Supply Chain Optimization: Definition, Benefits and Techniques

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Supply Chain Optimization

 

What is Supply Chain Optimization?

As the global logistics landscape continues to be reshaped by the Digital Revolution, supply chain optimization, network optimization, and similar terms are becoming more and more popular. But what does it actually mean to “optimize” your supply chain, and more importantly, how does that affect your business, and thus your customers?

In a broad sense, supply chain optimization refers to any efforts made by a company to increase the profitability of their logistics network, either through cost-saving initiatives, or through increases in efficiencies that drive greater customer satisfaction, and thus sales. Specifically, supply chain optimization can encompass any changes made throughout a company’s manufacturing and distribution network, including but not limited to, changes in suppliers, warehouses, fulfillment centers, carriers, technology, or transportation and labor costs.

Why You Need Supply Chain Optimization

Business has gone global, and markets everywhere are continuing to expand at an exponential rate. Today’s customers have higher expectations than ever before when it comes to shipping, and if your company wants to meet those demands, or even reach those customers in the first place, you need a supply chain that can keep up, and help you stay competitive.

While no two businesses are exactly the same, and thus there is no one size fits all supply chain optimization, here are four commonly identified areas that a supply chain optimization project can help maximize savings and efficiencies:

  • Visibility

Simply put, you can’t measure what you can’t see. Optimizing your supply chain with the latest business intelligence platforms allows businesses to zoom down to the individual shipment level and track inventory from end to end, ensuring no profits are leaking out anywhere along the line.

  • Agility

The logistics industry is changing at a record pace, every day, and shows no signs of slowing down. The ability to keep up with that rate of change is crucial to maintaining a competitive edge and keeping customer satisfaction high. Optimizing your supply to chain to combine and parse data from across disparate informational silos around the globe is the only way to respond to the current market demands in a timely and effective manner.

  • Shipping Rates

One of the most important, if not the most important, driving factors in a supply chain’s profitability are shipping rates. However, as influential as they are to a company’s bottom line, shipping rates are often times one of the least understood contributors, and thus one of the most commonly missed areas of savings, anywhere along the entire chain. Proper supply chain optimization can fix that, and put those savings back in your company’s pocket.

  • Network Optimization

Larger markets mean more access to customers, but they also mean more options in terms of warehouses, carriers, and fulfillment centers. Utilizing the latest logistics technology to understand the various geographic and transportation options available to shippers from one end of the supply chain to the other, from manufacturing to final mile delivery, can be pivotal in terms of maximizing profits and customer satisfaction, and is an integral part of any supply chain optimization.

  • Supply Chain Optimization Techniques

It cannot be emphasized enough that now, more than ever before, there is no one size fits all supply chain solution. Not only are individual companies vastly different from one another, but what works for one company today may not be the ideal solution for that same company six months from now. Thus, each supply chain optimization needs to be customized to that specific business, based on their current structure and needs, but also the current state of the logistics industry as a whole. And while there is no one right way to go about it, here are three common techniques utilized by experts in supply chain optimization projects:

  • What If Analyses

Technology is rapidly evolving to keep pace with the ever-changing logistics landscape, and leveling the playing field in the process. No longer are rate comparisons the esoteric realm of the carriers only, with individual companies now able to utilize the latest business intelligence platforms to instantly drill down to the penny level to see for themselves where they can save the most.

  • Network Mapping

Utilizing those same business intelligence platforms, it is now possible to perform complex location analyses for both inbound and outbound inventory, accurately predicting where companies will benefit the most when it comes to warehouse and fulfillment center placement in order to meet demand.

  • Bid Negotiation

Marrying the two techniques above, and many more, strategically negotiating the most beneficial carrier agreement is crucial to maximizing profitability in a business’ supply chain. The ability to respond intelligently and timely to multiple proposals, across all modes, can ultimately be the difference in a company’s long-term survival.

Let FreightOptics Drive Your Next Supply Chain Optimization

The time is now. If you’re interested in optimizing your supply chain to better serve your customers, and save more money along the way, reach out to us for a Free Demo, and let’s see how far we can go together!