issues.
You can make a pretty good guess about how global optimization differs from its local counterpart. This optimization strategy looks at all of the areas of supply chain efficiency that need work and attempts to boost them at as little cost as possible.
It may be impossible to cut costs across the board as you attempt to balance the many moving parts of your supply chain. However, the money you save should always outweigh the money you spend getting everything back into shape.
In order to get the most out of this strategy, leveraging the powerful tools of supply chain optimization software is a good idea. These platforms usually include features that increase your data visibility and show you what needs optimizing before going in blind yourself.
Supply Chain Optimization Best Practices
Now that we have a base of knowledge to work from, let’s discuss some best practices to consider when optimizing your supply chain:
Be Responsive and Agile
You may have one of the most efficient supply chains around, but if it can’t quickly react to demand, you’ve got optimizing to do. Including data visibility tools is a good idea here. Utilizing information like POS sales can help equip decision-makers with a roadmap of possible demand changes. Leveraging social media for demand information is another viable route toward an agile and responsive supply chain.
Positioning for the future before it happens is key to operating at maximum efficiency. If you can see what’s coming down the road, inventory can be repositioned so that important products are front and center. Not only that, but agile supply chains make for stronger customer service. Companies that are ready for demand avoid stock-out situations and dissatisfied customers.
Focus on Your Strengths
Having a supply chain that can equally and effectively handle every single process would be a dream, but let’s face it, you are going to have some underperforming aspects. Many companies falsely believe that because their supply chain can handle everything in the short term that it is still the best and most efficient choice. This is not the case. Outsourcing certain tasks can often have larger long-term rewards than handling everything in-house.
There are time-consuming tasks that only need to be completed once, like determining distribution networks, that can be handled by third-party providers. In fact, allowing a talented provider to focus on a task while you work on your core strengths is a win in multiple ways. A task that may have been rushed were it handled alongside all of your daily supply chain processes can be given focused consideration by a third party. This way, you further strengthen your supply chain while also successfully taking care of important side-tasks.
Think About the Global Picture
As time goes on and supply chains continue to grow, the global theatre will become more important. Staying competitive requires branching out, especially as supply chains go from local to spanning multiple countries. Manufacturers need to take on multiple channels in order to properly handle inventory levels. Not only that, but the ever-shifting global markets and regulations need constant observation. As supply chains continue to be optimized on a global level, carbon footprints of larger businesses can be reduced as well.
Acting locally is important too, however. A supply chain can’t flourish without the local support of technology. Upgrade your infrastructure, adopt supply chain management systems and ensure your on-site processes are being taken care of.
The efficiency of a supply chain’s warehouse management is vital to an optimized supply chain. With the introduction of robotics and artificial intelligence, warehouses have a variety of new ways to speed up and improve accuracy. Human employees have always been most valuable when managing or planning; this way, we can focus on what we do best.
Smart warehouses employ many different pieces of technology that all work together to optimize warehousing processes as best they can. Robots can fully automate the picking process, which can drastically reduce the time it takes to ship out a product. RFID tagging helps organize and control inventory while further improving the accuracy of picking and packing. Finally, warehouse management systems bring in a multitude of features that all work toward streamlined warehousing.
Don’t Get Complacent, Review and Update as Needed
No one wants constant meetings about anything, but establishing consistent supply chain reviews can keep a well-oiled company running smoothly for longer. Not only will regular reviews keep track of efficiency metrics, but these audits can also ensure that compliance and regulatory qualifications are being met.
Leading parties in charge of supply chains should always be looking for underperforming pieces that slow down the flow of goods or carry unacceptable amounts of risk. Keeping compliance and work standards current can improve risk mitigation and prevent fraud, theft and other destructive behaviors.
5 Areas That Will See Improvement From Optimization
After employing some of these best practices alongside some technology, you can expect your optimization efforts to positively impact these five supply chain areas:
1. Inventory Control
Inventory management is a crucial part of the supply chain. It affects several other parts of your supply chain, including order fulfillment and production planning. Raw materials, spare equipment parts and finished products all fall under the umbrella of inventory control.
Accurate inventory keeps you from purchasing excess goods that will only take up space or from not having enough and succumbing to demand. Having an organized and controlled inventory keeps mistakes at a minimum and helps fill orders on time without notifying a customer that you don’t have what they want.
2. Order Fulfillment
Speaking of order fulfillment, supply chain optimization also helps increase your on-time orders, order accuracy and the number of happy customers. As we mentioned above, proper inventory management makes sure that you always have enough goods available to ship to your customers. But there are also other components that help improve your order fulfillment.
The delivery of your orders is just as important as producing the goods for them. Supply chain optimization helps, obviously, optimize your order delivery. Two of the main components of this include discovering new methods to load your shipping transportation faster and finding the most efficient delivery routes. Logistics planning and optimization are also affected by these aspects.
3. Demand Planning
Being able to accurately plan for demand can be the difference between a supply chain that sinks or swims. Optimizing demand planning gives supply chain managers a more accurate view of demand fluctuations and helps them keep the right amount of inventory available. At the same time, excess purchase of less popular goods can be avoided, which can free up valuable warehouse space.
Effective demand planning can also help cut costs. If you have an idea of how demand is going to fluctuate, an efficient production plan can be put into place. If your demand planning isn’t up to snuff, you may have to spend some resources to catch up and reduce lead times.
4. Customer Service
Customer service improvement may not be the most obvious benefit of supply chain optimization, but it’s a worthwhile one nonetheless. Orders that arrive accurately and on time make for happy customers, this isn’t exactly rocket science.
A late delivery isn’t the end of the world, however. A properly optimized supply chain will send out notifications to alert customers when a shipment is expected later than agreed upon. This system should also be able to find out if a customer has been receiving their orders late and properly compensate if need be. If this happens, you can take measures, like offering discounts, in an attempt to make amends and keep their business.
5. Decision Making
The ability to make better decisions is oftentimes overlooked when optimizing a supply chain. Yet, it may be one of the more important aspects of optimization to consider. As you increase the efficiency and optimization of your supply chain, you’ll be better informed and ready to make more positive and impactful decisions.
This is especially true when with data pulled from real-time analytics. Real-time data allows informed decision making on the fly, which can help bounce back from emergencies. Visibility into data keeps you from making choices based on old or outdated information.
How to Achieve Supply Chain Optimization
So now you know some areas of the supply chain that can improve with supply chain optimization, but how exactly can you achieve it in the first place? We suggest starting with robust supply chain management software. This software comes with features for managing everything we mentioned above, and much more. Essentially, these systems help you take total control of your supply chain processes.
Think about the unique requirements your business needs in order to stay competitive. Spend some time shopping around and speaking to vendors to make sure that the system you decide on has answers the problems you have.
If you are in the market for a top-performing SCM system, take a look at your comparison guide to get a look at leading platforms.
Optimizing a supply chain can positively affect a number of struggling processes in any supply chain. Leveraging technology, data visibility and proper demand planning can help turn a failing supply chain around and keep it competitive.
Which portions of your supply chain have you recently optimized, and how has it affected the efficiency of your daily processes? Let us know with a comment below!