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5 Focus Areas for Supply Chain Optimization

5 minute read

Though the world is regaining a sense of normalcy, businesses are still reeling from the historic disruption we saw in recent years.

Priority number one for many organizations? Fixing their supply chain.

A recent PwC survey revealed that business leaders are still struggling to nail down supply chain basics—like increasing efficiency and managing costs—that have been severely disrupted since the start of the pandemic. This means before companies can focus on value creation opportunities, they need to optimize their supply chains by improving resiliency, boosting performance, and delivering for customers.

However, supply chain optimization can’t be done overnight. It’s a long-term and complex process that touches most parts of an organization, from finance to procurement, manufacturing, customer service, and more.

Though it’s a big commitment, the benefits of a fully optimized and efficient supply chain are well worth it. Keep reading for five focus areas for better supply chain optimization.

#1: Inventory management

A strong inventory management strategy seems like it’d top the list of supply chain priorities. However, many companies find themselves losing money and productivity due to inadequate inventory management.

In a GEP & Harvard Business Review survey on supply chain resiliency, only 13% of respondents said their organization had mature inventory management capabilities. Even more, research has found the average U.S. retail business has an inventory accuracy of only 63%, and nearly 13% of corporate executives said their business doesn’t use inventory management planning at all.

Given the stock and inventory problems dominating the news over the past few years, this may not come as a shock. However, if businesses want to move past the disruption and create efficient supply chains, inventory management can’t be ignored any longer.

There’s no quick fix for better inventory systems. The pandemic brought a shift from just-in-time inventory management, or keeping as little inventory on hand as possible, to just-in-case, or keeping excess inventory on hand to reduce the risks of stock outs.

Now, however, many companies are favoring a balance of the two extremes through techniques and technology that increase margins, decrease storage costs, and proactively prepare for future disruption.

Read: Trends & Insights Report: Optimizing Food & Beverage Manufacturing Facilities

#2: Visibility  

Supply chain visibility is the ability to track products and their individual components as they move from supplier to manufacturer to consumer.  

However, due to the complexity of today’s global supply chains, most companies don’t have proper visibility into their network. This leads to several problems, from the inability to mitigate risk to inventory issues and unhappy customers who are unable to keep tabs on their orders.

Most business’ supply chain visibility is worse than you’d think: only 6% of companies say they’ve achieved full supply chain visibility, and only 17% report having extended visibility.

Lack of supply chain visibility is a problem preventing complete optimization, and leaders know it. According to 2022 EY research, 58% of supply chain executives cited increased visibility in their supply chain as the top priority over the next two years.

There’s not one surefire method to boost supply chain visibility. However, data and analytics solutions are showing promise in mitigating risks, improving forecasting, enhancing product quality and delivery times, and increasing customer satisfaction.

Read: 7 Reasons to Embrace Supply Chain Analytics

#3: Analytics

You can’t improve what you don’t measure, which is why the need to embrace analytics is evident early in the supply chain optimization process.

Supply chain analytics is a booming field—and it’s clear why. The benefits of implementing an analytics strategy into supply chain management are vast, and all contribute to a more efficient network.

There’s a reason why data analysis is the top technology investment of supply chain professionals. However, according to Gartner, three common obstacles face leaders when adopting an analytics strategy:

1. Few organizations have the scalable data foundation needed
2. Relevant talent and skills are limited
3. The business case around supply chain analytics is unclear

Despite these barriers, companies are committing to analytics like never before. In the same Gartner research, 79% of respondents said they’ve developed training programs to help their internal users with advanced analytics adoption. When ready to jump into analytics adoption, our latest supply chain analytics blog post can help you overcome common supply chain analytics implementation challenges.

Read: Data Management & the Supply Chain

#4: Automation

Automation is everywhere in the supply chain industry right now. Robotics, Internet of Things, artificial intelligence, machine learning, digital process automation… It can be difficult to keep up with the abundance of new tools supply chain professionals are deploying for better optimization.

Simply put, supply chain automation is the use of technology to complete supply chain related tasks without humans. Using technology to automate processes can save time, resources, and reduce labor costs. From procurement to manufacturing, storage, and transportation—every single stop along a product’s journey can benefit from effective automation.

Nike is a classic example of automation in action. The production of their Flyknit shoe is highly automated, which has reduced labor costs for the product by 50% and material usage by 20%. Their use of data-driven technology also allows for more frequent updates and improvements.

Further proof that automation is crucial for supply chains of the future is the growth of the market. With a predicted compound annual growth rate of 13.5% from 2021 ($52.6 billion) to 2030 ($162.5 billion), the global logistics automation market currently has the highest growth rate in the supply chain industry.

Read: Supply Chain Trends & Insights Report: Innovation

#5: Customers

Over the past few years, the role of the customer has evolved in supply chain management. What was once the destination of a product’s journey now plays a crucial role in driving business decisions.

Customer centricity is thriving. But what is it? Customer centricity is keeping the customer at the core of an organization. In the supply chain, this means the customer is central along the entire network, from materials to suppliers, manufacturing, and distribution.

Why is customer centricity critical to supply chain optimization? Focusing on customer needs, wants, and suggestions increases profitability, brand loyalty, product innovation, and leads to happier employees.

Recent Accenture research confirms the front-and-center role customers play in today’s supply chains. In a study of 900 global companies, Accenture identified the top 10% of companies—labeled the Masters—with the highest performing and most profitable supply chains.

The main thing all Masters had in common? Customer centricity. Overwhelmingly, the best performing businesses based their supply chain strategy on delivering experiences linked to customer value propositions. The Masters saw financial benefits including higher revenue growth rate, EBITA margin, and contribution to total revenue.

Read: 4 Strategies for Becoming a Customer Centric Company

Supply chain optimization is a journey

With mounting pressure on organizations to optimize their supply chains for resiliency and performance, it can be tempting to jump right in. However, the journey to an optimized supply chain is strategic and thoughtful.

Technology, digital solutions, data, and customers must all be considered when crafting a plan to revamp processes for efficiency and profitability. And with 90% of executives saying supply chain is a strategic function that directly impacts their bottom line, companies want to ensure they make the right changes.

Catena Solutions can support you on your journey. View our Supply Chain & Operations solutions.