How supply chain visibility can help maximize operating efficiencies
It’s no exaggeration to say that a company’s supply chain can make or break the business. In fact, it could be argued that the success behind well-run companies like Amazon and Apple is an effective supply chain. And, one of the first things these best-in-class operations understand is that supply chains run on data. This makes sense because supply chains today are complex, and involve huge networks of suppliers and other stakeholders. Data visibility is about connecting these groups and divided silos of information. It’s also key to maximizing operating efficiency and performance.
Data Should Be 3-D
Many successful companies have discovered that data doesn’t have to move the same way materials do — in a straight line from sourcing to manufacturers to distribution centers to stores. Data provides its greatest benefit when it can move up and down, and across the organization. The ultimate goal for a data-driven business is creating a visible, precise, real time picture of the present and future demands on the supply chain. Better operations come with better understanding of the underlying business, which informs the ability to plan.
Improving visibility in this way allows companies to build flexibility and adaptability into their supply chain. For example, a company may use data gathered in-store, such as promotions or sales data, to adjust the ordering, allocation, or logistics of product and resources. Also, any anticipated effect on demand, such as a new product launch or an unexpected customer trend, is valuable information, but not always captured in the supply chain planning process.
The most apparent application for this type of data exists within inventory management. The benefits of data transcend beyond the obvious, such as reducing out-of-stocks or overstocks. For example, insight into specific region or store-level sell-through helps companies improve forecasting. This ensures product availability, but also keeps inventory levels low while, at the same time, maintaining service to customers. It answers the ultimate question for every company: “How do we balance both costs and service to our customers?”
Using Data to Decrease Supply Chain Friction
Data visibility can also help retailers drive strategic prioritization of products and services (e.g., ensuring highest traffic and most profitable stores are always in stock of product). Less focus, prioritization, and product allocation can be spent on less efficient, less profitable stores. Managing inventory and store allocation with this information helps retailers create efficiencies within their supply chain operations as well as maximizes their sales and profitability.
Furthermore, data visibility is an important way to avoid costly returns, which is a problem that impacts supply chain efficiency for both retailers and their suppliers. For retailers, this cost can come in the form of opportunity cost – retailers may be unknowingly merchandising a low velocity, low margin, under-performing item at the expense of a higher margin, more profitable substitution. Or, retailers may be incurring holding costs for these low velocity, under-performing items. These types of additional and unbudgeted supply chain costs are avoidable with better forecasting and inventory management that results from increased data visibility.
Data visibility also helps drive efficient labor and logistics resource planning. Variations in in-store or regional demand impact production floor management, warehouse planning, and product allocation. Awareness of differences in region or store-level performance also prevents wasteful over-staffing and ensures customer demand is always met. Logistics costs are also better managed because carrier resource utilization is improved in much the same way. With more reliable planning, large fluctuations in shipping rates can also become more consistent.
Data Should Be Used Up and Down the Supply Chain
Managing supply chain costs and operations efficiency is about predictability. In other words, disruption and uncertainty should be minimized in order to maximize the health of the supply chain. In the retail environment, these disruptions occur downstream, past the point when organizations are typically thinking about the supply chain. Therefore, the operations benefits can only be realized once data and program information are initiated upstream. Creating awareness earlier in the supply chain, through data, is a powerful way to improve operations efficiency and lower costs through better inventory, labor, and logistics management.
The common hurdles that prevent companies from making vast improvements in this way are typically rooted in the inability to effectively access and use data. Improving visibility and realizing the benefits of data analytics starts by incorporating structure and analytical systems to fragmented data within your retail company. To learn more about how 1010data can help retailers automate their supply chain analytics, check out our deep dive on this topic, Spotlight On Supply Chain Increase Visibility and Drive Greater Profitability.