May 26, 2021

Benefits of Supply Chain Network Optimization

Benefits of Supply Chain Network OptimizationA supply chain is a system that connects organizations and resources needed to produce and distribute traded goods. In the supply chain process, raw materials transform into the things we use in our day-to-day life.

A supply chain network is an advanced, more complex version of the basic supply chain. As it comes from the name, supply chain has the links aligned in direct order, whereas a network can have two-way interconnections between different links.

Certainly, everyone involved in the supply chain network understands how important it is for the network to operate smoothly. Even in the simple supply chain, the problems in one link are damaging for the whole chain. In the network, the damage is even more significant. However, there are still a lot of companies operating with unoptimized supply chains.

What is Supply Chain Network Optimization?

supply chain network
It is a process of evaluation of all supply chain network parts, including resources, technologies and facilities, aimed at identifying the problems and finding a way to solve them. Due to the complexity of the networks, their optimization may require advanced analytical software.

The first step for a successful optimization is to do a supply chain network research. It consists of gathering data and loading it in specialized software, as we’ve mentioned before. This research consists of several parts.

Data analysis

Loads of data should be gathered in order to complete supply chain network research. It includes the locations of all facilities involved in the network, necessary supplies, product flows, manufacturing plan, etc. After the data is gathered, the analysis begins. Its goal is to understand the business and see what models of work and strategies can be applied to better the workflow. This data can also be useful to indicate the areas outside of the supply chain that need improvement.

Baseline

A digital copy of the current supply chain network expenses shows all the links and locations participating in the network and the costs related to them. This shows the disposition of the expenses and also gives a look into the distribution patterns, volumes and capacity. It is needed to see what parts of the chain are overloaded or don’t work at the full capacity, bringing money losses in both cases.

Comparison of scenarios

Supply chain network research gives the opportunity to compare different possible scenarios before making any actual changes. Different distribution strategies are applied to the network to see their impact on its parts and compared to the baseline. Generally, this part is based on the gathered factual data, but it can also be used to predict the changes if the current disposition in the chain somehow changes. For example, if the warehouse is moved to another country.

What are the Benefits of Supply Chain Network Optimization?

supply chain
Overall, supply chain network research gives deep insights into the interconnections between the parts of the network, which help to make strategic changes. The results of the research depend on the goals you set, but here are some common benefits of the optimization that can be achieved:

  1. It cuts the unnecessary costs
  2. It might be the reason why you want to optimize the supply chain network in the first place. There are many areas in the supply chain that can be too expensive, if unoptimized. Incorrect warehouse layout takes the space that could be otherwise free, too high-priced carriers, wasting too much time on the tasks that can be automated, oversupply or overstock. All of these problems lead to spending more money than actually needed.

  3. It optimizes the transportation
  4. Transportation takes up to 10% of the GDP (Gross Domestic Product). Its impact on the final price of the product can be even higher if the transportation is inefficient. Finding the right shipping methods for different products reduces the product’s final price, which leads to better customer satisfaction.

  5. It improves risk management and planning
  6. The collected data and further analysis that you have after supply chain network research help you to see the dynamics of your business and plan its future accordingly. Based on the data, you can find locations for the new facilities that will work beneficially for the supply chain, plan restocking using the information about the product demand in the past years.
    Data analysis also helps to create backup plans for problematic situations and be prepared when the situations happen, rather than struggle to manage them and disrupt the supply chain network.

  7. It enhances quality control
  8. Quality control issues are hard to fix on the later stages of the supply chain, and they bring damage to the brand, lowering the level of customer satisfaction. Creating the process guidelines and product criteria causes suppliers to follow your requirements, which improves their quality control. Another way to enhance quality control using data is to analyze and compare the performance of different suppliers and choose the best.

supply chain network optimization software
While doing supply chain network research is undoubtedly helpful, subsequent implementation of a supply chain software brings even more benefits for your business.

Software solutions streamline the processes, bring visibility and real-time data updates and improve contact between parts of the supply chain. They make it easier to control the network and let you see the whole picture. After implementing supply chain software, you’ll no longer need to do the research, as it will be done automatically.

You can use different software for different parts of the chain (such as Transport and Warehouse Management Systems, Last Mile Delivery app, financial software) or an Enterprise Resource Planning solution. However, choosing the right software vendor can be tricky. Their solutions are often generalized and can be unsuitable for some businesses, as they lack flexibility.
If this is the case for you, we can create a solution perfect for your needs or adapt our preexisting ones, which you can find in our case studies.

Out of all supply chain software companies, why choose Coreteka?

  • 5 years on the market;
  • 35 successful projects in logistics and 20 – in retail;
  • Extensive list of services covering the whole software lifecycle;
  • Experienced with enterprise companies and startups.

We are interested in becoming your business partner. Contact us!