Supply chain efficiency: the key to competitive advantage in 2020

It’s no secret that gaining a competitive advantage can come in many shapes and forms. From the price and quality of products or services, to the employees’ skills and the level of customer service provided, businesses face a constant battle to make themselves stand out from the crowd.

For retailers and manufacturers, supply chain and distribution logistics are critical differentiators. Sourcing and receiving materials, as well as delivering products to customers better, faster, and cheaper, is the heartbeat of every business.

This is especially true for those that operate on an international scale, where materials and products likely pass through multiple geographies, suppliers, manufacturers, distributors and service providers that often don’t communicate as efficiently as they could.

The consequences of the resulting disorder and fragmentation are numerous, which is why the importance of an efficient and well-optimised supply chain as a key factor of competitive advantage cannot be underestimated.

The pitfalls of inefficiency

When we talk about supply chains, we’re really referring to sprawling ecosystems — a coming together of disparate entities of various sizes, offerings and influence. Each organisation in these ecosystems shares three common objectives: selling more products, cutting operational costs, and reducing their inventories. These are all factors that can be significantly impacted by supply chain inefficiency.

This is something toy giant Mattel Inc. has recently discovered. Unlike its main competitor Hasbro, Mattel makes its products in 13 of its own factories instead of outsourcing its manufacturing. But weak sales have exposed inefficiencies in its manufacturing network, with the expense of running these factories, a growing product portfolio and productivity issues impacting the company’s bottom line. In an effort to cut costs, reduce its product range and streamline its operations, Mattel has announced that it is reducing its manufacturing footprint by shutting three factories — something Mattel’s Chief Supply Chain Officer Roberto Isais believes will “increase the productivity of our manufacturing infrastructure and achieve efficiencies across our global supply chain.” It’s like a story straight out of Eliyahu Goldratt’s ‘The Goal.’

This illustrates how a lack of supply chain efficiency can manifest itself in several ways that can impact a company’s success. For example, a reliance on manual planning can elongate planning cycles and in turn decrease a company’s flexibility, while an inability to align supply and demand can lead to lost money through excess inventory. From a logistics perspective, poorly optimised routing can result in fleets completing thousands of wasted miles per year. This not only has a significant financial impact, but also increases the production of carbon emissions.

But there’s no need for businesses to lose hope. By harnessing the power of artificial intelligence (AI), machine learning and advanced big data analytics — the driving forces behind this era of innovation — businesses can transform their supply chains and turn things around.

Finding an edge

While digitisation has flooded the global supply chain with vast quantities of data, the rise of these technologies provides a means of organising unwieldy datasets. With 81% of businesses lacking full visibility into their supply chain and 54% having no visibility at all, the use of AI and analytics can make a tangible difference when it comes to increasing efficiency and gaining that all-important competitive edge.

For example, by analysing data collected from multiple systems in real-time, businesses can get a clear picture of their whole supply chain and uncover insights to help them identify potential issues, whether that’s inaccurate inventory management or inefficient delivery routes. Addressing these issues can then translate into reduced friction and waste, thereby increasing efficiency and having a direct financial impact on the business by cutting costs and increasing net profit, return on investment (ROI) and cash flow.

Furthermore, applying data analytics to product recommendations through a demand stimulation tool can connect FMCGs, manufacturers, distributors and retailers in a chain so that they can buy and deliver the right goods at the right time (with fewer surprises). It can also enable dynamic pricing, where businesses can lower or raise prices in certain areas based on the items distributors have in stock.

In addition, industry collaboration and cooperation will also play central roles in enhancing existing supply chain operating models. By pooling information and applying these technologies to the resulting dataset, businesses will be able to collaborate to a greater extent than ever before, providing access to a treasure trove of insights that can help them operate in a more efficient manner.

Along with access to shared data, the democratisation of AI and machine learning tools will give businesses access to far more powerful insights than any single company could deliver alone, releasing significant value to the network as a whole. What’s more, a map of global trade will provide an opportunity to help businesses with several key problems they aren’t currently able to address.

Ultimately, an efficient supply chain comes down to optimising each stage of a product’s journey so businesses are able to get the right goods, to the right place, at the right time — all as cost-effectively as possible. This translates into selling more goods while having the flexibility to meet fluctuating consumer demands, an invaluable differentiator at a time when CEOs are under pressure to improve the financial health of their companies.

That’s why this is the year for businesses to achieve a competitive advantage by driving supply chain efficiency through the application of innovative technologies such as enterprise AI, machine learning and enterprise knowledge graphs. Those that don’t, risk losing out altogether in the race for supremacy.

To find out about the new era of supply chain AI, check out the Clear AI website now.