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A Collaborative Approach to Solving Supply Chain Optimization Problems

Supply chain optimization involves the integration of decision-making processes to manage the production and flow of products and services from the source to customers. It requires companies to automate transaction processes and capture data related to supply chain and logistics operations. However, it is neither easy nor cheap but offers the biggest opportunity for most companies to improve their performance and significantly reduce costs. For most supply chain and logistics operations, there is an opportunity to reduce costs by 10% to 40% by making better decisions. This article will help companies to better understand supply chain optimization problems and the steps they should be taking to significantly reduce their costs and improve performance.

Supply Chain Optimization Problems and Steps to Address Them

Supply chain optimization problems #1: Location

Location plays an important role when it comes to supply chain optimization. Location decisions depend on market demands and the customer base. Strategic decisions must be focused on the placement of production plants, distribution, and stocking facilities in prime locations.  Once customer markets are determined, locating production and stocking facilities close to consumers is one of the key supply chain optimization problems that companies face today.

In industries where components are lightweight and market-driven, facilities should be located close to the end-user. In the heavy industry segment, companies must determine where plants should be located to keep the distance to a minimum. Also, tax and tariffs should be taken into consideration, especially during inter-state and worldwide distribution.


Supply chain optimization problems #2: Production

Key decisions regarding the production process are based on customers’ preferences and market demands. This is one of the major supply chain optimization problems affecting companies of today since they fail to analyze market demands accurately. With the rising complexity, companies lose supply chain visibility and do not have a clear idea of how many products to produce. Also, they face difficulties in determining which parts or components should be produced at which plants or outsourced to capable suppliers.

Such strategic decisions regarding the production of products must focus on capacity, quality, and volume of goods, ensuring that the customers’ demands are met. Furthermore, operational decisions such as scheduling workloads, maintenance of equipment, and meeting immediate client/market demands, should necessarily be taken into consideration while developing a supply chain optimization model.

Supply chain optimization problems #3: Inventory accuracy

Inventory management is a critical issue in supply chain management optimization. Companies must have 100% inventory accuracy as it costs anywhere between 20-40% of their value. Also, without 100% inventory accuracy, companies will not be able to ship to customers on-time.

Implementing a warehouse management system or resources planning system to maintain optimal levels of stock at each location is important to ensure customer satisfaction. Correct levels of supplies at order and reorder points should be determined by control policies to ensure smooth functioning of day to day operation of organizations.

Supply chain optimization problems #4: Tier 2 Suppliers

Tier 2 suppliers are the suppliers who provide components, raw materials, and, at times, services to suppliers. However, companies do not possess much knowledge about such suppliers, the products they supply, their pricing strategies, and lead times – creating numerous supply chain optimization problems.

Businesses should build a relationship with Tier 2 suppliers, negotiate with them, and develop strategies to lower cost of goods and lead times.  Many times, a Tier 2 supplier supplies more than one of Tier 1 suppliers. Negotiating volume pricing should also be done to optimize the supply chain.

Supply chain optimization problems #5: RFXs

Requests for Proposals (RFPs), Requests for Quote (RFQs), and Requests for Information (RFIs) are the key metrics for businesses to ensure that their suppliers are providing the highest quality products at the lowest costs. However, measuring such metrics can be difficult for companies.

The infrastructure, financial strength, and capabilities of new suppliers should be evaluated through RFI to identify new potential suppliers.  After that, RFQ should be reviewed to get the best prices to drive down process costs, and to ensure quality and ongoing supply.

Supply chain optimization problems #6: Distribution and transportation

Transportation decisions are closely related to inventory decisions as well as meeting customer demands. If the goal of the company is to ship what customer wants, when that customer wants it, then they might fall into the trap of relying on expedited and overnight shipping fees to make up the delays in production or purchasing process.

Robust demand planning and selecting the right mode of transport is critical to minimize the amount of money spent on logistics expedite. The transportation mode must be chosen in a way that customer service levels are met and logistics costs are reduced. Developing dynamic supply chain network optimization capabilities, understanding lead times, and having access to long-term demand are a few methods to optimize the supply chain.

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Why Is Supply Chain Services the Need of The Hour for Modern Businesses?

Today, supply chain services have become an integral part of businesses and are vital for the success of any organization. As manufacturers nowadays need to manage multiple product lines, companies with complex supply chains require supply chain services that can simplify the daily operations. Moreover, manufacturers have to manage logistics and address demand across the globe.  With effective supply chain services, companies can integrate functions, improve financial stability and boost customer services.

At SpendEdge, we understand the impact that supply chain services can have on expenditure. That’s why our team of experts has highlighted some relevant key areas that are crucial for businesses to grow and manage financial stability.

