Looking at the modern companies that work in a supply chain industry, Data Informed's Lora Cecere wrote that she found the vast majority are still stuck on improving the chain's performance. Supply chain optimization has two major issues working against it, she said: the understanding of the system and how to effectively use data. The main problem, she said, comes from a lack of analytics to examine an organization's apps, something that can help them understand their enterprise as a whole.
"For most companies, the word analytics is synonymous with reporting. But despite thirty years of supply chain technology evolution, the most commonly used system for supply chain planning is a spreadsheet," Cecere wrote. "Companies cannot effectively model the trade-offs of growth, profitability, supply chain cycles such as procure to pay and inventory turns, and business operations complexity on a spreadsheet. As that complexity increases, most companies are unable to use supply chain systems to improve operating margin and inventory cycles."
Organizations are also not able to readily balance their network, as only 11 percent have the ability to evaluate "what if" when it comes to their organizational scenarios and 24 percent have a model of profitability that impacts what will happen when the system changes. Organizations can have all of the reporting tools, data collection software and more but if they are not able to understand what it all means, Cecere said it will all be for naught, as there needs to be knowledge of how the business will be affected by these numbers.
Accurate Planning to Save Money
Industry professional Romi Malik said on Supply Chain Brain that planning with accurate forecasts and figuring out the product demands can help drive production and distribution, better sort out budgets and cut down the cost of freight.
One issue the website pointed out is when there is a low market serviceability, such as a demand for 1,000 tons per week but only being able to dispatch 750 on time, Malik said. Using planning, business data and analytics can help an organization anticipate this and get the most out of the situation instead of floundering. In another instance, there could be either too much or too little inventory; the website cited an example in which a medicinal soap's development and launch cost millions.
"Even though customers are excited about the new product, demand planning was under-forecasted," according to Malik. "So, the estimated demand was less than the actual orders, causing insufficient inventory at distribution centers. On the other hand, when demand is over-forecasted and there are actually fewer sales, the enterprise could end up with non-moving inventory, resulting in a sudden decrease in profits because of the expense of carrying this excess inventory."
Cecere said there needs to be a more intelligent use of data through these channels to transform the supply chain and data collection. Currently, the concepts are becoming more mainstream, but there are still many organizations which have not adopted this technology. Now may be the best time to gain control of the organization as a whole through these innovations.