Guide to Supply Chain Optimization

World map overlaid with hexagonal structure and icons representing factories, transportation, and shopping.

What is Supply Chain Optimization?

Supply chain management is about optimizing the flow of a product from the initial stages of production through its eventual distribution. Companies rely on supply chain managers to answer increasingly complex questions in 2019, most notably around minimizing the operating costs for moving a product from Point A to Point B before it eventually ends up in the hands of the end-customer.

It is difficult to overstate the importance of a qualified supply chain manager. Reducing operating expenses and improving delivery helps build critical competitive advantage for a company. CFO's often look to supply chain managers to optimize delivery and find valuable cost savings to improve the return on investment (ROI) to shareholders. The more value they find in end-to-end supply chain analysis without degrading quality, the better the business can perform. Simple, right?

As companies scale globally, the C-Suite is recognizing this to be anything but simple. Introducing the complexities of foreign currency exchange, levels of risk involved in a business trading in certain markets, and a host of new operations & technology solutions that drive competitive advantage demands hiring the best talent available. That talent is often difficult to recruit.

The main reason? Experts in supply chain planning have a lot more job responsibility than they did ten or twenty years ago: third-party logistics and tracking, using data to optimize supplier relationships that yield better value to the customer downstream, factoring in sustainability and social responsibility initiatives, and planning for unseen risks to the entire supply chain network. Those risks are real. Ethical buying behavior is now a primary concern for the upwardly mobile end-customer concerned with how companies are sourcing in the supply chain.

To handle this complexity, a host of teams are responsible for supply chain optimization while helping to meet the demand of the customer: Manufacturing, Finance, Procurement, Data Science, Legal, and a host of other internal players who are either managing or directly affected by the day-to-day supply chain processes.

When these teams of business leaders are all focused on optimizing their end-to-end supply chain to meet customer demand, positive ripple effects can be seen across a company.

Three Ways to Optimize Supply Chain

Optimizing a supply chain is difficult, and the right training and experience goes a long way to delivering on a global scale. There are several key methods that supply chain management professionals use, however, that UT Haslam students focus on in-depth:

  • Control your End-to-End Supply Chain. Tight inventory management and careful demand planning is only scratching the surface of a well-oiled supply chain. Full supply chain visibility beginning not only with your suppliers but their suppliers is a critical first step in streamlining operations and reducing sourcing cost before production begins. Having that full visibility also helps manage increasingly important KPI's like inventory turnover and inventory accuracy, both improving customer satisfaction and ensuring demand is met down the line.
  • Resourcing with Premium Software Solutions. Supply chain management software is the secret sauce of high-performing, modern day supply chain managers. It helps improve their own decision process, ensuring the highest quality data is available to meet demand, but it also has impacts far beyond themselves and the customer. Major software providers like SAP have tools built-in to structure approval processes across departments, and several tech startups have entered the space as well. In the next two years, supply chain software companies are poised to make strides in planning, sourcing, operations, and fulfillment as new entrants to the space challenge existing business.
  • Use Predictive Modeling. Supply chain managers and risk managers will have their hands full in the next years as warehouses, fulfillment centers, and even delivery become fully automated. However, companies putting an emphasis on predictive modeling will take some of the guesswork and human error out of the process. Using machine learning algorithms that predict future performance based on company and third-party data, smarter decisions can be made to improve supplier-customer efficiency and help handle truly complex third-party logistics.

Processes and methodologies are important and can help cement the competitive advantage of a business, but the industry should be able to see real-world results. Careful planning, seeking creative business solutions, and a laser-focus on supply chain analytics are what help companies perform at their best. The robotics company, Zipline, applied technology for delivery drones that allowed the vital delivery of supplies to health clinics in Rwanda. And when Amazon developed a trucking app called Relay to tighten up their inventory management, it opened the door to unmatched supply chain visibility for every touchpoint in their customer-fulfillment process.

Developments like these are game-changing. Smart supply chain managers that are trained to work with risk managers and lower overhead (ultimately reducing costs) and who can apply existing business cases are in high demand.

Common Weak Spots in a Company's Supply Chain

While there are many strengths and ways to optimize a supply chain, there are also two pitfalls that inexperienced supply chain management teams face each day. UT Haslam students are trained to know how to solve these business problems, and global businesses are trying to hire to meet the demand.

  • Poor Planning. As different economies and markets range in their level of volatility, scenario-planning is an essential part of the process. It's incredibly easy to disrupt fulfillment when an upstream supplier has a warehouse fire or is sourcing raw materials from an unstable region. What are the backup plans needed to handle unplanned headaches with third-party logistics and delivery? What is the manager's failsafe in each phase of the supply chain network if a process breaks down? Most importantly: Did the supply chain strategy even factor in the risks?

    Many of the headaches that companies face in periods of high demand begin with poor planning. UT Haslam's approach to managing a global supply chain and training the best students helps mitigate that risk for companies.

  • Basic Data Security. This is one of the toughest challenges supply chain managers face today, and entire industries are facing previously unseen risk as more cases of hacking, identity and credit card fraud, and privacy violations become mainstream. GDPR was a major lift for IT managers dedicated to ensuring that their company and its supply chain remained compliant, however, more and more "Shadow IT" solutions require a closer eye on the supply chain (in a space that needs many more qualified professionals). Economies becoming more and more dependent on data demand their businesses are equipped with better data security.

These aren't the only two glaring weaknesses to tackle in a supply chain, but they get the most media attention thanks to the volatility of several regions in the world, as well high-profile hacks of companies like Sony, Facebook, and credit agencies that resulted in multi-billion dollar lawsuits.

A Master's in Supply Chain Management Can Make the Difference

As technology evolves, corporate leaders who are responsible for shareholder value have more on their minds than ever before. From supplier fragmentation, to the rising costs of transportation, to the overwhelming data from supply chain analytics, the challenges facing business require the highest-caliber supply chain management.

UT Haslam's Master of Science in Supply Chain Management, students are trained to handle problems just like these. Whether fixing existing processes or building a supply chain from the ground up, graduates learn to identify and solve problems right away by studying extensive global case work and getting hands-on experience to step in and handle the production process.

Reach out today to learn more about the University of Tennessee, Haslam College of Business's MS in Supply Chain Management.

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