“Today’s supply chains are perfectly suited for the needs of businesses 20 years ago.”
If we look at the current state of affairs in the supply chain industry, this statement stands just true. However, modern-day supply chains are highly complex. In this competitive and dynamic landscape, supply chain enterprises need more agility to stand out and perform efficiently. Network Optimization is the way to go for modern supply chain enterprises. Supply chain network optimization helps to reduce operating costs and deliver delightful customer experiences.
Locus recently hosted a webinar on ‘Unlocking the potential of Supply Chain Network’ in association with V-Guard, India’s leading electrical appliances manufacturer. The key panelists of the webinar were Mr. Mehul Mohta, Head – Category Strategy and GTM at V-Guard and Mr. Krishna Khandelwal, Chief Business Officer at Locus.
The speakers discussed the essential elements of excellence in supply chain, the trends that are driving the future of the industry and how Network Optimization is a key determinant for success in the business.
The Changing Dynamics of Supply Chain
The supply chain industry is evolving at a rapid pace. Product development lifecycles are becoming shorter by the day and geographical flexibility is making supply chains global. Consumer expectation for faster deliveries is simultaneously growing and effective demand planning has become iterative, short-term and mostly analytical.
A McKinsey report states that digitization can supply chains grow by 3.2%. Supply chain enterprises are now turning to technology such as Big Data, Artificial Intelligence and IoT for optimization and scalability.
The Supply Chain Network Optimization Challenges
Supply chain complexities are caused due to a number of challenges and dynamics that the industry is subject to. When asked about the most critical pain points and key focus areas in the supply chain, 63% of supply chain CXOs believe that cutting down transportation costs is their top priority.
43% consider tech implementation as a growth strategy, while 32% of businesses are focused on improving business processes and 31% on customer experience. The below chart explains the major challenges and focus parameters for supply chain enterprises globally.
However, these individual pain points are also interlinked with each other. “Supply chain enterprises must now start looking at them as a whole and address these challenges simultaneously, rather than sequentially.”, stated Krishna.
Network Optimization is the Game-Changer
The Supply Chain Network forms the backbone of operations for all major industries. Therefore, Supply Chain Network Optimization plays a crucial role in streamlining supply chain operations to a large extent.
Given the complexities and the number of touch-points in the modern supply chain, running operations based on assumptions or human intuition is not feasible anymore. In a broader sense, Network Optimization means modeling and analyzing the supply chain network using Artificial Intelligence and Machine Learning algorithms.
It primarily focuses on streamlining the four major elements of a supply chain network:
- Physical Flow of Goods – Transportation, lane, route planning and logistics optimization
- Location Intelligence – Accurate placement of supply chain nodes, warehouses, and distribution hubs
- Inventory Optimization – Multi-echelon inventory level optimization across the supply chain
- Strategic Sourcing – Optimizing sourcing costs and procurement processes using data intelligence
Network designing and strategizing is perhaps the first step towards optimizing supply chain performance. Network Optimization can essentially be implemented under three main stages as depicted in the image below.
A number of factors such as the nature and complexity of the supply chain, the number of SKUs or the annual turnover can determine the ideal level of network optimization at an enterprise.
“However, there’s no defined thumb rule for network optimization. The journey may start from one point, but complete network optimization can be achieved only after all the three levels are unlocked.”, stated Mehul.
The ideal approach for Network Optimization
Network Optimization is a two-ended problem that can be addressed effectively with the help of supply chain expertise and data science capabilities. It is now possible to devise a complex mathematical model of the supply chain, called Digital Twin.
A Supply Chain Digital Twin is a virtual replica of a real-world supply chain model and business processes designed to optimize every element of the supply chain.
With the help of a Digital Twin, enterprises can not only optimize delivery networks but also prepare for contingencies in advance, speed up last-mile deliveries, improve customer experience and also expand the supply chain smoothly.
Digital Twin is a rising trend in the supply chain across several industries, FMCG, retail, grocery delivery, e-commerce, healthcare, and 3PL to name a few.
What-If Scenario Simulation, Sensitivity Studies, and Constraint Studies are also some popular approaches to achieve network optimization in supply chain. Unlocking the true potential of your supply chain network is now possible with the combined efforts of human and artificial intelligence.
Do you wish to optimize your supply chain network to achieve business efficiency and cost-effectiveness? Request a demo for supply chain consulting from our expert supply chain consultants at Locus.