How using supply chain data can lead to better decision-making

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The combination of inconsistent global events has made the years-old goal of reducing overall business costs a lot more challenging and more complex than ever before.

For companies operating complex supply chains, an intuitive solution exists, though it is one that very few executives realize: data-use optimization.

Note that this solution is about the use of all the data that has been collected at the central location. This is because most businesses already have all the data needed to start optimization. Cost-saving actions such as reducing additional inventory to trim transportation costs are just two of the immediate benefits of properly utilizing what supply chain data businesses already have.

Rising prices across all categories due to inflation, the collapse of the Covid-19 supply chain and the war in Ukraine are causing carriers to shift their transport assets – companies must take advantage of the insights provided by their datasets.

Dealing with different datasets through centralization and generalization

One of the most common reasons businesses do not maximize their own supply chain data is a lack of understanding of what the data shows or where to find the data they need. This is often the result of a variety of internal company datasets that need to be generalized, as well as the fact that they are often not accessible from a single platform or system.

The different datasets that companies regularly work with include manufacturers, vendors, distributors, wholesalers, cargo ships, freight vendors, and Internet-of-Things sensors. The enterprise resource planning, order management and warehouse management system also create each unique dataset.

The most effective C-Suite executives today are not only investing in technology to organize these datasets and gain relevant insights, they are also investing in hiring the right people to manage that information. The data scientist is the key to unlocking the potential hidden in the data held by the business. They have the skills to extract data from where it currently sits so that it can be used.

Focusing data in one place enhances the organization’s ability to manage information resulting in benefits, including identifying sources of truth, ease of analysis, and areas that need improvement.

Once the company reaches that point, it can link messages from executive data to the business objective – a problem that needs to be solved – and a return on investment behind those items.

Supply chain operation as differential

The operation of the supply chain is more relevant than ever because it determines whether companies have the ability to reduce the distance between the start and end points of the supply chain.

While most Amazon supply chains are spread over a distance of about 60 miles, most other businesses work with supply chains ranging from 1,600 miles to 1,800 miles. That’s why Amazon can consistently deliver products to customers in a day or two. Longer supply chains mean longer time, more flexibility, more stock requirements and less certainty about where to place inventory.

Condensed supply chains – more warehouses with shipping routes, for example – enable cost savings by improving areas including demand management or forecasting, planning and implementation.

There is tremendous potential for improvement. One November McKinsey & Co. The report found that only 2% of companies take advantage of supply-base visibility over second-tier suppliers. Those companies supply content to first-tier suppliers of businesses, including partner business direct contracts, such as manufacturing facilities.

Apple is a prime example of a company that uses data efficiently, combining that approach with its broader business strategy. It has developed solid multi-acronym data visibility and combined it with a fab-to-end-consumer vertical-integration approach. The result: a system that protected Apple Pal from disruptions months after it affected other businesses.

A combination of talent and tech for success

Most companies do not have the structural advantages of Apple, but they do not hinder businesses from improving the data game plan. Data scientists and data engineers who are the coolest translators of company information are a step up. Companies that invest in this type of talent will soon see a decline in inventory and an improvement in inventory returns.

Data scientists can get descriptive facts from supply chain information. More importantly, however, those scientists are trained to help businesses use prescription data.

The second step is investing in technology that integrates disgruntled datasets in a way that makes sense, like a digital dashboard. That type of technology allows warehouse inventory and movement of goods – two completely different types of data – to be viewed in one place. This becomes especially crucial, for example, if a company has made a lot of acquisitions and now has to manage a lot of warehouse management systems.

Cloud-based platforms that utilize artificial intelligence and machine learning help better manage such complex logistical realities. And, while macroeconomic factors such as inflation, volatility and the PMI index – which measure whether the manufacturing sector is expanding or shrinking – become instruments that make a difference – companies are ultimately forcing consumers to pass on rising costs.

For example, Kraft Heinz Company reported that it increased prices by 3.8% during the fourth quarter of 2021 due to global supply disruptions. Paulo Basilio, CFO of Kraft Heinz, said many corporate executives were facing shipping, materials and labor costs when he said during a February call with analysts that the company would consider any future adjustments appropriate.

The executives who integrate investments in top-level data talent with the strongest supply chain management technology will be the ones looking for ways to reduce procurement, transportation and fuel, among other costs. Eliminating unnecessary costs is important today, as global forces buffeting the supply chain make its operations more unpredictable. The winners will be the companies that succeed in this area – and their customers, who are less likely to absorb the increased costs.

Greg Price is the co-founder and CEO of Shipwell


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