A supply chain is a complex web of operations — inventory management, warehousing, logistics, and more. If these operations are inefficient, your costs increase. Responding to shifts in demand, market changes, or unexpected disruptions also becomes more difficult.
Supply chain optimization aims to improve every process in your supply network for maximum efficiency.
What Is Supply Chain Optimization?
Supply chain optimization is about making your supply network run more efficiently. It’s a continuous process that aims to maximize your performance.
Successful optimization often occurs in three phases:
- Design: Lay out how your supply network should look to boost its efficiency. Where should your warehouses be? How many suppliers do you need, and what technology will you use to optimize your processes?
- Planning: Create a plan for optimizing the flow of products from suppliers to customers. How much inventory should you hold to avoid over- or understocking? How will you reduce waste and get products to your customers more efficiently?
- Execution: Implement your supply chain optimization plan. This includes setting up supply chain visibility solutions and warehouse management tools.
Why Is Optimizing the Supply Chain Important?
Benefits of optimizing your supply chain include:
- Meeting customers’ expectations: Modern customers want their orders delivered on time. Speeding up your supply chain processes can help you meet those expectations.
- Improving visibility: Optimization ensures supply chain systems are connected so they can talk to one another and share data. The result? A clear view of what’s happening across your supply network.
- Reducing risk: By improving your visibility, you can spot potential supply chain issues early. This makes it easier to avoid or mitigate supply chain disruptions.
- Enabling accurate planning: Supply chain network optimization gives businesses the tools and visibility to make precise, data-driven decisions when preparing for the future.
- Reducing operating costs: The main goal of optimization is to make your processes more efficient and eliminate waste, which ultimately reduces your supply chain costs.
How to Optimize Your Supply Chain Processes
What can you do to make your supply network more efficient? Here’s how to optimize your supply chain management.
Improve Planning and Forecasting
Guesswork and gut feelings are unreliable in supply chain forecasting. Instead, predict future demand using real-time sales information, market signals, and other data-driven insights.
Besides using more data, consider modernizing your prediction process. According to McKinsey, supply chain leaders have been clinging to manual systems and old software when forecasting demand. Predictive tools powered by modern technology, like machine learning, are faster and more accurate.
Optimize Inventory Management
One way to optimize your inventory is to make or hold just the right number of products needed to meet customer demand. Carrying excess inventory ramps up your storage costs and can lead to waste. On the other hand, having insufficient stock on hand means you’ll miss out on sales.
Your demand forecast will tell you how much inventory to carry. Just make sure the predictions are reliable.
Streamline Logistics and Transportation
Fast delivery and low- or no-cost shipping are some of the biggest customer expectations today. Streamlining your logistics and transportation can help you meet these expectations.
Here are a few ways to do that:
- Determine the best spots for your factories, warehouses, and distribution centers: Strategically placing these facilities (closer to your customers or key suppliers) shortens your delivery times and reduces your transportation costs.
- Optimize delivery routes: Find the fastest, most cost-effective routes that vehicles or vessels should take for deliveries and pickups. That way, raw materials and finished products reach their destination quickly and affordably.
- Choose reliable shipping carriers: If you don’t have your own transportation fleet, pick a carrier with fast delivery options, like same-day, overnight, and two-day delivery.
Renegotiate Supplier Relationships
The business environment constantly changes because of shifting market trends, new technologies, changing regulations, and economic fluctuations.
When these changes occur, your old supplier agreements might not cut it anymore. For example, prices may need to be revisited, or delivery terms tweaked. Renegotiating your supplier relationships is a smart way to stay flexible and keep up with new trends.
Leverage Technology and Automation
The right supply chain technology helps you increase your efficiency, improve your risk management, and save money.
A few types of supply chain software you can use to streamline your operations include:
- Inventory management software: helps you avoid overstocking and understocking
- Warehouse management software: supports warehouse optimization
- Transportation management software: automates route optimization and gives you real-time visibility into product movement through each stage of the supply chain
- Supply chain visibility software: helps you collect and analyze information on your entire supply chain, from end to end
Make sure the tools you use integrate with your existing systems, can grow with your business, and are easy to use.
Gain End-to-End Visibility
Supply chain managers can optimize their processes only when they have a clear picture of each link in the network. End-to-end visibility enables you to see everything happening across your entire supply chain. Achieve it by connecting your systems through integration.
The Role of AI in Supply Chain Optimization
As supply chain leaders integrate advanced technologies into their processes, artificial intelligence (AI) plays a huge role in the supply chain transformation.
Key use cases for AI in supply chain optimization include:
- Improving the accuracy of demand predictions: AI-driven forecasting in supply chain management reduces errors by 20% to 50%.
- Enabling autonomous planning and execution: For example, AI can use real-time data to automatically change transportation routes based on factors like traffic and weather.
- Boosting supply chain visibility: AI systems can process large volumes of supply chain data to provide end-to-end visibility.
- Promoting intelligent warehouse automation: Adopting AI in the supply chain can boost your optimization efforts. AI-powered warehouse robots, like those used by Amazon and Walmart, can navigate the storage facility, pick and pack items, and unload trucks.
Optimize Your Supply Chain With Surgere
Technology is at the center of supply chain optimization, but not all digital solutions are effective. Teaming up with the right provider will be critical to your success.
Surgere provides the IoT supply chain solutions you need to achieve your goals. Access real-time insights through a centralized platform to make your operations more efficient and future-proof your supply chain.
Contact us today to see how we can help transform your supply chain.
