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Nov 19, 2020

Supply chain optimization is the art of delivering goods to your customers in the most efficient and effective way possible. Usually, supply chain decisions are divided according to their planning scope:

Strategic: Long-term decisions that impact and shape the vision of the company.

Tactical: Medium-term planning that serves as guidance for future operations.

Operational: Short-term decisions that result in day-to-day activities and execution.

If you want to keep up with your competitors, have a look at five reasons why you need to optimize your supply chain.

1. Increase your efficiency

Every decision related to your supply chain operation leads to trade-offs between different costs. Reducing your inventory holding costs at the expense of increasing production costs or escalating stockouts might or might not be the best approach for your business.

Using analytical models to grasp these trade-offs will help you make optimal decisions leading to a reduction in overall supply chain costs that will benefit your company’s bottom line.

2. Increase your effectiveness

The emergence of e-commerce and social media, as well as the rise of globalization, lead to the empowerment of customers. Being the cheapest is no longer enough, you need to be fast, flexible, and reliable.

Optimization techniques can guide you to revamp your supply chain in order to answer your customer needs considering the impact of customer satisfaction on demand. This way, you can find the balance between supply chain costs and long-term sales.

3. Separate yourself from the competition

The increased complexity and the need to balance both costs and customer satisfaction makes it so that ‘one-size fits all’ solutions no longer provide good enough outcomes to guide your supply chain decisions.

Supply chain optimization projects will help you find the best solutions to solve your unique problems in an innovative and customized manner. Don’t do what others should be doing, do what is best for you.

4. Enhance your partners’ operations

In recent years, business managers became increasingly aware of the importance of looking at the supply chain from a holistic point of view. Your service level is only as good as your suppliers allow it to be. Finding new partners is expensive, you want to help your partner’s businesses thrive.

Supply chain projects should go beyond the scope of a singular entity, looking at the impact of each decision on the whole chain and understanding how it affects each layer. The recent trend is to fairly distribute the benefits of the supply chain optimization process across all involved players.

5. Be ready for the unpredicted

If there is a time when this point is relevant, it is now (this article was written during the Covid pandemic). An efficient and seemingly robust supply chain can turn into a nightmare as soon as a large unforeseen event happens, and the truth is, these events are not that rare.

Supply chain optimization projects will not provide you with a solution that will be beneficial in every possible scenario. However, sensitivity analysis can help you ensure that the solution is robust, and it will also help you understand the point at which you should revisit your supply chain configuration.

Besides, structured analytical frameworks will help you make faster decisions, becoming more agile when facing new circumstances.

Conclusion:

Supply chain optimization used to be seen as a way to decrease costs, and it can be. However, it can be much more than that. It can be a means to awe your customers, to stimulate your suppliers and to make sure you are ready to answer the contingencies that appear along the way.

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