Optimizing Your Supply Chain

Stephen DeAngelis

July 22, 2019

The late Supreme Court Justice Oliver Wendell Holmes, Jr., once stated, “Certitude is not the test of certainty. We have been cocksure of many things that were not so.” With that caveat in mind, I think I can assert every organization wants to optimize its supply chain. I simply can’t imagine a CEO going to his or her board of directors and telling them their goal is to implement a sub-optimized supply chain. Megan Ray Nichols (@nicholsrmegan) observes, “Viewed end-to-end, your supply chain includes the steps, supplier engagements, and processes that cover the entire lifecycle of a product. From inception to shipping to marketing, each link is vital. A key step in taking a more strategic approach to [supply chain operations] is looking at the big picture and working to optimize the supply chain from end-to-end. Your organization’s goal should be to go from facility to consumer as efficiently as possible by removing extra steps that might bog down the process streamlining those steps that are necessary.”[1] Shreyas Bhat, Director of Supply Chain Modeling at Armada, adds, “Supply chain optimization techniques, if leveraged properly, can help companies achieve their strategic business objectives, drive significant reductions in operating costs, and make informed cross functional decisions in complex scenarios.”[2]

 

The benefits of supply chain optimization

 

Many supply chain professionals believe their field is viewed as an annoying but necessary part of an organization. Steven Bowen (@StevenJBowen1), Founder and CEO of Maine Pointe, observes, “Surprisingly few companies understand the importance of the supply chain.”[3] Lora Cecere (@lcecere), founder of Supply Chain Insights, asserts such thinking is deleterious to an organization’s success. She explains, “The supply chain IS Business, not a department within a business.”[4] When company executives adopt a positive view, they see supply chain potential in a whole new light. Bowen observes, “Supply chains offer an effective … path to creating value through growth, driving down working capital, improving cash flow and lowering cost.” The key to achieving those goals is supply chain optimization. Bowen recommends using a Total Value Optimization (TVO) framework. “The Total Value Optimization framework,” he writes, “promotes greater collaboration, integration and transparency. The framework focuses on finding value drivers for cost, cash and growth, and building an action plan to achieve those drivers by leveraging the end-to-end supply chain [and] implementing supply chain excellence.” He insists companies should begin the optimization process by looking at the supply chain in a new light. He writes, “Best practices begin with redefining supply chain excellence and broadening its scope. Rather than seeing the supply chain as having a primary focus on procurement and logistics, it is about optimizing the entire end-to-end supply chain, from the supplier’s supplier, to the four walls of the business, to the customer’s customer.”

 

Optimizing your supply chain

 

Although it was not his intention, Bowen makes it sound like end-to-end supply chain optimization is a straight forward process. It’s not. Supply chain professionals struggle with the synchronization of supply and demand. This should come as no surprise — especially for professionals involved in aligning global supply chains. Siloed local optimization and decision-making can lead to misalignment of overall enterprise goals and, often, to misunderstandings between divisions. This misalignment can result in a huge amount of human processing of exceptions, resulting from the lack of agility in systems of record. Although data probably exists that could make optimization a reality, it is often not harnessed to enhance supply chain decision making and execution. The lifeblood of all supply chains is data; and, that data can be leveraged by cognitive technologies to help optimize operations. For example, utilizing the Enterra System of Insight and Actions™, organizations can:

 

  • Define one set of enterprise goals to keep optimization and decision-making across planning functions aligned.
  • Encode the decision logic of the best human decision makers as well as rules from the system. This mitigates the risk of losing key personnel (i.e., loss of tribal knowledge) and enhances automated processes.
  • Employ subtle human decision-making strategies to automatically adjudicate exceptions as well as your best experts.
  • Make decisions on a much broader set of data from up and down the supply chain.

 

By integrating data and making it available to everybody who needs it, the Enterra System of Insight and Actions can help create alignment across silos. We call this the Enterra Concurrent Optimization System™. Use of this System results in more “perfect orders” and fewer out-of-stock situations. Other benefits include reduced transportation costs, reduced inventory costs and improved labor scheduling. Because it leverages machine learning, the System continually learns and adapts. Staff members at CIO Review note, “Companies have found a solution in machine learning to eliminate the noise from (data) lakes to structure the unstructured and historical data. Machine learning helps organizations identify patterns in the supply chain, thereby helping them make decisions based on the actual trends and supply chain visibility. Predictive analytics has a vital role to play in forecasting the events that are likely to occur in the market, using supply chain data.”[5]

 

Concluding thoughts

 

Nichols concludes, “An end-to-end supply chain exists for every single product and service your organization offers. Taking steps to improve and optimize these chains today can ensure you have products available for your customers, and can save you both money and time tomorrow.” Bhat adds, “Supply chain optimization techniques take commitment and a process-driven approach to ensure they are successfully applied. If done correctly, supply chain optimization techniques can unlock value by enabling your supply chain to be more flexible and adapt to changing market conditions to deliver a competitive advantage.” When corporate executives recognize that supply chain operations are central to business success, supply chain optimization efforts will rise on the corporate priority list. Bowen recommends supply chain professionals “connect with the C-suite.” I would turn that recommendation on its head and recommend the C-suite connect with the supply chain.

 

Footnotes
[1] Megan Ray Nichols, “Optimizing Your End-To-End Supply Chain,” The Strategic Sourcerer, 21 November 2018.
[2] Shreyas Bhat, “Four Ways to Optimize Your Supply Chain,” Inbound Logistics, 31 January 2018.
[3] Steven Bowen, “Six Ways To Optimize Your Supply Chain To Generate Profit,” Forbes, 17 may 2019.
[4] Lora Cecere, “Sage advice? Only for turkeys.eft, 1 February 2013.
[5] Staff, “Leveraging Big Data to Optimize Supply Chain,” CIO Review, 19 March 2018.