Supply Chain Optimization: From Planning to the Last Mile

Supply Chain Optimization

How the Optimization of your Supply Chain could help you increase your customers’ satisfaction while reducing costs?

Getting your products into the hands of your customer is the ultimate goal of every manufacturing and distribution company. That means it’s been sold, you’ve earned the revenue, and you have — hopefully —  turned your costs into a profit.

However, as simple as it sounds, managing the end-to-end supply chain is much more difficult in reality. Turning raw materials into products that are manufactured, packed, shipped and delivered on time to the final customer requires coordinated planning and execution of activity across the whole supply chain.

Supply Chain Optimization Starts with Accurate Demand Planning

Supply chain planning starts with demand planning. Demand planning is creating a plan of what the business expects to sell which drives the supply plan of what to make, source and stock in order to fulfil customer requirements. It drives decisions about the materials, components and products to make and buy; what capacity do you need for manufacturing; as well as storage and what inventory buffers need to be held along the supply chain to protect against variability. 

Creating the demand plan is a mixture of science and art. It combines statistical and  machine learning techniques with collaborative input from stakeholders to arrive at a consensus plan that can be use to drive all the upstream supply planning decisions.

How Much Inventory Do You Need to Hold?

Based on the demand plan, companies make decisions about the inventory plan. In other words, how much stock to hold and where to hold it. Too much inventory and you are tying cash up and restricting the ability to invest in growth and continuous improvement. If your inventory levels are insufficient, you risk running out of stock. Especially if the sales forecast was difficult to predict in the first place. 

When you have a global distribution network spanning multiple countries and continents, the decisions become even more complex. With a multinational footprint, you will have to factor in lead times; vehicle loads and managing the intricacies of exports and imports. 

The Importance of Supply Planning Optimization

Once you agreed about what you expect to sell, how much inventory to hold and where to hold it, the supply plan is determined. An accurate supply plan will mean that the right levels of inventory are in place for every product, in every location. 

Every company faces constraints in the supply chain. Consequently, supply plans have to reflect these constraints. They must be realistic — but also optimized to make the best use of the available capacity and inventory. 

For manufactured products, plans need to consider the available capacity of machines, labour and materials. For purchased products, you must factor in the capability and limitations of external suppliers to meet the requirements. 

The co-ordination of all these planning activities across the enterprise is the role of Integrated Business Planning (IBP) or Sales & Operations Planning (S&OP). This is the coordination of decisions related to demand, supply and finance. S&OP ensures the business is working according to the plan and can be executed accordingly. 

When planning is done well and done correctly, you will have the right product, in the right place, at the right time, and at the right cost to meet the demands of the customer. This is not an easy task. However, it is certainly made easier when your planners have got the right tools to support them in creating and executing the supply chain plan that is going to deliver the objectives of the business.

Plan, Make and Distribute

A truly end-to-end supply chain strategy must consider both demand planning and distribution. Both are of equal importance. You can’t sell what you have not produced; and if you can’t get your goods to customers in a timely manner, don’t expect repeat business.

Until the coronavirus pandemic, the average customer may not have considered all the intricacies of the supply chain network. But with toilet paper shortages in the US, truck queues at European borders, and congestion at UK ports, more people than ever have greater understanding that getting goods from manufacturers to end users is not a simple business. 

Supply chain optimization must also include ensuring that your global trade and transportation needs are fully considered.

Simplifying Export Management

Moving goods around the world comes with a host of compliance regulations. It does not matter if you are shipping a full ocean container or a tiny parcel — every single shipment must comply with international global trade regulations.

Companies can leverage technology to digitize the supply chain, capturing business-specific export rules and processes. Furthermore, you can automate critical workflows. This includes verifying that your trading partners have not been flagged on any government or international restricted party lists and ensure that required licences and permits are included. Export management solutions can also manage licenses by date, quantity and/or value.

Global trade runs on paperwork — either physical or automated. If you miss a crucial document — such as a dangerous goods note — or do not have the correct permits and licences in place, your shipments will be delayed. By automating documentation creation and customs reporting, your company can ensure that no hold ups occur due to incomplete paperwork.

Cutting Transportation Costs

Transportation is not only a complex undertaking, it is an expensive one too — and often rife with inefficiencies. To take one example, it is not uncommon for large enterprises with multiple locations to have site-specific and carrier-specific shipping systems. 

As a result, companies do not have a clear picture of their total transportation costs. This data is fragmented across different systems, making it difficult to leverage volume discounts and ensure that all locations adhere to the same processes and workflows.

Companies can reduce logistics costs and standardize their shipping processes with a comprehensive, global, multi-carrier, multi-modal transportation execution solution. A further benefit is that companies gain 360° post-dock visibility as their shipments move through the carrier network. 

Companies can make significant additional savings by consolidating shipments bound for the same destination or region. For instance, companies can use the consolidation services offered by carriers, such as UPS World Ease, FedEx IPD or DHL Breakbulk. In such a case, the chosen carrier will be responsible for both the first and final leg.

However, companies using the consolidation services in transportation execution solutions can use different carriers for the first and last mile. This can result in compelling cost reductions. This is especially the case if you ship to customers in Europe or Asia, where there are hundreds of local carriers to choose from. Consolidated shipments also require a single customs declaration, instead of individual declarations for each package.

Companies that automate export processes, and leverage transportation execution solutions create standardized processes so that every site and location works according to the same enterprise-wide rules. 

This will improve cycle times, reduce customs hold-ups, increase visibility and most importantly of all — reduce costs.

End-To-End Supply Chain Optimization

Taming the global supply chain is no easy task. At every point, there can be vulnerabilities that cause bottlenecks, unexpected costs and unhappy customers. Manual processes increase these risks.

Best-in-class companies leverage professional expertise alongside technology. From demand & supply planning to critical import and export activities, it is possible to optimize every step of the supply chain to ensure your customers have what they want, when they want it.

This article has been written in collaboration with Anne Sexton, Global Marketing Manager at QAD Precision.

Gary Shaw
Gary joined QAD DynaSys in 2014 as a Business Consultant. He is passionate about enabling organisations to unlock the potential of supply chain planning solutions to support their Integrated Business Planning processes. Prior to joining QAD DynaSys he spent 7 years in system implementation and 10 years in operational planning for various UK manufacturers and retailers. In his spare time Gary spends his weekends in wet and muddy fields watching his two sons play football and the occasional round of golf. He has promised his colleagues that one day he will learn French.