Supply chain optimisation

Look at how optimising your supply chain will benefit your organisation

What does supply chain optimisation mean?

Supply chain optimisation (SCO) is the application of tools and processes to streamline an end-to-end manufacturing or production operation. The aim of it is to reduce cost and increase profit.

When working in the supply chain, you’re tasked with seeking optimisation. You must try to find a balance of delivering what the customer wants at the lowest overall cost, but with the highest overall profit to your business.

How do you optimise a supply chain?

Every link in the supply chain costs money and takes time to improve it. When improved, you can reduce the amount of money that link costs. Here are some opportunities to consider for optimisation.

Mapping the supply chain: To improve the supply chain, understand the current structure and where the blockages and costs lie. An in-depth mapping process will expose these areas.
Improved business alignment: Align your supply chain to the organisational structure strategy and goals. Align management resources to support the supply chain objectives e.g., people, information, technology, finance. Align suppliers with your supply chain goals through communication and collaboration.
Software support: Introduce mathematical modelling software to plot optimal inventory holding against customer demand. This can either be integrated in a central ERP system or run by an application service provider (ASP) as a bespoke service.
Improved processes: Introduce lean and agile approaches. Collaborative planning, forecasting and replenishment routines. Business process re-engineering. Outsourcing non-core activities to third party providers. Reduce manual processes e.g., Introduce block chain technology in invoicing and payments.
Pursuing specific supply chain optimisation opportunities: For example, improved order processing, reduced inventory, warehouse and storage management, freight handling, increased supplier collaboration, focused reporting and analytics, security, transportation and logistics, compliance and auditing, product size and packaging, innovative production approaches.
Waste reduction: Look at delays, bottlenecks, double handling, write offs and remove all these non-value adding activities.
Introducing measurement and Key Performance Indicators: Measure the impact of your optimisation approaches by use of Gross Margin Return on Inventory Invested (GMROII), Standard Deviation and Means Absolute Deviation on stock, Cash Flow indicators and Working capital measures.

What is the goal of supply chain optimisation?

The goal of SCO is to remove waste activities and add value to your supply chain process, without increasing your risk or reducing your efficiency or the product availability to the customer.

What are the four attributes of supply chain?

The supply chain can be broken down into four key attributes:

Integration: This starts in your planning stage and is the key to long-term success. Make sure you have an accurate and reliable source of information about your supply chain activities, which helps you to plan for and mitigate supply issues.
Operations: The day-to-day running of your operations is important to maintain a strong supply chain.
Procurement: This is the sourcing, contract and supplier relationship management aspect of securing goods, services and works for the organisation.
Distribution: This is where the supply chain ends, when the product or serviced is delivered to the customer.

Future supply chains

Supply chains are constantly evolving; technology along with diversification of staff skill set is playing a key part in this development. Discover more on how organisations are remaining fit for the future.

Find out more about Future Supply Chains

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