Technology is Central to Supply Chain Network Optimization

From digitalizing and connecting processes to streamlining deliveries and enabling pre-emptive network planning, technology is offering ever more opportunities to drive efficiency up and costs down in supply chains.

Technology is Central to Supply Chain Network Optimization

Supply chain network optimization focuses on spotting and eliminating process inefficiencies throughout the supply chain, and progressively working towards a logistics network model that is data-driven, highly collaborative, and adaptive to global as well as local business conditions. This is essential to helping brands and logistics operators deliver higher service standards at lower costs. Research shows that focusing optimization efforts on the supply chain can yield double the cost reductions compared to optimizing other operational areas, along with reducing inventory holdings by over 50% and speeding up cash-to-cash cycles by at least 3 times.

But this is a daunting, if not insurmountable, task without the judicious application of technology. Traditionally, the data needed for supply chain visibility and optimization has resided in silos throughout logistics networks–in outdated, inefficient channels such as shared spreadsheets or even paper-based records. Unifying all these and providing a single view of where problems are, for supply chain operators to begin addressing them, is the fundamental role supply chain technology plays in untangling this knot.

Modernizing the back end 

Studies have found that a typical shipper can lose up to $150,000 a year from invoice mistakes. Manual processes are not only labor-intensive, they run the risk of racking up additional costs when human error strikes. The same holds true for order management, where the average cost to rework an order has been estimated at $200-250. As e-commerce continues to boom in the wake of the pandemic, so will these unwanted costs–to say nothing of the inability to scale with demand or respond swiftly to unexpected changes.

Digitalization and automation of back-end processes such as order management is a crucial first step in network optimization. Not only does this free up human capital for more value-added tasks, it creates opportunities to centralize data from processes across the supply chain for greater speed and clarity in decision-making. Increasing automation, in particular, is a focus area over the next 1-3 years for 63% of companies surveyed in the wake of COVID-19.

Last mile delivery optimization
Optimizing the last mile

Last-mile delivery costs can run as high as 53% of the total cost of shipping. Distance traveled, time taken, and cost of movement all contribute to this.

Route optimization technology tackles this by helping each delivery vehicle reach its destinations by shorter and better routes, thereby reducing the overall number of vehicles needed to fulfill a given number of orders. Integration with external data sources can allow traffic and weather conditions and other potential obstacles to be factored into route generation, further improving its accuracy.

Paired with fleet management software, this translates to fewer vehicles and less fuel used, along with better visibility into driver habits that can help further reduce costs in areas such as vehicle idling time. The average delivery truck spends 25% of its daily operating hours idling, using some $2,500 worth of fuel in the process and accelerating its depreciation–which in turn incurs maintenance costs. Better route planning and more granular fleet control can cut these costs.

Supply chain network optimization
Planning better networks

On a broader and more strategic level, technology is also making it possible for organizations to identify ideal courses of action for their supply chains and prepare for change well in advance. One example is digital twinning, which leverages real-time supply chain data to construct a virtual replica of a logistics network for testing the impact of scenarios such as facility relocations, alternative sourcing, or unexpected disruptions. This approach revealed cost savings opportunities of as much as $60 million for a global manufacturer during a network optimization study conducted at the height of the disruptions wrought by COVID-19.

From modernizing and streamlining individual processes to network-wide change, technology has never had a larger and more relevant role to play in creating resilient, cost-effective supply chains.

Book a demo with us today and explore what technology your supply chain needs to meet the challenges of tomorrow’s logistics landscape.

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