Importance of supply chain services 

#1 Streamline flows and integrate functions 

Aligns flow 

Retailers depend on supply chain services that can deliver products to customers on time and avoid holding costly inventories in stores any longer than necessary. With supply chain optimization companies can easily design, manage, and coordinate their supply chains.

If your organization is finding it challenging to streamline functions, get in touch with our experts and know how our supply chain services can help you.

Integrates functions 

Supply chain management system bridges the gap between logistics, purchasing, and operations and ensures that companies focus on goals that can improve their overall performance. Businesses can even employ supply chain services companies for better-customized supply chain solutions.

Predicts demand 

Unlike earlier, demand planning  requires analytical skills and computer modeling. Not every company possess the efficiency to interpret the data and analyze the trends precisely. By outsourcing supply chain consulting and strategies companies can accurately predict market demand.

#2 Enhance monetary position

Improves profitability

Supply chain services help firms to reduce supply chain costs. This can lead to a dramatic increase in the profitability of companies. Also, supply chain services facilitate procurement managers to identify latent saving opportunities and offer cost-effective supply chain consulting and strategies.

Reduces fixed assets 

With proper supply chain services, firms can easily reduce the use of large fixed assets such as depositories, plants and transportation vehicles in the supply chain. They can redesign their network to serve customers in such a way that it can significantly reduce the number of warehouses.

Conducts supplier cost analysis 

Supply chain services enable firms to employ supplier cost analysis (or) price breakdown analysis technique and analyze various components. Furthermore, they aid in procuring the right products and services at the right price levels.

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#3 Boost customer service

Ensures timely delivery

Customer service function is often considered to be the end function of the supply chain, but it is definitely not the end process. It works to meet the needs of the customers and ensures customers receive what they want on-time. Therefore, it becomes imperative for companies to understand customer’s needs. With supply chain services, firms can easily access the skills and knowledge required to meet customer’s needs.

Extends after sale support 

The responsibilities of companies do not just end after the delivery of products. Customers expect products to be serviced at the earliest in case of any discrepancy. This requires companies to have supply chain solutions that can keep up with such demands.

Delivers value to customers 

It is essential  for companies to determine different ways to make purchase decisions easier and deliver value to their customers. For instance, retail companies like Amazon and Walmart are giving steady competition to brick-and-mortar retailers. Therefore, businesses need the help of reliable supply chain consulting firms that can provide them with competent supply chain solutions.

Managing supply chain can become an exhausting task for companies . If you are one of them, request a free demo and let our procurement experts help you.

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5 Useful Tips to Boost your Supply Chain Management

Efficient supply chain management is the key to boost a company’s revenue and stay competitive in the marketplace. To achieve this, companies must be hyper-focused on reducing waste to generate cost savings and minimize the risk in supply chain management. Furthermore, the rising customer demand calls for better service and availability of right products at the right time so that companies don’t lose their valuable customers to competitors. Here are the five key tips for companies to boost their supply chain management:


Tips to boost your supply chain management

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Partner with current suppliers

Often, companies tend to face market wide challenges in supply chain management. Developing an effective solution for this kind of scale might be a difficult task for a single partner within the value chain. Hence, it becomes necessary to develop deeper partnerships with your suppliers to help grow each of your businesses. Creating a mutually beneficial strategy can be tricky, but with the right planning and strategies in place, it is easily attainable. Here enterprises must lay the focus on clearly defined, revenue sharing-based, and easily trackable KPIs, and information transparency. Furthermore, they can also develop a coalition charter that outlines the arrangement in detail. In this manner, firms can tackle issues in supply chain management at a scale beyond their current capabilities.

Maximize IT investment

Today, the IT department is tasked with both supporting daily operations and expanding the business operations. It is important for modern businesses to invest in new technologies that can help employees perform tasks in a much-simplified manner and in turn boost the company’s supply chain management.

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Comprehensive training of the workforce

A training program should be aimed at teaching the workforce more than what the daily tasks that they are expected to perform. It is vital for companies to share their comprehensive plan to the employees in order to increase productivity while reducing costs. The workforce must be trained on the importance of internal and external customer service. It is also important to incentivize them to act in accordance with your business’ vision, mission, and values. Sharing this and training will drive a successful organization by creating aligned goals while improving supply chain productivity.

Improve information sharing and visibility

Transparency is an essential ingredient to determine the efficiency of operation in supply chain management. Furthermore, it is high time that companies eliminate slow, unreliable spreadsheets to provide information. Rather they must share up-to-date information through current technology solutions. Other ways to increase information sharing include taking advantage of big data analytics, measuring supply chain metrics regularly, and also involving employees in identifying inefficiencies in the system. By keeping the workforce and the clients informed, companies can create opportunities for innovation.

