The Requirement
To break it down, the term “supply chain optimization” means operating a supply chain at peak efficiency. This is based on key performance indicators including total operating expenses and gross margin return on inventory invested. The goal is to deliver products to customers at the lowest total cost with the highest level of profit. In order to meet these goals, managers must balance the costs of manufacturing, inventory, transportation, fulfillment and customer service expectations.
Given the complexity involved, supply chain optimization is a business activity that you might consider a marathon, not a sprint. The supply chain configuration that is currently the best mix of cost and service may change over time. This could be due to fluctuations in material costs, carrier changes, customer demographics or other factors that require continuous oversight.
Given the complexity involved, supply chain optimization is a business activity that you might consider a marathon, not a sprint. The supply chain configuration that is currently the best mix of cost and service may change over time. This could be due to fluctuations in material costs, carrier changes, customer demographics or other factors that require continuous oversight.
The Assessment
Companies often consider supply chain optimization when there's a significant event, such as a merger or acquisition, or when there are concerns surrounding financial results. Perhaps transportation costs are rising, or service levels are falling, and other members of your supply chain are complaining. As suppliers expand meet changing expectations, supply chains have begun to grow in an ad hoc fashion. Response to e-commerce demand has led companies to bolt on direct-sales capabilities without integrating them into other channels, eventually leading to higher costs and fragmented management.
The process for a supply chain optimization typically starts with a thorough analysis based on forecast demand, followed by the development of a production and inventory plan to meet the forecast. The study includes inbound raw materials or components, manufacturing, transportation and distribution. It's also an opportunity to examine the possibilities for better integrating e-commerce through an omnichannel strategy.
The process for a supply chain optimization typically starts with a thorough analysis based on forecast demand, followed by the development of a production and inventory plan to meet the forecast. The study includes inbound raw materials or components, manufacturing, transportation and distribution. It's also an opportunity to examine the possibilities for better integrating e-commerce through an omnichannel strategy.
The Solution
There are generally no easy answers when it comes to optimization. The best answers depend on a deep dive based on a company's specific situation, including suppliers, production and customers. While there are some tried-and-true supply chain optimization techniques, you can rest assured that there is no “one-size-fits-all” approach to optimizing your supply chain.
A strategic network analysis will allow you to look at a wide range of metrics including physical facilities and inventories, costs for warehousing, transportation and labor, and distribution networks. The supply chain optimization initiative will typically use the company's data to create various "what if" scenarios to uncover the best solutions for creating and storing inventory within the supply chain to minimize operating costs.
A strategic network analysis will allow you to look at a wide range of metrics including physical facilities and inventories, costs for warehousing, transportation and labor, and distribution networks. The supply chain optimization initiative will typically use the company's data to create various "what if" scenarios to uncover the best solutions for creating and storing inventory within the supply chain to minimize operating costs.
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The world of international supply chains involves a myriad of unknown risks and challenging regulation.
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