In our last blog. we looked at what’s involved in supply chain optimization, the supply chain optimization techniques and tools that are available to you. This time we’ll cover the key benefits of supply chain optimization and how you can achieve them.
Estimates put the size of the global market for supply chain management software at almost $23 billion by 2024. This market encompasses all the supply chain optimization technologies – B2B integration, supply chain planning, procurement, transport and warehouse management, supply chain analytics and others – needed to deliver the visibility and control required when optimizing supply chain processes.
However, you’ll need more than software when you look to optimize supply chain networks.
What is Supply Chain Optimization?
Let’s start by just recapping on a supply chain optimization definition.
Today’s supply chains have evolved. From simple connections between organizations and their suppliers, they have become supply chain networks. You can think of supply chain networks as a combination of locations–suppliers, customers, factories, warehouses–and the logistics and transportation to move materials and products between them.
End-to-end supply chain optimization seeks to maximize an organization’s profits and minimize costs while providing continually improving levels of customer service. In many supply chain optimization models, this can be further broken down into three areas:
Supply chain cost optimization
- Cost optimization takes each cost area in the supply chain–such as orders and payments, storage and transportation, stock and wastage–to identify potential cost reductions.
Supply chain inventory optimization
- Supply chain inventory optimization helps determine the ideal amount of inventory needed to satisfy customer demand and where it should reside in the supply chain.
Supply chain network optimization
- Network optimization looks to improve every part within the supply chain. It enables organizations to develop strategies and plans to maximize productivity and profitability and identify which suppliers are best suited to help achieve these goals. In addition, supply chain planning optimization relies on a clear understanding of exactly how your supply chain network operates.
What are the benefits of supply chain optimization?
There many supply chain optimization companies that provide a variety of tools and techniques to address specific supply chain optimization problems. You must take time to identify the supply chain optimization solution that meets your individual business requirements. The best supply chain optimization software should deliver a wide range of benefits including:
- There are many areas where supply chain optimization can help an organization reduce costs. By optimizing the warehousing, logistics and delivery processes, infrastructure costs are much more easily controlled and managed. As well as supply chain infrastructure optimization, organizations can begin to automate repetitive, duplicate and redundant processes. Increasing process efficiency leads directly to a saving in transaction execution and labor costs. In addition, supply chain cost optimization allows you to focus on keeping optimum levels of inventory to meet customer needs. This results in reduced cost tied up in inventory and a reduction in the amount of redundant or wasted stock within the business.
Boost revenues and profitability
- Better, faster and more accurate. Supply chain optimization tools enable organizations to deliver the right order to the right customer at the right time. Research has shown that an increase in ‘perfect orders’ equates to a 1% increase in revenue, while 2% improvement becomes an extra ten cents increase in earnings per share. Optimizing the supply chain means that you have far more insight into all activities and are able to respond faster, which boosts customer satisfaction and increases re-ordering and customer retention.
Improved supplier performance
- Digital supply chains provide in-depth, real time data on the performance of every supplier. Visibility is core to supply chain optimization, meaning you can see which suppliers are performing well and which are under-performing. You can assess which suppliers are delivering to your agreements and which are missing their targets. You are able to identify and address where bottlenecks are occurring in your supply chain. Armed with this information, you can take the necessary steps to improve supplier performance and re-negotiate contracts based on actual performance. It sets in place a solid foundation upon which to make strategic sourcing decisions.
Improved supply chain collaboration
- Effective collaboration with trading partners requires that your organization share valuable information in real time. With a secure and high performance environment to communicate and share information, your supply chain network acts as an extension of your business to drive innovation as well as ensuring you deliver the best levels of service to your customers. This requires a single, end-to-end supply chain optimization solution that connects with all your suppliers, partners and customers. Everyone on the platform has the latest data in order to make quicker, smarter decisions and work together to deliver supply chain continuity and mitigate risks.
Integrated supply chain management
- Supply chain optimization software delivers end-to-end supply chain visibility and transparency allowing for constant improvement in both operations and planning. By gaining control over your supply chain data, you are able to extract actionable insights to make more informed decisions. This level of granularity improves performance in many elements of supply chain management including:
- Sales forecasting
- Cash flow management
- On-time delivery
- Route planning
- Credit control
- Margin measurement
- Disaster recovery
- It may appear that supply chain optimization has little impact on product quality but nothing could be further from the truth. Supply chain optimization techniques allows you to build quality management into the end-to-end production process, from raw materials to customer delivery. A focus on quality will help drive efficiency while reducing waste. In addition, quality management is an important element in supply chain planning optimization allowing quality standards and KPIs drive what can be expected at each stage of the supply chain process.
Enhance supply chain planning
- There are many elements to supply chain planning, all of which are important to deliver supply chain optimization. For example, when considering supply chain network optimization, the visibility and transparency into supply chain dynamics and performance allows you to better plan the location of different facilities. You are able to discern the best position for plant and warehouses to ensure the effective delivery of product to customers while minimizing supply chain costs.
Why choose OpenText as your supply chain optimization vendor?
OpenText is one of the world’s leading supply chain optimization companies. Over 60,000 companies worldwide rely on us every day to help drive performance and visibility in their supply chain. We deliver one of the most comprehensive ranges of supply chain network optimization tools include:
- Digital on-boarding
- Supplier information management
- Operational intelligence
- Supply chain analytics
- Vendor compliance management
- Global e-invoicing compliance
- Order management
- Product catalogue management
In addition to our tools, OpenText provides supply chain optimization services – including full managed services – to ensure you have the recourse and expertise you need to maximize the value of your supply chain.
Visit our website to learn more about supply chain optimization examples.