It seems like all anybody talks about these days is how to optimize this while making that more efficient. The word “optimization” has become one of the prominent — and, frankly, overused — buzzwords of the last few years. That said, there’s no escaping it. No matter how overused it is, it remains an important aspect of today’s business. And nowhere is it more important than in supply chain optimization.
Supply chain management is one of the most important components of any business. It involves almost the entire business; deals with both suppliers and customers; and is responsible for creating the products and services that make up the core of the business. In other words, it’s kind of a big deal. In turn, this makes supply chain optimization a big deal, since it ensures that you get the most out of your supply chain.
So when you optimize your supply chain, which parts actually see the most improvement? When it’s all nice and optimized, you can expect to see these five areas of your supply chain get a whole lot better:
1. Inventory Control
Inventory management is one of the most crucial parts of the supply chain. It informs several other parts of your supply chain processes, from order fulfillment to production planning. This applies to all of your inventory, from raw materials to finished goods to spare parts for your equipment.
Supply chain optimization ensures that you always maintain control of your inventory management. Accurate inventory numbers ensure that you don’t order too many or too few materials during the production process. The same goes for fulfilling orders for your customers, as you need to be sure that you always have enough goods to fill every order on time.
2. Order Fulfillment
Speaking of order fulfillment, supply chain optimization also helps increase your on-time orders, order accuracy and the number of happy customers. As we mentioned above, proper inventory management makes sure that you always have enough goods available to ship to your customers. But there are also other components that help improve your order fulfillment.
The delivery of your orders is just as important as producing the goods for them. Supply chain optimization helps… well… optimize your order delivery. Two of the main components of this include finding ways to load your trucks or other transportation faster and optimizing your delivery routes. These aspects also fall under the category of logistics planning or logistics optimization (there’s that buzzword again…).
3. Demand Planning
Accurate demand planning is one of the most important areas of the supply chain that can be improved. Supply chain optimization helps you achieve more accurate demand planning, which increases the likelihood that you’ll have enough goods to fulfill your demand. At the same time, you can avoid producing too many goods that would take up extra warehouse space.
Additionally, accurate demand planning helps reduce costs. When you have a picture of how much demand you expect to see, you can create a production plan based on that demand and the length of your products’ various lead times. But when your demand planning is off, you have to make sacrifices — usually in the form of extra costs — to reduce lead times in order to fulfill that extra demand.
4. Customer Service
Customer service improvement may not be the most obvious benefit of supply chain optimization, but it’s a worthwhile one nonetheless. As we discussed earlier, orders that arrive on time keep your customers happy. This is a form of customer service, because you’re serving them the product and delivery service that they requested and paid for.
When your orders fail to arrive on time, however, supply chain optimization can still help your customer service. A good supply chain optimization sets up a notification system for when orders arrive late. This system should also be able to highlight when a customer receives consistently receives their orders late. If this happens, you can offer them both apologies and discounts to keep them happy and coming back.
The ability to make better decisions is oftentimes overlooked as one of the areas that can be improved by supply chain optimization. Yet, it just may be the most important area of all. The more your supply chain processes are optimized, the more well-informed you’ll be, and the more positive impact your decisions will have.
This is especially true when you have access to real-time data. Real-time data allows you to make decisions on the fly, in case any emergencies happen that need your attention. It also ensures that your data is always up to date, so your decisions are never based on outdated data. In addition, this has the added benefit of informing any changes you make to your tactical planning.
How to Achieve Supply Chain Optimization
So now you know what you can improve with supply chain optimization, but how exactly can you achieve it in the first place? We suggest starting with robust supply chain management software. This software comes with features for managing everything we mentioned above, and much more. Essentially, these systems help you take total control of your supply chain processes.
Some of the best vendors we suggest taking a look at include SAP SCM, GT Nexus, Infor and Epicor SCM. These supply chain optimization solutions help you plan more accurately for demand, fulfill orders better, make better decisions and, best of all, reduce costs. So let’s get optimizing, shall we?