One could argue that everything in the supply chain starts with planning. Even the simplest supply chains require at least some basic assumptions and forecasts around cost, supply and demand. Although this process is more complex than it is at first blush. Just look at the daily news, and you’ll see supply chain planning complications come to life. This is evidenced by the chip shortage in electric vehicles, for example, or rapid demand changes due to a deep freeze or sudden drought.
On top of inherent complexities, climate change, political instability, and pandemics have continued to make supply chains more unreliable. This makes the supply chain planner’s job increasingly difficult, and they deserve help. Enter supply chain optimization technology.
Whether you are new to the idea of using supply chain optimization technology to support operations, or you are looking to enhance the way you use this powerful technology, I want you to know that there are vast opportunities and benefits here.
What is Supply Chain Optimization Technology?
Supply chain optimization technologies (SCOT) are software used to optimize the outcome of processes within your supply chain. Many times, the optimization technology address key processes such as:
- Sales and operations planning
- Production and supply planning
- Distribution planning
- Demand planning
- Inventory management
- Order allocation
- Manufacturing scheduling
- Transportation scheduling
The use of optimization technology allows your internal supply chain team or external supply chain experts to design the best way to operate your process so the outcome you are seeking is maximized or minimized. See below for more info. on common problems that are solved using supply chain technologies.
Typically, supply chain optimization technology is used in conjunction with your enterprise resource planning (ERP) system, transportation management system (TMS), or manufacturing planning and control (MPC) system. It can be integrated for continuous update of the optimization scenarios or used periodically as a stand-alone solution.
READ THE BLOG FROM FICOXPRESS’ ZAHIR BALAPORIA ABOUT THE BENEFITS OF SCENARIO ANALYSIS FOR OPTIMIZATION
There are many supply chain optimization technology solutions on the market, and we are familiar with most of them, but typically, the solution providers we team with up are:
Our technology partners provide a variety of supply chain solutions from highly configured advanced planning applications to targeted advanced analytics and optimization tools.
Common Problems Companies Solve with Supply Chain Optimization Technology
While optimization can be a very powerful tool to give your supply chain that competitive edge it needs, it is imperative that the initiative has a very specific objective from the start. Desiring your inventory management to be better is simply not enough. Are you trying to reduce inventory costs, increase service level and time to market, or maximize profit? Each of these objectives may deliver different answers and require different data scopes to complete the analysis.
Here are some common problems that our customers ask for our help to optimize.
- Minimizing the total supply chain cost including manufacturing, sourcing, transportation, and inventory carrying costs
- Optimizing key performance indicators (KPI) such as plant lead time, order delivery timeliness, asset utilization, and profit
- Enhancing the decision-making process in day-to-day manufacturing or replenishment planning
- Shorten the response time to unexpected and urgent situations, while maintaining high confidence and effectiveness of revised plans
Maximize Supply Chain Optimization Technology Investments
Making an investment in supply chain optimization technology is not a trivial decision. The question is not necessarily the cost of the investment, but what would you get in return. At Profit Point, we’ve designed a framework that ensures your investment in SCOT is protected and maximized.
Leveraging powerful supply chain optimization technology is not a plug-n-play operation. It requires a full understanding of the business situation, needs, and process changes that are needed to generate true returns.
Beyond the straightforward benefits previously mentioned, the process of implementing SCOT comes with additional value for your company. The process of implementing any technology and making sure it has a successful and lasting impact for a company, requires collaboration and cooperation across teams. The streamlined processes SCOT offers requires an agreement from all functions within a company (sales, finance, operations etc.) on the underlying data required as input to the technology. This represents a perfect opportunity for teams who operate in silos to collectively create a streamlined process and single, unified view of an organization’s financials, inventory, KPIs, and more.
Supply Chain Optimization Technology Tangible Value
To illustrate the capabilities and benefits of supply chain optimization technology, let’s examine the case of a bulk cargo vessel operator. Faced with frequent price changes, a rapidly growing fleet of vessels, and limited infrastructure, the vessel operator knew that planning was far too complex for their planners to manually update on a regular basis.
In a typical planning scenario, the planners had to use a minimum of six (6) inputs, make six (6) calculations, and make up to five (5) different decisions. This exercise took 300 minutes on average. By implementing a set of supply chain optimization technologies fully integrated into their ERP, the vessel operator’s planners were able to reduce each planning session down to 22 minutes, significantly boosting their ability to quickly react to changing operational and marketing conditions.
By integration supply chain optimization technology into their systems and processes, the company:
- Reduced manual effort by more than 90%.
- Eliminated the chance (to 0%) of overlooking any constraint or sub-optimal solution in their system.
- Saved at least 1.5% of their total supply chain cost vs. manual planning by leveraging practical planning tools, techniques and expertise.
- Conducted what-if scenario analysis to speed incident response time significantly by more than 93%.