The benefits analytics bring to the supply chain

Introduction
Supply chain management is an interconnected web of processes and activities that ensure the
flow of raw materials to finished products, which products reach consumers when needed.
Supply chain analytics makes this process more efficient, effective, and cost effective, which
has the potential to revolutionize the way businesses operate. In this reading, we'll look at the
practical advantages of analytics in the supply chain, using real-world examples to
demonstrate their impact.

Benefits of Analytics in Supply Chain

1. Reduce costs and improve margins

Imagine you're the manager of a grocery store and you need to keep your shelves stocked
with just the right amount of product. If you invest too much in low-demand items, you risk
losing money on items that will not sell. If you invest too little in high-demand items, you
risk disappointing your customers. But how do you know which items are in high demand
and which are in low demand?

This is where analytics come into play. By gathering historical data and using forecasting
tools, you can identify patterns and trends in customer demand. This allows you to accurately
predict which items are likely to be in high demand and which ones may not sell as quickly.
By optimizing your inventory levels based on these insights, you can avoid overstocking
items that may lead to increased holding costs and potential waste. Ultimately, this data-
driven approach helps you meet customer expectations by ensuring that you always have the
right products available when they need them.

After considering your options, you decide to optimize your inventory levels using data from
historical sales and apply analytics (pattern recognition, forecast, anomaly detection, etc.) to
reduce excess stock, lower holding costs, and ensure that you have just the right amount of
products at the right time. Applying analytics saves your company money, increases their
profit margins, and increases your customer satisfaction.

2. Better risk management

Consider a manufacturer who relies on a network of suppliers, transportation, and distribution
channels to get their products to market. But what if a sudden weather event disrupts their
supply chain, leaving them without critical components? This is where analytics can help to
quantify, predict, and even simulate potential risks.

Think about the following scenario: ABC Manufacturer is analyzing historical shipping data
and notices a trend of delays during certain times of the year due to adverse weather
conditions. With this information, they can plan for alternate modes of transportation or
adjust their production schedules to avoid bottlenecks and keep their products flowing.

In this case, ABC Manufacturer is using data to better understand risks by identifying
potential disruptions and vulnerabilities before they occur. This enables ABC Manufacturer
to identify potential weak points in their supply chain and take proactive steps to mitigate
these risks. ABC Manufacturer can also use risk analytics to assess the impact of multiple
scenarios, allowing them to make the best-informed decisions that minimize the effects of a
wide range of disruptions.

With a robust risk analytics system in place, ABC Manufacturer can ensure a resilient supply
chain and maintain their ability to deliver products to market in the face of countless
uncertainties. Maintaining a record of readily accessible contingency plans to mitigate
potential risks ensures that their operations run smoothly even in the face of unexpected
challenges.

3. Increase accuracy in planning

Let us return to our manufacturing company. They must ensure that they have enough
components on hand to meet demand. They risk tying up valuable resources such as cash and
warehouse space if they overestimate demand. This can result in increased costs and
inefficiencies in the manufacturing process. Underestimating demand, on the other hand, can
lead to stockouts, missed sales opportunities, and dissatisfied customers. As a result, finding
the right balance and forecasting demand accurately are critical for the company's success
and overall profitability. Instead of relying solely on historical data to identify demand highs
and lows, the company now uses data on supplier performance, lead times, and market trends
to fine-tune production and distribution planning. The end result? Better forecasting, fewer
production delays, and happier customers.

In situations in which analyzing historical data isn't an option or wouldn't be beneficial, a

manufacturer can use other forms of analytics to assess demand for various features and
configurations. Understanding what customers want allows the manufacturer to tailor their
production plans accordingly, avoid unnecessary production of unpopular options, and
thereby save money.

4. Achieve a lean supply chain

Now, think about a factory that produces clothing. Inefficiencies in their production process
can lead to wasted materials, longer lead times, and increased costs. But what if they could
identify these inefficiencies and eliminate them? Again, analytics will help them by using
data points to pinpoint bottlenecks, streamline processes, and reduce waste. This results in a
leaner supply chain in which resources are optimized, and products move swiftly from
production to customers.

The factory analyzes their production line data and identifies a particular machine that
frequently breaks down, causing delays. By using analytics, the factory can schedule
preventive maintenance for that machine, ensuring smooth operations and minimizing
production interruptions.

5. Prepare for the future

Consider a tech company, Digital TeleCom, that designs and sells smartphones. They need to
stay ahead of the curve to remain relevant in a rapidly evolving market. But how do they
predict changes in customer preferences or emerging technologies? Predictive analytics are
the answer. Digital TeleCom can use data to forecast market trends, enabling them to adjust
their product offerings in advance. By doing so, they're prepared to meet customer demands
before they even arise.

Imagine a scenario where a Digital TeleCom uses predictive analytics to identify upcoming
trends based on social media buzz and celebrity endorsements. Armed with this insight, they
can stock up on the latest "must-have" items, capturing sales and maintaining their reputation
as a smartphone trendsetter.