Supply chain optimization is the process of adjusting a supply chains operations to ensure it is at its peak of efficiency. It aims to ensure the optimal operation of a manufacturing and distribution supply chain, including the optimal placement of inventory within the supply chain, minimizing operating costs including manufacturing costs, transportation costs, and distribution costs. Optimization often involves the application of mathematical modeling techniques using computer software. Supply chain optimization can be undertaken using qualitative, management-based approaches, and is often considered to be part of supply chain engineering.
Supply chain optimization makes the best use of technology and resources like blockchain, AI, and IoT to improve efficiency and performance in a supply network. It is a critical business process that is crucial for a successful customer experience. A high-performing supply chain enables business efficiency and responsiveness, so customers get what they want, when and where they want it, in a way that is both profitable for the organization and contributes to supply chain sustainability.
There are three phases that occur within a successful supply chain optimization process:
- Supply chain design: focuses on network design, warehouse placement, and the distribution fleet.
- Supply chain planning: determines how to manufacture and distribute products and/or services in a way that will balance supply and demand and meet the forecast demand at the highest profitability.
- Agility: how fast can your supply chain respond to change, whether customer demands, competition, or supply disruptions? Modern supply chains must be agile to remain competitive.
Supply chain optimization has applications in all industries manufacturing and/or distributing goods, including retail, industrial products, and consumer packaged goods (CPG) . It may include refinements at various stages of the product lifecycle, so that new, ongoing, and obsolete items are optimized in different ways, and adaptations for different classes of products, for example, seasonal merchandise. It should also factor in risks and keep supply chains on schedule, even when conditions become less than optimal.
In summary, supply chain optimization is a process that aims to ensure the optimal operation of a manufacturing and distribution supply chain, including the optimal placement of inventory within the supply chain, minimizing operating costs, and making the best use of technology and resources. It is a critical business process that is crucial for a successful customer experience and has applications in all industries manufacturing and/or distributing goods.
