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What is supply chain optimisation and how to achieve it

Jonas Mehrhoff
Jonas Mehrhoff
May 23, 2022
5 min read

Note on the authors

Heiner Murmann is the founder and CEO of Orkestra SCS, a logistics, technology and services company. In addition, Heiner serves as Executive Chairman for Evolution Time Critical and President of The Five Inc., and as an Advisory Board Member for both Metro Supply Chain Group and Black & McDonald Limited. Notably, Heiner previously held various senior executive roles at DB Schenker, one of the top three global logistics companies, as a Member of the Board of Management responsible for Air and Ocean Freight, and as CEO of the Region Americas.

Arnold da Silva, Senior Ocean Freight Advisor for Orkestra SCS, is head of an ocean freight consulting company where he actively advises global shippers on ocean freight strategy and execution. With 40 years of experience in the ocean freight industry, Arnold served as Executive Vice President for Ocean Freight Region Americas for DB Schenker. Arnold's passion is to conceptualize and implement innovative ocean freight solutions that transform one’s supply chain and promote a shipper's success.

Optimising your supply chain sounds like the solution to a lot of problems you might be facing, but there are a few things to address before you get there. This process comes down to improving your network efficiency by ensuring your processes and technologies run to the best of their ability to effectively streamline operations. This ensures that customers get what they want when they want it, while your business reduces costs and boosts profits. Luckily, there are several ways to achieve supply chain optimisation (SCO) and get a competitive edge. Here’s a look at the key features of optimisation and how to integrate them into your supply chain.

What is supply chain optimisation?

Attaining the right balance between the customers’ needs and maintaining the lowest cost to business is crucial in achieving a fully optimised supply chain. Before this can happen, it’s wise to understand the full scope of what implementation will look like in the following three buckets: Design, Planning and Execution.

Design  

The Design stage involves designing the supply chain processes including strategic objectives like demand forecasting identifying and establishing supply routes, operational planning, and schedule. The design process also covers identifying the best location for distribution centers and route maps for the products to flow efficiently between the various locations.

Planning  

The Planning stage includes the formation of strategic plans to carry things out such as, inventory planning, optimising delivery of goods, asset coordination, monitoring the supply and demand patterns and setting up communication modes with customers.

Execution

The execution stage involves the use of applications and technology covering warehouse and inventory management (WMS), transportation (TMS), trade management and supply chain visibility platforms to enable real time monitoring.

How to optimise the supply chain?

According to Forbes, best practices in supply chain start with companies redefining excellence and broadening their scope. It’s not only a matter of prioritizing procurement and logistics; supply chain managers need to optimise the end-to-end supply chain all the way from the ‘supplier’s supplier, to the four walls of the business, to the customer’s customer’.

To achieve this end-to-end optimisation, all three phases of the supply chain need to be addressed. This means businesses need to consider the entire operation to address areas of weakness and to maximize areas of potential growth. Think big picture; every cog in the machine must work in order for it to run smoothly.  

Think strategically  

Supply chain optimisation can also be achieved by considering the global opportunities that await companies. This could be in the form of procuring goods and services for example. By increasing the number of channels for procurement, businesses can benefit from cost reductions, are better positioned to withstand disruptions to the market, and enjoy optimised inventory levels for a more satisfied customer base. This strategic thinking should also extend to sustainable business practices, keeping lowering carbon emissions a priority. Increased regulations are making this mandatory, making future proofing the supply chain now by adopting sustainable business practices a worthwhile endeavor. 

Encourage cooperation

From the executive level to entry-level staff, open communication and collaboration are imperative. While traditional setups insist on barriers between various departments and managerial levels, these need to be broken down for optimal supply chain operations. Alternatively, data is siloed and there is no end-to-end visibility which impacts performance. Businesses can also consider creating a cross-functional team specifically tasked with visualizing the entire supply chain. This will initiate conversations with internal and external stakeholders and drive positive decision-making. 

Implement risk management 

A fundamental building block of the supply chain is risk management – an area that is often overlooked with devastating results. Trade wars, geopolitical conflicts, weather events or shipping disruptions can be catastrophic for the supply chain. To optimise processes, it’s important that companies consider a formal, documented risk management process which identifies areas of risk in the current supply chain, while anticipating and mitigating future risk. 

Use existing technology

Supply chain optimisation today uses technology to provide superior exception management. It’s key to remaining competitive. Businesses have better visibility across the supply chain, and better decision-making capabilities in real time – not just across their own organization, but across the entire business partner ecosystem.

IBM

There are many existing and emerging technologies that assist companies in achieving supply chain optimisation. Take blockchain technology for example, that brings together data from various sources across the supply chain. With the assistance of artificial intelligence (AI), this data can be analyzed to provide powerful insights that encourage further supply chain optimisition. There has also been a significant move towards mobile-based technology, which enables more direct services to the customers.  

Consider third-party providers

One of the areas where businesses fail is by trying to take on all processes and not focusing on core operations. There are so many third-party providers who can take on repetitive tasks that are time-consuming and that ultimately drain resources. These service providers use various technological solutions that can be leveraged to automate administrative duties and optimise the supply chain.

What are the features of an optimised supply chain?

Once a company has followed these steps, the supply chain should be fully optimised displaying the following key features:

  • Increased visibility with updated inventory tracking
  • Real-time intelligence through AI services
  • Reporting and analytics to identify patterns
  • Agility in responding to change and disruptions
  • Sustainability in procurement
  • More responsive to customers’ changing expectations

Key takeaways

The modern global network is increasingly complex with disruption a constant threat on the horizon. For companies to navigate this uncertainty, it’s necessary to prioritize supply chain optimisation so that everything operates as it should, even when conditions aren’t optimal. 

To achieve this, it’s necessary for companies to create collaborative practices throughout the supply chain; draw on third-party providers and technological innovations to streamline processes; and perform thorough risk management to fully optimise the supply chain. 

Once achieved, businesses are able to enjoy a competitive advantage and protect the brand from reputational damage. 

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What is supply chain optimisation and how to achieve it

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