As companies grapple with global challenges and transformation, the demand for advanced supply chain optimization has surged. In 2024, 62% of enterprises focus on predictive development, and 71% invest in sustainable practices.
If you want to optimize your supply chain or learn more about the latest techniques and solutions, you are in the right place. In this article, we will discuss the best practices of supply chain optimization in 2024. Below, you will find:
So, let’s get started!
Before we move to the discussion on supply chain optimization, let’s look at some key statistics:
Supply chain optimization is a process of improving the efficiency of each chain point: suppliers, manufacturers, warehouses, іnventory, and so on. It includes everything from raw material procurement to product delivery to customers. The main goals are to reduce costs, enhance service levels, and ensure that products are available at the right time and place.
At its core, the business needs to design the supply chain work, including:
Each of these steps is subject to further refinement. Based on these points, supply chain optimization includes 4 key elements:
Demand forecasting involves predicting future customer demand for products. This process uses historical data and market analysis to estimate the quantities of goods customers will buy over a period. Accurate demand forecasting helps businesses align their production, inventory, and procurement plans with expected demand. It reduces the risk of overproduction or stockouts.
As a rule, demand forecasting requires the input of supply chain managers and data analysts. They use statistical analysis programs, ML/AI algorithms, and ERP systems to collect and analyze large datasets. Thus, they can provide forecasts that inform supply chain decisions.
Inventory management, in turn, controls the ordering, storage, and use of components and finished products. This process ensures that the right amount of inventory is available at the right time to meet customer demand. It helps avoid both surplus and shortage. At its core, effective inventory management maintains a balance between supply and demand.
Supply chain specialists track inventory levels, manage stock locations, and set reorder points. There are various tools and techniques for this purpose. For example, you can use barcode systems, RFID technology, and inventory management software.
Supplier optimization is about selecting, managing, and collaborating with suppliers. In this process, you must test suppliers, track performance, and manage the risks. The goal is to secure high-quality materials and services at competitive prices. Supply chain managers use data analysis, supplier scorecards, and regular audits. They also collaborate with suppliers to streamline processes and drive continuous improvement.
According to a Gartner study, logistics costs account for almost 80% of total supply chain management costs in some companies. That is why it is a top priority for improvement. Logistics optimization focuses on transportation, warehousing, and distribution processes. At this stage, you need to ensure that products move smoothly from suppliers to customers.
Optimized logistics can reduce costs, improve delivery times, and enhance service quality. Usually, logistics managers work on route planning, load optimization, and strategic inventory placement.
Supply chain optimization is a continuous process that requires regular assessment and adaptation. You must constantly track market conditions, technological advancements, and customer needs.
Now, let’s take a closer look at popular supply chain optimization techniques and models per each element.
To begin with, accurate demand forecasting combines both qualitative and quantitative data. The first includes information from industry reports, trends, market research, and customer feedback. To prepare for collecting qualitative data, businesses should:
Quantitative data, in turn, covers sales, revenue, traffic, etc. Preparation for its collection includes:
The SAP platform suggests 4 main methods for demand forecasting in supply chain optimization:
Accurate forecasts also consider factors like seasonality, promotional activities, competitors, and so on.
To start, ask yourself what you aim to achieve with demand forecasting. Collect both qualitative and quantitative data, use advanced analytics, and align stock with demand.
Inventory optimization is part of a management strategy that aims to find the optimal balance of stock levels to meet demand. This strategy usually covers 4 key types of inventory:
Experts usually manage each inventory level with the help of advanced software solutions. They provide real-time inventory tracking, demand forecasting, and automated reorder points. However, organizations can also use more traditional methods:
In VMI, the supplier manages the inventory levels for their products at the buyer’s location. The supplier maintains the agreed-upon inventory levels, which helps reduce the buyer’s burden.
First, establish a partnership with the supplier and set clear expectations about inventory levels. Then, share data and sales forecasts with the partner. The supplier will track inventory levels and replenish stock as needed. In this method, remember to review performance and adjust parameters as necessary.
ABC analysis is a method of categorizing inventory into three categories based on value and turnover rates:
To implement ABC analysis, follow these steps:
Safety stock is extra inventory held to protect against variability in demand and supply. It acts as a buffer to prevent stockouts. To use it, determine the desired service level. For example, a 95% service level means 95% of demand is met without stockouts. Then, calculate the standard deviation of demand and lead time. After this step, you can use the safety stock formula:
Safety stock = Z-score * standard deviation of lead time * average demand.
After all, you can adjust safety stock levels based on changes in demand patterns and lead times.
Cycle counting is the periodic counting of an inventory item subset to ensure record accuracy. It is less disruptive than full inventory counts and helps maintain data accuracy. To use this method, schedule regular counts for different categories of inventory based on their importance.
