Supply chain optimization is the application of processes and tools to ensure the optimal operation of a manufacturing and distribution supply chain. This includes the optimal placement of inventory within the supply chain, minimizing operating costs.
Supply chain optimization method:
- Inventory control
- Supplier inventory management
- Demand planning
- System integration
Ways to Optimize Supply Chain Optimization & Management
Think Globally but Act Locally
This is not only a geographic reference; but it is also an important point to consider when thinking strategically about supply chain or value chain planning. Companies increasingly must think in terms of global opportunities for procurement of goods AND services, and when considering the global needs of the corporation. Manufacturers should consider multiple channels and determine the optimal levels of inventory within the echelons of the supply chain process.
This is also critical to consider carbon footprint levels and ensure the greening of the supply chain. However, during the execution of the supply chain it is important to optimize locally to maximize your investments in critical resources: infrastructure, assets and technology.
Utilize Mobile-Based Technology
This technology can help improve field sales, merchandizing and marketing, and enable direct services to the consumer (through customized location-based coupons or services that improve employee productivity in the field). Providing information such as provenance, origin, item contents and specialized information on demand about sustainability, local content or manufacturing methodology enhances the brand and allows companies to connect directly with the consumer.
Build a Responsive Supply Chain
Utilize source data such as POS sales, as well social media information to identify trends and demand changes much earlier and enable your supply chain to respond faster to increase sales, improve service levels and reposition inventory to maximize true benefits. Multi-channel programs will change expectations from supply chain forecasting/planning paradigms to building responsive supply chains.
Supply Chain Optimization Models
Tier 2 supplier management
Tier 2 management focuses on optimizing those behind-the-scenes suppliers — the ones supplying your suppliers and other vendors with materials. Track down who those parties are, and start negotiating. The more savings you can net your suppliers, the more those savings will trickle down to you and your customers. You can also help your suppliers find better deals with outside sources.
Supplier inventory management
This approach focuses on optimizing the amount of inventory your supplier carries in relation to your business. If they’re carrying too much, it costs more to house and manufacture. If they have too little, it means fewer sales and lower revenues. The key here is sharing accurate demand and order data, as well as tracking seasonal and annual trends. You also need to understand supplier lead times to optimize inventory levels best.
COGS (Cost of Goods Sold) management focuses on lowering your overall product costs. It involves negotiating — and renegotiating on a regular basis — with your vendors and suppliers.
The thought here is that as time passes, your vendors should have fully optimized their processes based on your needs and demands. That means lower production costs for them which should, in turn, mean more savings for you.
With logistics management, you focus on achieving the lowest cost shipping and delivery costs — while still offering customers the delivery times they’re looking for.
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