Analyze customer trends and opportunities

Supply chain managers must keep a constant watch on the trends and opportunities in the market. This will not only help them be in line with the newest market opportunities but will also consequently improve the overall supply chain management and its efficiency by adopting innovative techniques to cater to customer demand.

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5 Interesting Ways in Which AI can Enhance Your Supply Chain

artificial intelligence

Artificial intelligence is gradually gaining a foothold as a mainstream technology in most industries. So, what is this technology all about? Artificial Intelligence is the intelligence displayed by machines, in which, learning and action-based capabilities mimic autonomy rather than process-oriented intelligence. Ideally, AI can be broken down into two categories- Augmentation (which assists humans with their day-to-day tasks) and Automation (which works completely autonomously in any field without the need for any human intervention). Understanding these categories of AI capacities is essential for the future implementation of artificial intelligence into business work tools. The application of AI into supply chain related-tasks holds high potential for boosting top-line and bottom-line value. Here are some interesting ways that artificial intelligence can help enhance your supply chain:SE_Demo2

Operational procurement

To streamline procurement and related tasks through automation and augmentation with the help of chatbots, there is a need for robust and intelligent data sets which the procurement bot would be able to access as a reference. Chatbots are a form of artificial intelligence that can be used for functions like speaking to suppliers, place purchasing requests, and also to set and send actions to suppliers regarding governance and compliance materials. With the help of these automated functions in the supply chain, a company can increase their focus on other vital areas.

Supply chain planning

For any business, supply chain planning forms a crucial aspect of the supply chain strategy. Machine learning coupled with supply chain planning could help companies in forecasting within inventory, demand, and supply. Machine learning also has the ability to revolutionize the agility and optimize supply chain decision-making. With the help of machine learning, supply chain managers can deliver the best possible outcomes based on intelligent algorithms and machine-to-machine analysis of big data sets.

Warehouse management

Supply chain planning is heavily reliant on proper warehouse and inventory-based management. One of the main problems most businesses face regarding warehousing is understocking or overstocking. Machine learning algorithms and data streams have precise predictive power to forecast the supply and demand. With this mechanism, issues pertaining to the shortage or excess stock can be avoided.

Logistics and shipping

The rising demand for on-time delivery is putting pressure on companies to improve the efficiency of their shipping and logistics facilities. Efficiency in shipping and logistics is a win-win situation for both the company and its customers. Faster and more accurate shipping reduces lead times and transportation expenses, adds elements of environmental friendly operations, and reduces labor costs.

 Supplier selection

Choosing the right supplier and maintaining a good professional relationship with them is a crucial task for businesses. Also, sourcing from the right suppliers is an increasing concern for enhancing supply chain sustainability, CSR, and supply chain ethics. A single slip-up in this operation could lead to bad PR and negative publicity for a company. With the help of machine learning and intelligent algorithms, firms can get active real-time data about their suppliers. This will help them in better choosing the best supplier from the lot with minimum errors of judgment.

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Top Trends in the Electric Motors Market

Electric motors power nearly every electrical devices in the world, and it would be an incredibly difficult task to get through our day without using one. Electric motors are mechanical devices that convert electrical energy into mechanical energy through the process of electromagnetism in the stator and rotor windings. Recent advancements in technology have even made it possible for motors to be as small as a nanometer consisting of a single molecule. The electric motor finds applications across multiple industries including automobile, energy, manufacturing, HVAC, consumer appliance, and industrial automation. Amongst these, the automotive industry is expected to drastically drive the demand in the global electric motor market due to the increased production of electric vehicles. (SpendEdge – Procurement Market Intelligence Report)

Request Free SampleTrends in the Electric Motor Market

Energy efficient electric motor

The demand for energy-efficient motors from end-user industries such as power and energy, automobile, and others has been strong. However, they are demanding energy-efficient electric motors to reduce their energy costs. Additionally, such engines also reduce the carbon emission, which helps companies to meet their sustainability goals. Also, some governments have imposed strict regulations that will increase the demand for energy-efficient electric motors in the future.

Rise in prices

The increase in global steel prices is expected to increase the price of electric motors by 15%-20% by 2022. Such changes will affect the prices of motors related to efficiency standards such as IE2 and IE3. Though the price of energy-efficient electric motors might increase, buyers can reduce their energy costs.

Customized electric motor

The supply market of electric motors is highly fragmented due to the presence of several regional and global suppliers, which intensifies competition. To increase competitiveness, suppliers are customizing their electric motors to differentiate their products and provide products according to the needs of buyers. Consequently, buyers require customized products to avoid compatibility issues such as load efficiency.