For example, if you combine cycle counting with ABC analysis, you can calculate ‘A’ items more frequently. As a result, you can analyze discrepancies to identify and address underlying causes.
Logistics management is a part of supply chain network optimization that focuses on the movement and storage of goods. It improves shipment visibility, reduces costs, and increases customer satisfaction.
Here are some best practices for logistics optimization:
Logistics control towers are platforms that provide real-time visibility across the supply chain. They check shipment status, track performance metrics, and identify potential disruptions. Control tower systems can integrate data from various sources, including:
TMS are software solutions that help plan, execute, and optimize the physical movement of goods. You can use TMS to plan and optimize routes, manage carriers, and track shipments.
WMS are software applications that manage warehouse operations. It includes inventory tracking, picking, packing, and shipping. WMS helps track inventory in real time and optimize storage locations and order fulfillment processes.
All this data combined can help logistics control towers identify trends and areas for improvement. Notably, by the end of 2024, 80% of global supply chains will have adopted logistics control towers.
This method focuses on the final leg of the delivery process, from the distribution center to the end customer. To start, ensure that you incorporate customer preferences for delivery times and locations. For example, over 75% of last-mile deliveries in North America and Europe have near-real-time visibility with delivery windows and ETAs. This approach helps customers stay informed about their deliveries and enhances their experience.
Also, we recommend you use route optimization software like Circuit route planning. This solution can reduce delivery times and lower transportation costs.
4PLs are external organizations that manage the entire logistics process on behalf of a company. They offer end-to-end supply chain solutions, including transportation, warehousing, and inventory management. To use 4PLs, follow these steps:
Today, over 60% of large organizations use 4PLs as their preferred outsourcing model. By partnering with external experts, companies can focus on core activities while ensuring reliable logistics operations.
Using advanced technologies and strategic initiatives can significantly improve productivity and reduce costs. Here are steps to help optimize the supply chain in 2024.
According to statistics, nearly 50% of managers still use Microsoft Excel for supply chain management. These outdated methods limit automation and data analysis capabilities. Approximately 95% of supply chains need to respond quickly to changes, but only 7% can do so in real-time.
By 2024, about 50% of supply chain organizations will invest in AI-supported advanced analytics apps. These solutions help track and plan logistics with minimal intervention over time. Companies report that this approach improves predictability and increases Return on Equity (ROE) by 2-4 percentage points. It can add 1-3% to gross profit margins from revenue, expenses, and assets.
To implement AI and predictive analytics:
The supply chain manager collaborates with data and IT specialists to select analytics systems. The manager identifies use cases, estimates the budget, and sets the project timeline. They also ensure the system can handle large data volumes, forecast demand, and support predictive analytics. The supply chain manager oversees training programs to equip staff with the necessary skills. After these steps, the team monitors the system’s performance.
The economic value created by AI in the global supply chain is forecast to increase 1.3 times over the next 20 years. Moreover, 90% of supply chain professionals expect predictive analytics to have a significant impact over the next decade. This way, investments in real-time decision-making digital supply chains will grow x5 by 2028.
To choose the right software, don’t forget to check our overview of supply chain tools below.
43% of organizations claim they need more visibility into first-tier supplier performance. This trend complicates risk management and decision-making. That is why over half of companies want greater transparency in their supply chains.
To enhance visibility, consider one of these solutions:
Visibility helps companies better manage their suppliers and reduce potential risks. Here’s how it goes:
The supply chain manager first identifies the areas lacking transparency. They consult with tech experts to determine whether SCM systems, blockchain technology, or IoT solutions fit best. After selecting, the manager works with IT specialists to tool the technology and data analysts to set up the necessary data streams. They collaborate with suppliers to ensure they follow new transparency standards.
Even if you have found software for your logistics department, you must integrate it. Specialized personnel are also necessary here. Some large organizations develop dedicated programs based on existing platforms because ready-made solutions don’t fit their structure. In this case, you must find programmers in this field or turn to low-code platforms.
A low-code platform is a development environment that allows non-technical users to build apps with minimal hand-coding. They use visual interfaces with drag-and-drop features and pre-built templates. This approach allows you to install new functionality without significant development costs. As of 2024, two-thirds of companies have already implemented low-code platforms in their supply chains.
Imagine a company needing a custom inventory management module that integrates with its existing ERP system. Instead of hiring a team of developers for months of coding, it uses a low-code platform. The IT manager configures the platform, sets up the necessary workflows, and integrates it with the ERP. Within a few weeks, the new module is up and running.
