A Guide to Supply Chain Optimization for Companies of Any Size
Prior to the emergence of advanced technologies like artificial intelligence (AI), radio frequency identification (RFID), blockchain and the Internet of Things (IoT), supply chain optimization emphasized a more efficient design of the supply chain to minimize operating expenses. This translated into optimally-located warehouses, carefully-planned transportation routes and closely-managed inventories. Nowadays, optimization is focused on the challenges associated with adapting to uncertainty, mitigating risk and improving decision making when external factors threaten to destabilize your operations.
The configuration of your supply chain can change over time, whether due to variations in logistics costs or cost of raw materials, changes to the financial forecast of your business, a shift in your business model, altering of customer demographics or, as we’ve seen over the past year, an increased customer demand for eCommerce products. In any case, the primary goal of supply chain optimization is to ensure your supply chain operations are being conducted as efficiently and as cost-effectively as possible, regardless of these variations. With the right technology, software and performance tracking tools in place, optimizing your supply chain doesn’t have to be complicated.
Why Should You Optimize Your Supply Chain?
Before explaining the benefits of supply chain optimization, it’s good to first understand the common challenges associated with the optimization procedures themselves. One of the main problems businesses face when scaling and optimizing their supply chain is being able to carefully set, manage and meet client expectations. Customers expect responsive service and short lead times at all times and finding a balance between satisfying their needs and your own can sometimes be difficult. Additionally, some businesses simply aren’t prepared to scale up their supply chain, either because of operational constraints like labor or inventory shortages, or because of technological limitations that result in low end-to-end data visibility.
However, once customer expectations can be set and the operational kinks worked out, the advantages of having an optimized supply chain far outweigh the costs. Transportation, manufacturing and production methods become much more economical. The supply chain becomes more responsive to disruptions, such as sudden changes to inventory levels or weather delays. Products can be delivered to customers in a more timely fashion at a lower cost to you. The result is increased customer satisfaction and higher profits. With a more dynamic, agile supply chain, you’re able to build a stronger competitive position in your market.
So how do you actually go about optimizing your supply chain?
Supply Chain Optimization Best Practices
In essence, optimizing your supply chain means knowing how all components function both individually and as a cohesive unit. While it’s recommended you utilize a WMS software that can be easily integrated with your ERP to assist with the optimization process, there are plenty of actions you can take without software to put your supply chain in a great position for long-term growth and scalability. The following optimization best practices are a good starting point
- Integrate your current supply chain management system with other systems within your operation, including network, analytics, communications and automation systems you already use.
- Prioritize inventory control and cycle counting. Start by looking at demand and production and then come up with a detailed inventory control plan to keep you with an optimal supply at all times.
- Conduct regular audits of your distribution centers to ensure all employees are trained to the appropriate level and your equipment is safe and reliable. The audit should also include a full network analysis to look at warehouse layout and labor, distribution networks, carriers and transportation routes, and manufacturing and production capabilities.
- Track data across the entire organization and at each point in your supply chain, not only in factories and warehouses.
- Search for new facilities like warehouses and distribution centers based on their potential for future growth, not just what they’re being used for today.
- Take advantage of the expertise in other departments or areas of your supply chain. Cross-functional planning and collaboration is key, as is making sure communication and goal setting starts at the top with organizational executives.
- Have emergency contingencies in case of reduced inventory, labor shortages, or disruptions to transportation routes and schedules.
- Review your plan regularly and continue optimizing as necessary.
Tracking Supply Chain Performance with KPIs
Key performance indicators, or KPIs, are core metrics you can use to track the performance of your supply chain across several domains. Supply chain KPIs can change depending on your industry and business model but, as most supply chains are built around inventory management, there are a few KPIs you should be tracking regardless of your business type
- Inventory Turnover
- Inventory-to-Sales Ratio
- Inventory Days of Supply
- Inventory Velocity
- Total Cost vs Sales
Many organizations also look at KPIs such as gross marginal return on investment (GMROI), perfect order rate and fill rate. Tracking the right KPIs can help you identify patterns in your data to make forecasting future demand and sales easier. However, be careful not to track too many KPIs. Data overload can be just as bad as no data at all. Choose your core supply chain KPIs carefully and don’t be afraid to adjust them as your supply chain grows and your business processes change.
Technology’s Role in the Supply Chain
Today’s supply chain managers and warehouse operators have access to a variety of advanced, multimodal technologies to assist them with day-to-day operations and supply chain management. These technologies include widely-used solutions like voice picking and RFID, as well as up-and-comers like blockchain, artificial intelligence (AI) and the Internet of Things (IoT).
Voice-based picking is perhaps the most widely used technology on this list. Sometimes combined with Bluetooth or barcode scanning, voice picking is a hands-free, eyes-free picking system that relies on voice prompts given via headsets to help warehouse operators execute their daily picking tasks. For large distribution centers with a wide range of SKUs and a high volume of carton-based fine picking, voice picking keeps pickers more engaged, improves safety outcomes and automates tedious manual processes. This translates to greater job satisfaction for the operators, as well as a higher hourly picking rate for you and your supply chain.
RFID is another technology that is becoming increasingly popular in manufacturing and supply chain operations. Using radio frequency waves, data can be transferred wirelessly from special tags on the items you’re tracking to your organization’s ERP system. RFID allows you to track inventory more accurately, automate data management, improve visibility throughout the supply chain and give real-time shipping status and order fulfillment updates, among other benefits.
In addition to voice picking and RFID, there are a few other rising technological solutions that can be incorporated for greater warehouse productivity, picking efficiency, data accuracy, and worker safety. These include:
- Blockchain: For the purposes of enhancing material traceability and adding more transparency to outsourced contract manufacturing
- A.I.: To automate tasks like demand forecasting and production planning, predicting disruptive events, and even making the customer experience more pleasant with customer service chatbots
- IoT: For real-time data intelligence and tracking the location and condition of goods being delivered.
Optimizing Your Supply Chain with DATASCOPE WMS
The task of choosing a high-quality software to assist with your supply chain optimization that both fits your business requirements and can be successfully implemented with your WMS and ERP is fraught with difficulties. Even the slightest issues with the software setup can lead to a failed implementation. Before making a decision on a software solution, and to avoid making the implementation more complicated than necessary, keep in mind the tips below:
- Take into account the overall look and feel of the software for the sake of your warehouse workers and employees who will be using it on a daily basis.
- Make sure the WMS reseller you’re partnering with is reliable, professional and has long-term goals that align with your own.
- Mitigate potential risks by providing adequate WMS software training for all employees, conducting a comprehensive inventory audit before going live with the software, and holding regular project meetings to check in with everyone involved in the implementation.
- Identify the critical WMS functionality needed for your business to position itself competitively in your market and prioritize those during the implementation.
- Always remember your budget but be prepared for unexpected fees, especially if working with a third party on the integration.
It’s often easiest to organize and manage the optimization process with the help of a consultant. With years of experience making supply chains more dynamic, combined with our premium supply chain software, DATASCOPE can be that consultant. DATASCOPE WMS is cloud-based, built specifically for the SYSPRO ERP, and is fully customizable. If you would like to learn more about how DATASCOPE’s software can aid in your supply chain optimization, try it for yourself by scheduling a free software demo!