Increased production of high power-to-weight ratio motors

Industrial buyers form the automobile, electronic device, and aircraft sector are focused on reducing the overall weight of their product without compromising on functionality and power. As a result, they demand motors with high power-to-weight ratio. For instance, in aircraft manufacturing, the use of electrical drives in aircraft up to 2.20 ton had a limitation in take-off weight because of the high weight of the electric motor. This issue can be addressed by the use of a high power-to-weight ratio electric motors

Read more about the emerging trends in the electric motors market along with supply market insights, procurement challenges, sourcing insights, and key suppliers in SpendEdge’s upcoming report on the global electric motors market.

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The Logistical Nightmare of Black Friday – And How to Prepare for the Next Holiday Season?

It is estimated that around 30% of annual retail sales occur between Black Friday and Christmas. In 2016, consumers spent a staggering amount of US$655.8 billion in retail purchases. With such insane amount of purchasing happening in such a short amount of time, companies are having to find innovative ways to adjust their logistics and supply chain in order to cater to such considerable demands. So, with companies selling their products at such a throwaway price and battling to get their logistics and supply chain right, how are they managing to churn out profits? It all comes down to proper planning and a little novelty in their logistics and supply chain. Here are some of the tips to help your company gain an edge to manage the supply chain to remain effective for the next holiday season.SE_Demo2

Align and Communicate with Your Partners

The holiday season usually calls out for managing a large amount of stocks and delivering it to the consumers. It is essential that all entities along the supply chain such as buyers, suppliers, and 3PL vendors communicate their goals, expectations, and performance metrics so that everyone is in the same line. This helps to alleviate any disruption occurring in the supply chain as each party makes unified attempt to address the issue. Numerous manufacturers have a fair idea about the customer expectations and demands, and communicating the same to all parties across the supply chain facilitates the end-goal which will help in reducing the overall logistics cost.

Expanding Sales Date and Offers

Big retailers and especially e-retailers have realized that handling the crazy Black Friday traffic for a single day can be disastrous. So they have started their Black Friday and other holiday sales much earlier in advance. Most of the retailers are starting the sales a week before Black Friday. For instance, this year Amazon began their Black Friday sales a week earlier offering Amazon Alexa at a discounted rate. Expanding the sales dates eliminates supply chain bottlenecks by distributing the total traffic throughout the week and makes the demand more manageable.

Incorporate Big Data Analytics

The retail industry has embraced big data to gather meaningful insights. With such significant amount of data accumulated on historical sales and user behavior, it is possible to accurately forecast what items will be on demand during the holiday season and in what quantities. This equips the supplier to be prepared to adjust their supply chain as per the requirement. Also, retailers can identify factors that can cause disruptions for holiday season sale by using real-time data from optimization tools to discover risks. Carefully monitoring data trends helps to identify outliers that can cause disruptions which can lead cause the logistics function to fail. Additionally, it also helps to increase supply chain efficiency by improving order-to-cycle delivery times and enable procurement teams to respond to arising crisis effectively and efficiently.

Taking Advantage of Omni-channel Logistics

When it comes to making deliveries in the holiday season, the shipments are usually delayed. This is because the same logistics partner has to cater to the multi-fold increase in demand, which is quite impossible. This can mean that your parcel can be delayed by as much as a week. To avoid this scenario and maintain customer satisfaction companies can leverage omnichannel logistics of nearby. For instance, if a customer orders any product from the online store, instead of sourcing from the distribution center, the company can get that item from the closest brick and mortar store so that it reaches to the customer quicker.

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Reverse Logistics Facilitates Supply Chain Optimization

Reverse logistics follows the same order and process of a supply chain albeit in a reverse order. It entails all the processes related to the return of unsold products from various supply chain channels and sold goods from the end consumers to SE_Demo2the manufacturer or the producer. As a part of reverse logistics, activities such as repair, refurbishment, resale, redistribution, and recycling of goods whether wholly or partially is undertaken. Reverse logistics is crucial as it has a direct impact on the organization’s bottom line and enables supply chain optimization.

Reverse Logistics Management

The reverse logistics phenomenon seems difficult but is unavoidable for the manufacturers and producers. Organizations should focus on standardizing processes, streamlining operations, and driving supply chain optimization to facilitate forward logistics. By focusing on streamlining reverse logistics operations, companies can minimize costs, enhance customer satisfaction, and schedule regular maintenance activities. Additionally, businesses can gain a competitive advantage in the market by analyzing returns, costs, and complaints to devise effective customer retention strategies. Reverse logistics enables organizations to recover maximum value from returned goods, which help in supply chain optimization and reduces costs. To enhance operational efficiency, companies must be able to fully automate the product routing to facilitate supply chain optimization and make strategic decisions to streamline logistical activities.

