62

Supply chain analytics

What is it?

Supply chain analytics is the process of assessing each stage of your supply chain or the various processes that go into creating your product or service. This type of analysis looks at all the processes from purchasing the raw materials, through various production processes to final delivery to the customer so as to manage inventory intelligently, deliver to your customer efficiently and minimise costs and delays.

The purpose of supply chain analytics is to determine opportunities for savings, improvements or increased return, while also ensuring that your customers get what they ordered as quickly as possible.

Why does it matter?

Supply chain analytics matters because you need to know what happens in your business between the moment you purchase from your suppliers to the moment your customers receive their goods so that you can control costs, price your products or services correctly, make money and keep your customers happy.

The more you understand your supply chain and the more flexible it is the better able you will be to understand your market, predict potential road bumps that could cause your business problems and the quicker you can adapt to changing customer needs. Plus, by understanding your supply chain you can effectively predict how many products or services you will need to supply demand, which can in turn allow you to minimise inventory and the costly need for excessive warehousing.

When do I use it?

Although supply chain analytics may still be relevant if you are providing a service, it is more important when you produce and sell products. In which case you should be conducting supply chain analytics at least every month.

If there are few changes in your supply chain and the business is fairly stable then you may get away with every six months.

What business questions is it helping me to answer?

Supply chain analytics helps you answer business questions such as:

  • What is the optimal delivery route for our trucks?
  • Where are the delays occurring in the supply chain?
  • Are there any significant fluctuations in supply performance?
  • Which suppliers are more unpredictable and why?

How do I use it?

With sensors and data collections along most supply chains, it can be easy to track actual performance. The data can come from telematics systems on delivery trucks, from GPS tracking sensors on ships and lorries, as well as from RFID (radio frequency identification) sensors on pallets and products and cameras.

This allows companies to track products from the manufacturing process right through to the end user. This data can then be correlated with other supply chain metrics: such as order fulfilment cycle time (OFCT), which is the continuous measurement defined as the time from order confirmation to receipt of the goods or services; or delivery in full on time (DIFOT), which looks specifically at the fulfilment process which is all the customer is really interested in anyway.

Analysing this data using tools including neural network analysis (Chapter 17), linear programming (Chapter 14) and Monte Carlo simulation (Chapter 13) can allow you to optimise delivery routes and detect bottlenecks and risks in your supply chain.

Practical example

I worked with a major drinks manufacturer that was interested in discovering their shrinkage rates across their supply chain from production through distribution to the retailers. In other words, they wanted to see where they lost most product, either though breakages or theft. The idea was obviously to identify problem areas and then institute processes or better packaging that would prevent this costly expense. The result of the supply chain analytics using tracking sensors (Chapter 26), image analysis (Chapter 10), interviews (Chapter 22) as well as elements of ethnography (Chapter 23) showed that their supply chain was very secure and the vast majority of their shrinkage resulted in the retail setting where people were stealing the product from supermarkets. By working with the supermarkets to ensure better tagging they were able to reduce shrinkage considerably.

Many manufacturers are also now using sensors on their manufacturing equipment that monitor real-time operation of the equipment. These sensors will provide data on wear and tear so that parts of important machinery can be replaced at the right time – before they break down and cause disruption to production. This enables dynamic servicing, which is more effective and often much cheaper than replacing parts simply because a certain amount of time has elapsed.

Sensors can also raise issues that may not be noticeable from operators and also provide important data on usage and productivity.

In days gone by, if you bought a product you might get a delivery window of several hours. Those days are now gone because of sensors on pallets and the use of handheld devices that record delivery to monitor where drivers are, while also monitoring the engines of the delivery vehicles to create dynamic servicing, etc. It is now possible also to track your order online. Not only do you know when your product will be delivered – often to within an hour window or less – but you might even know the delivery driver’s name!

Tips and traps

Amazon is a global leader in supply chain management – there isn’t much they haven’t figured out. Amazon has obviously developed software to optimise their stock, but it isn’t possible to purchase this software so you must use these analytics tools for your own business.

Making money in business is not just about making sales – it is also about managing costs and supply chain analytics offers a powerful insight into where and how you can manage costs effectively.

Supply chain analytics makes sense – using big data, predictive tools and cloud computing to crunch through vast amounts of data to optimise the supply chain makes business sense. But often the supply chain systems are not cut out to deliver the type of data that is required to crunch. The biggest trap therefore is often the investment required to make use of the main tools now available.

Further reading and references

To understand more about supply chain analytics see for example:

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset
18.216.150.75