The Stream by River Logic

How to Master Supply Chain Optimization

December 8, 2015 | By River Logic

It may not be the flashiest aspect of your business, but supply chain efficiency can easily be the single most important determinant of a corporation’s overall profitability. With that in mind, the importance of supply chain optimization can’t be overstated — and neither can the potential benefits of mastering skills necessary to bring your supply chain closer to perfection. Today, we’re going to cover seven points on the path to supply chain optimization mastery which translate directly to superior management and a superior bottom line.

Take Your Supply Chain Optimization to the Next Level

Value data appropriately

Effective supply chain isn’t built on a foundation of gut instinct, assumptions, presuppositions, and guesses — it’s built on hard data from reliable sources. If you aren’t collecting data properly, if you aren’t parsing it properly, if you aren’t looking at the right metrics and running the most accurate simulations possible, you’re not going to achieve a maximally efficient supply chain. Optimizing your supply chain often works as a result of myriad small changes working in aggregate to produce a big impact. You can’t achieve that sort of precise adjustment without basing your changes on hard numbers.

Use the right tools for the job

It follows that if you need to collect, organize, and act upon hard data, you’re going to need tools to do so. But rarely will an off-the-shelf, out-of-the-box solution allow you to achieve the sort of supply chain optimization we’re aiming for here. Your tools for supply chain optimization should provide full visibility into all aspects of your supply chain, enable real-time management of logistics, production capacities, raw materials, etc. Such tools need to be uniquely constrained and organized according to the unique constraints and organizational quirks of your corporation. That means most companies will want to work with custom solutions from a reputable vendor (at the very least, customizable solutions).

Lean into prescriptive analytics

Once you have the tools to analyze and manage your supply chain, and a firm appreciation for the value of hard data in optimization, its time to begin taking prescriptive analytics seriously. In years past, prescriptive analytics had little to offer — the complexities of business operations and supply chain logistics added up to an unsolvable problem for the software and computing power of yesteryear. But today, modern solutions can turn hard data into hard suggestions on improving your company; you need only make sure you’ve accounted for the appropriate variables from the top of your corporation to the bottom. Which leads us to …

Plan holistically

Supply chain optimization cannot occur in a vacuum; don’t attempt it if you want to consider yourself an optimization master. Instead, supply chains should be planned alongside every other aspect of the company. C-level strategic decisions, mid-level tactical decisions, and low-level operational decisions should all be planned for together as a whole. If this isn’t prioritized, your company ends up working at cross-purposes, undermining itself with, for example, contradictory strategic and operational planning. Supply chain optimization that doesn’t account for budgets, strategic goals, etc. simply isn’t real optimization.

Consider failures before they happen

Failures should never be a surprise. You should carefully figure out the myriad ways something can go wrong with your supply chain, and develop plans for reacting to that problem. A supply chain that works magnificently when nothing goes wrong and falls completely apart in a crisis isn’t truly optimized. After all, aren’t errors, mistakes, and unfortunate industry events part of every business? The best supply chain is the one that takes those hiccups into account — it’s a rugged vehicle that can go off-road, not a prototype too over-tuned to leave the test track. Analyze past failures

Future failures aren’t the only ones to concern yourself with. If you don’t already tirelessly pore over past supply chain failures, you should be. Any mistake should be a one-time occurrence — you should not only eliminate the point of failure, but improve your supply chain across the board with what you learn from each failure.

Understand what makes your business unique

This holds true for any form of optimization, but especially for supply chain optimization: what makes your business unique will almost always be the determining factor in how to perfect your optimization, not what it shares with other businesses. Shared traits will be largely optimized by rivals and the industry at large; where you open up a gap and achieve real success is in the special differences. Understand what makes you unique, and optimize to seize the advantage.

Closing remarks

These above points should give you a good launch to mastering supply chain optimization. However, make no mistake — optimization never ends, and neither should your education and research! Researchers and specialists constantly come up with new tools and methods for improving the optimization process; if you want to get the most from your company, it’s essential to keep a finger on the pulse of such developments.

Case Study: River Logic Cox Wood  

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