Market data says 54% of customers want to deal only with companies that practice ecological and social sustainability. There are many approaches to optimizing supply chains according to these principles. You can use circular economy, greenhouse gas emissions reduction, and risk management. Here is how it works:
The sustainability manager assesses the current supply chain. They collaborate with environmental analysts to develop a sustainability plan. The manager oversees the adoption of eco-friendly technologies and coordinates with the procurement team. The logistics coordinators then integrate it into the supply chain operations. Analysts track the impact of these changes and report the findings to stakeholders.
Interestingly, only 5% of supply chain emissions are associated with direct production. The ones within the supply chain can be 5-10 times higher. Thus, companies can invest in eco-friendly technologies like electric commercial vehicles (BECV). By 2030, BECV sales could account for 15-34% of total sales.
In 2023, e-commerce accounted for 22% of all retail sales worldwide, up from 14% a few years ago. Now, 63% of consumers expect the goods they order to arrive within 3 days.
This trend also has a way to optimize supply chains. For example, micro-fulfillment centers can reduce costs by 75% compared to traditional warehouses. They allow for more efficient inventory management and faster order processing. Also, this is a win-win solution for efficiently placing warehouses closer to end consumers.
The logistics manager identifies potential locations for micro-fulfillment centers near key consumer markets. They collaborate with urban planners to find suitable sites and ensure compliance with local regulations. Once finalized, the supply chain analysts design the layout and inventory flow. The operations team oversees the setup and operational launch of the centers.
According to research firms, warehouse automation can increase productivity by up to 20% per square foot. The total value of this market will reach $30 billion by 2026.
Automation can reduce dependence on human labor, increase operation accuracy, and reduce warehouse maintenance costs. Also, this solution will improve inventory accounting and control processes.
Automation engineers select the appropriate automated systems, such as robotic pickers, automated guided vehicles (AGVs), and inventory management software. The IT team integrates these systems with the existing warehouse management system (WMS). The operations team then oversees the installation and setup. Following this, they conduct thorough testing and training sessions for staff.
A Gartner study found that customers who receive support are twice as likely to make repeat purchases. However, only 23% of supply chains focus on customer support.
Gartner states that companies investing in customer experience achieve the following results:
To maximize this step, we recommend you consider implementing CRM systems. Also, provide multi-channel customer support. Ensure customers can contact your team via phone, email, chat, social media, or AI-powered chatbots. Also, invest in staff training to improve customer service quality. And don’t forget to collaborate with customer experience analysts to set up performance metrics. Monitor response times, resolution rates, and customer satisfaction levels.
Last but not least, invest in human resources. A global labor market study by Gartner shows that about 20% of supply chain workers sought new opportunities in the past year. Now, 44% of supply chain companies report that talent shortages have limited their business activity.
Thus, developing strategies to attract and keep skilled professionals is essential. Besides competitive salaries and bonuses, consider training programs and a positive work environment.
Here are a few steps to consider:
If you are already affected by a talent shortage, consider staffing or partnering with outsourcing companies. This option allows you to offload some of your work to external specialists. Supply chain companies usually outsource logistics and transportation, IT services, and customer support.
Staff augmentation offers another solution where you can hire temporary employees to fill skill gaps. It provides access to talent without the long-term commitment of full-time employment. Moreover, staffing agencies can provide specialists within 2-3 weeks. At the same time, in-house recruitment can take months.
If you’re already experiencing a lack of IT talent, don’t hesitate to contact us. We at DOIT Software will analyze your needs and provide you with the first developer CVs in a few days.
As a bonus, we’ll discuss some of the best supply chain optimization software on the market. The following examples will give you a complete view of how technology can help you implement the steps from the section above.
Rating: 4.3 (111 Reviews)
Price: Flat fee; starts at $30,600
SAP IBP is a cloud-based solution that integrates sales and operations, demand, and inventory planning. It employs machine learning for demand forecasting based on real-time market data. The platform uses advanced algorithms to balance inventory levels and predict needs.
Notably, scenario simulation provides “what-if” analysis to assess potential outcomes. SAP IBP also integrates exception management and alerts to flag issues in the supply chain. The platform offers advanced analytics, performance monitoring, and custom reports.
SAP IBP key features include:
SAP IBP is available from any web browser by deploying in the cloud as software as a service (SaaS). It also integrates with other SAP extensions for demand planning and supply chain management.
Rating: 4.6 (136 Reviews)
Price: By request; demo available
Oracle SCM Cloud is a set of apps for supply chain planning, inventory management, and analytics. It enables businesses to plan demand, supply, order fulfillment, and production. The suite helps optimize inventory levels and the use of working capital. It’s a great solution to get visibility and control of product flow.
Moreover, you can benefit from integrated manufacturing execution systems (MES) and built-in supply chain integration, IoT, and AI. One of its most interesting features is Oracle Fusion SCM Analytics. Here, you can leverage analytic insights for supply chain optimization using machine learning and third-party data sources.
