In today’s complex global business environment, effective supply chain management (SCM) is crucial for maintaining a competitive advantage. The pandemic and its aftermath highlighted the importance of having a robust supply chain strategy, with many companies facing disruptions due to shortages in raw materials and fluctuations in customer demand. The challenges continue: one 2023 survey found 44% of companies had to make changes in the past year due to issues with their supply chain footprint, and 49% said supply chain disruptions had caused planning problems.
But with the right tools and priorities, each step in the process can run smoothly. Here’s how companies are using different strategies to address supply chain management and meet their business goals.
Why supply chain management matters
Supply chain management involves coordinating and managing all the activities involved in sourcing, procurement, conversion, and logistics. It includes everything from product development and strategic decision-making to information systems and new technologies. But perhaps most relevant today are the capabilities within SCM to help mitigate disruption.
Supply chain disruptions are caused by a variety of factors, from pandemics, natural disasters, and political instability to supplier bankruptcy and IT failures. To mitigate these risks, companies need the resources and technology to develop robust contingency plans.
On top of disruption, companies with global supply chains must also deal with different regulatory environments, cultural norms, and market conditions. They need strong SCM practices to help work out the logistics of transporting goods across long distances and through multiple countries without creating longer lead times or delays.
Effective SCM initiatives offer several benefits:
- Lower operational costs: By optimizing inventory levels, improving warehousing efficiency, and streamlining order fulfillment processes, companies can save on storage, labor, and transportation expenses.
- Better customer satisfaction: An optimized supply chain allows businesses to make sure products are available when and where people want them—which can improve relationships and loyalty with customers.
- Fewer disruptions: A healthy supply chain mitigates risks and protects against inevitable disruption. By developing contingency plans and resilient supply chains, companies can continue to operate even when unexpected events occur.
Key strategies for effective supply chain management
There are a number of ways that companies can better optimize and manage their supply chains. Here are the areas some businesses are focusing on as they refine their overall approach:
Forecasting and demand planning
Companies can reduce storage costs and avoid stockouts or overstock with help from accurate demand forecasting, which uses historical sales data, market research, and economic trends to predict future market demand for products or services.
Big data and predictive analytics are increasingly being used to improve forecasting accuracy, allowing businesses to respond more effectively to changes in customer needs. Advanced software tools can automate some parts of forecasting, providing real-time updates and alerts when inventory levels are too high or low.
Automation
Automation can streamline supply chain operations, from order fulfillment to inventory tracking. It can take many forms, from automated warehouse systems that pick and pack orders, to blockchain-based smart contracts to software that automates purchasing and invoicing processes. These technologies can significantly reduce manual labor, minimize errors, and speed up processes, leading to increased efficiency and cost savings.
Technology-driven visibility
AI and machine learning can be used to analyze large amounts of data quickly and accurately, providing insights that can improve forecasting, inventory management, and customer service. A 2023 survey found that a third of businesses are using artificial intelligence (AI) to improve resource and supply chain planning, and more than a third said using digital tools for inventory management was the most effective strategy in cutting overall supply chain costs.
Real-time tracking systems, often enabled by Internet of Things (IoT) devices, help companies monitor their supply chain accurately and immediately. Having visibility into the status and location of goods as they move through the supply chain helps companies monitor supplier performance, identify bottlenecks, and respond quickly to disruptions. A supply chain control tower can connect many sources of data-driven information and improve end-to-end visibility.
Moreover, enterprise resource planning (ERP) software can integrate different aspects of a business into one system, providing a holistic view of operations and the metrics needed to streamline supply chain processes. Integrated supply chain analytics software, such as IBM Planning Analytics, connect complex data sets for more insightful analytics and scenario analysis that can help avoid demand-and-supply mismatches or fulfillment delays.
Sustainable and ethical sourcing
Companies are trying to ensure that every stage of their supply chains is adhering to responsible practices. This not only helps satisfy customer desire for sustainability and ethical products but also helps mitigate risks, such as regulatory penalties or reputational damage.
Ethical sourcing involves ensuring that the products and services a company procures are produced under fair, safe, and environmentally friendly conditions. This may involve conducting audits of suppliers, implementing codes of conduct, and using certification schemes to verify compliance. Sustainable sourcing, meanwhile, focuses on minimizing the environmental impact of the supply chain. This might involve partnering with suppliers who use renewable energy, reducing packaging, or implementing recycling programs.
Blockchain technologies can increase transparency and traceability in the supply chain, helping to prevent fraud and ensure product authenticity. For example, IBM Food Trust®, a collaborative network of growers, processors, wholesalers, distributors, manufacturers, retailers, and others, uses blockchain technology to improve visibility and accountability across the food supply chain.
Building strong partnerships
Strong relationships are a key part of any business strategy. When it comes to supply chains, strong connections with providers, distributors, and other key stakeholders in the supply network can help companies improve resilience. Partnerships can facilitate better communication, collaboration, and responsiveness, particularly in times of disruption. They can also provide access to new markets, technologies, and expertise, offering a competitive advantage.
Because finding the right suppliers can be challenging, some businesses turn to technology to help. For example, IBM® Trust Your Supplier, a supply chain risk management software solution, helps ensure suppliers and other partners in the supply chain meet global and industry standards, provides continuous monitoring and risk assessment, and uses blockchain-based information management to ensure transparency and traceability.
Effective supply chain strategy for the future
Whether it’s through forecasting, automation, sustainable sourcing, strong partnerships, or new technologies, there are numerous strategies companies can employ to optimize supply chain planning and execution. By doing so, they can improve profitability, meet customer demand, and ensure their business is resilient in the face of disruptions.
To learn more about how a technology-enabled supply chain can support your business goals, explore the IBM Sterling® Supply Chain Intelligence Suite.
Transform your supply chain operations
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