Organizations generate huge amounts of data from the activities at various stages of their supply chains. This information is recorded through applications that aid inventory management, warehouse management, shipping, and procurement. Supply chain analysis, therefore, is the analysis of information from those different applications using one ERP system. Analysis of data from one activity, such as warehouse management, may not mean much. However, when all information across the supply chain is viewed together, it provides unlimited value opportunities.
Categories of Supply Chain Analytics
The premise of supply chain analytics has remained the same for as long as trade has existed. However, the advancement of human knowledge and technology has led to an increase in the possibilities that supply chain analytics unlock.
Perhaps the simplest form of supply chain analytics is descriptive. It’s historical. It looks at the same type of data but from different periods and attempts to establish a pattern or trend. Descriptive analytics explain the reasons for change between periods. Leaders can then make corrections from the conclusions made regarding the causes of changes.
Predictive analytics attempts to tell what could happen if different scenarios were to occur in the future. This is very important in supply chains because disruptions are quite common. By envisioning different scenarios, business leaders can implement proper measures as opposed to knee-jerk reactions. If demand is expected to fall during a certain period of the year, the firm can slow down production and the procurement of raw materials.
Prescriptive analytics goes beyond predicting what will happen in the future. The results of prescriptive analytics suggest the best course of action to reach desired goals. It requires powerful software to be able to simulate different plays and establish the best one. Prescriptive analytics might be able to tell that a certain key line of business is likely to decline in the coming year based on historical data or other developments in the sector. The business, therefore, needs to figure out how to recoup lost revenue.
Cognitive analytics replicates human thinking and decision-making. It’s powered by artificial intelligence and can predict such things as how much of a product to produce or the sufficient marketing budget for the year based on revenue targets. Cognitive analytics augments the ability of data scientists and quickens the pace of decision-making.
What are the Specific Benefits of Supply Chain Analytics?
Here are a few things analytics can help your business achieve.
Through descriptive analytics, you can explore different performance metrics on your supply chain. For instance, you can monitor the performance indicators such as on-time delivery, equipment failure rate for different suppliers. Decisions can be made to change suppliers to improve performance. The company can also monitor its own ability to deliver items on time to customers or eliminate stock-outs by better inventory planning. By uncovering the underlying reasons, the business can improve customer satisfaction rates.
By getting a better understanding of markets through supply chain analytics, the business can find opportunities to grow revenue. If some opportunities were missed due to stockouts or shipping problems, this can be eliminated altogether. If the organization can succeed in being reliable to its customers, it increases the chances of getting more business from them. Getting accurate estimates of demand and planning accordingly is a sure way to increase dependability.
Through analytics, both descriptive and predictive, supply chain risks are identified, and appropriate measures are taken. An example would be price fluctuations due to disruptions in the supply chain. To hinge against such a risk, it would be beneficial to enter long-term agreements with suppliers so that prices are fixed for the contract period. This is a common supply chain risk management tool. A firm might also establish a fund to cushion against such movements. Money can flow into and out of the fund depending on prevailing prices.
Collaboration of Departments
Supply chain logistics will reveal valuable information that would help create better congruence in the strategies of departments. When the production team is informed of an increase in demand, the transport team should also be aware to improve their capacity accordingly. All this might have been triggered by more spending on the marketing front. The value of such coordination might be difficult to quantify because the benefits are in opportunity costs avoided.
Lower Inventory Costs
Modern analytics tools can combine past data with real-time happenings in the market to give an accurate picture of how much of each item to produce. A new event might mean that a client that was supposed to make a big order is likely to cancel it or review it downwards. Such timely information will inform real-time production decisions so that the company does not have too much inventory lying around. Using real-time information can free up working capital that would normally be tied up in unmoving inventory.
It’s important to keep a keen lookout on how much the company is spending to serve and keep its customers. While selling to customers will yield profits, there are costs to keeping them too. The resources might be used to serve customers elsewhere and yield even better results. An analysis of how long customers take to pay is equally important because too much money might be tied to accounts receivables.
Getting Started with Supply Chain Analytics
If your business is already using tools to improve certain supply chain operations, then you are already generating data that can be used for analytics. By engaging an e-procurement and supply chain analytics consultant, you’ll identify different opportunities to leverage analytics in your operation.
A supply chain analytics program ought to provide you with an interactive dashboard from where you can make queries and generate reports quickly and easily.
To learn more about supply chain analytics, check out the different e-procurement software offerings from ProcurePort.