Oracle’s key features for supply chain management optimization include:
Oracle Cloud SCM is available by request after consultation with the sales team.
Rating: 4.1 (21 Reviews)
Price: By request
Infor Nexus is the leading supply chain optimization software that combines a control tower, visualization, and management solutions. Today, more than 85,000 companies use the platform to connect with 90% of the world’s 3PLs and 76,000 suppliers and factories. Infor Nexus provides visibility into orders, shipments, and inventory. It uses machine learning algorithms based on global network data to automate manual work. With Infor Nexus, you can:
Infor Nexus is also useful for sustainability activities. The software includes a dashboard for tracking carbon emissions and managing trading partners.
Rating: 3.8 (31 Reviews)
Price: By request
Manhattan is one of the renowned supply chain optimization companies providing management, execution and planning solutions. With over 30 years of experience in supply chain tech, they have created a unified platform for:
The Manhattan Active Platform is based on microservices, APIs, cloud SaaS, and a headless approach. It combines computational and behavioral intelligence, data analytics tools, and no- or low-code supply chain optimization services. Notably, Manhattan Active is a leader in the Gartner 2024 Magic Quadrant for Warehouse and Transportation Management.
If you can implement the best practices for supply chain optimization that we discussed above, you will benefit greatly. However, you may also face barriers. Let’s take a look at what to expect.
Supply chain optimization is primarily driven by cost reduction. Companies can achieve large savings through efficient inventory management and transportation optimization.
For example, Hyundai Mobis saved $616,000 on monthly inventory maintenance costs after implementing the SAP IBP app. The projected savings reached more than $22 million.
An optimized supply chain ensures that products are available when and where customers need them. Better demand forecasting aligns production schedules with market needs. Faster delivery times, achieved through efficient logistics management, enhance the customer experience.
For example, Bissell integrates forecasting and all its product data with Oracle Cloud SCM. In this way, the company has achieved self-service capabilities so that users no longer need to wait 8-9 hours for the IT department to process data.
An agile supply chain can adapt to disruptions such as natural disasters, geopolitical issues, or sudden changes in demand. Predictive analytics enable businesses to respond to potential problems before they escalate.
For example, when COVID-19 first hit Chipotle, they used Oracle Cloud ERP to predict a 30% reduction in deliveries. The company was able to recover quickly and fulfill online orders when they were most needed.
The use of lean manufacturing techniques, AI, machine learning, and IoT improves supply chain efficiency. Automation reduces manual labor, streamlines processes, and minimizes errors. For instance, robotics in warehouses can handle repetitive tasks and allow workers to focus on more strategic activities.
For example, Manhattan Active helped Lamps Plus increase its retail outlet’s throughput by 35% when scanning goods into carts, accepting payments, and printing receipts.
Optimizing the supply chain can significantly contribute to sustainability goals. Efficient transportation routes and resource use reduce the carbon footprint. Sustainable sourcing ensures that materials are procured responsibly, supporting environmental and social governance (ESG) commitments.
For example, Amalthea used Infor AI to increase yields and reduce raw milk waste. The company achieved a 7-fold speedup in detecting milk yield abnormalities, annual savings of €500,000 for every 1% increase, and improved sustainability.
Despite many successful supply chain optimization examples, every company should also prepare for barriers. Here are some of the most common ones:
Supply chain optimization can reduce costs, increase efficiency, and improve customer satisfaction. But, like every new strategy, it can come with some challenges. To overcome them, start by assessing your current supply chain. Identify inefficiencies and bottlenecks and define areas for improvement. Then, explore different tech solutions to determine which ones are the best fit.
Put in place these technologies gradually, rolling them out in phases. And remember to maintain clear communication with stakeholders, suppliers, partners, and employees.
Supply chain optimization is not a one-size-fits-all solution for solving all operational issues. However, when implemented with expertise, these strategies can lead to more sustainable processes. Collaborating with experienced IT staff can be valuable for organizations looking to develop tailored supply chain solutions. If you’re interested in partnering with top-tier developers, contact us and get the first CVs within a few days.
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REQUEST CVSAn optimized supply chain reduces costs, improves efficiency, and enhances customer satisfaction. It helps organizations ensure timely delivery and better resource management
Companies may face issues related to the high costs and complexity of implementing technologies. Another common problem is employee resistance to change.
Some of the most demanded enablers now are AI, machine learning, and IoT. Besides technology, you need to be equipped with robust information systems, for example, through effective collaboration with suppliers and partners. Additionally, a skilled workforce is essential for successful supply chain optimization.
The cost can vary depending on the operation’s scale and the technology involved. For example, digitizing an enterprise supply chain system can cost tens of millions to hundreds of millions of dollars over several years. These expenses include investments in AI, ML, IoT, and software solutions, as well as training and integration costs.