Reverse Logistics Drives Profitability 

Reverse supply chain logistics is considered to be an opportunity for the companies to drive down costs, maximize profits, and gain proper traction in the market irrespective of the industry in which it operates. Organizations now take into consideration the end-of-life aspects while developing new products to minimize the product returns and maximize the value received by disposing of the used goods. To ensure an effective logistics management and facilitate supply chain optimization, companies must have the infrastructural capabilities, competitive technologies, expertise, and a robust supply chain.

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The Rise of AI, Machine Learning, Big Data, and Blockchain – Are Machines Threatening the Job of a Supply Chain Manager?

Technological advancements in AI and machine learning have come a long way, causing a stir among some people over the future of humanity. Today, many complex tasks that could once be done only by a human can be done by a machine. Deep learning and neural Get More Infonetworks have given computers the ability to think like a human, and in some case a lot better. So, does this mean that machines will take over the job of a supply chain manager? It seems quite early to come to that conclusion yet, but recent development suggests they are getting closer.

Does Perfect Information Exist?

For a long time, perfect information was considered a myth. A supply chain manager is equipped with supply chain and logistics data, but cannot have perfect information about the market. However, machines have an edge over the supply chain manager as it can take inputs from numerous sensors, communication devices, servers, and data registers. In addition to this, it can also process all such information to provide a robust analysis of the problem.

Machine Never Forgets

A supply chain manager can forget to execute a certain task or delay some decisions, but an interconnected network of IoT devices wouldn’t miss out. For instance, sensors in the warehouse can identify reduction in stocks and automatically place order requests to the supplier. Thus, IoT can cut costs and improve efficiency requiring lesser personnel, which contributes to increased profitability.

So, What About the Security?

There are security concerns over increasing our dependence on machines. Questions such as what if someone manipulates the data or what if the system is hacked raises concerns over security. To resolve such security issues, supply chain managers are resorting to private blockchain technology. Such a technology enables a supply chain manager to share information with restricted stakeholders and at the same time maintain transparency.

The IoT technology and accuracy of algorithms are improving each day. However, the day when a supply chain manager will be replaced by a machine is a distant dream. At present, supply chain managers are embracing this technology to optimize their supply chain. Even in the near future, people are required to do handover jobs, make strategic decisions, and maintain supplier relationship.

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Auto Parts Manufacturer Leverages Supply Chain Management to Identify Optimal Warehouse Space

Category Overview

Today, warehouses have become a crucial aspect of the overall supply chain as they are points where the products are stored and distributed across the globe. According to our supply chain management specialists, it has been noted that the ongoing globalization and changes occurring in areas such as reverse logistics, information technology, environmental sustainability, and overall supply chain integration have resulted in the higher preference for warehousing services.

Consequently, to retain their foothold in the market, organizations across the globe have started evolving their roles, responsibilities and strategies for the warehouses. To streamline and maximize operations at strategically located facilities, organizations have started opting for supply chain management studies. Moreover, the supply chain management studies offered by SpendEdge, help auto parts manufacturers improve operations and transport links to plants and customers across the globe.

The Procurement Pain Point and Insights Offered

A leading auto parts manufacturing firm wanted to build a new warehouse space as they lacked sufficient warehouse space for operations. The new warehouse would help the auto parts manufacturing firm accommodate parts from other neighboring plants and supply them to their customers across the globe. They also wanted to set up a new warehouse space near their manufacturing facility, which could house parts from regional plants.request free proposal

To cater to the specific category requirements of the client, the supply chain management specialists at SpendEdge followed an in-depth two-step research methodology, which included primary and secondary research coupled with qualitative and quantitative data collection procedures to address the client’s issue. During the course of this supply chain management study, the client was able to choose a site with appropriate transport links and build a distribution center with a bigger storage capacity. Additionally, the supply chain management study helped the client improve their inbound, outbound, customs clearance processes.

Furthermore, SpendEdge’s supply chain management team also provided the auto parts manufacturing client with value-added services at the site, which included labeling and printing.

Key questions answered in this supply chain management study include

supply chain management

Business Outcome

The supply chain management study helped the auto parts manufacturing client serve more customers across the globe with the help of a sufficiently equipped warehouse. Additionally, better transport links to plants and customers provided by SpendEdge helped them improve inbound, outbound and customs clearance certification processes. This resulted in the successful shipment of a higher number of auto parts annually.

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