3 Compelling Reasons To Look At Supply Chain Analytics

  • Ed Thompson, CTO
  • March 18, 2014

Supply Chain Analytics - 3 Compelling ReasonsIt’s not difficult to see why there’s a strong interest in supply chain analytics. These days, most companies have a fairly good handle on their manufacturing operations, and in some industries—electronics, for instance—direct manufacturing now accounts for 5% or less of overall product cost.

But as the relative proportion of cost represented by direct manufacturing has shrunk, the proportion represented by the broader supply chain has risen. Especially so in industries exposed to soaring commodity prices, or globalisation.

The challenge: determining what exactly drives that supply chain cost, much of which—by definition—resides outside the four walls of the enterprise. And this where supply chain analytics comes in.

Simply put, supply chain analytics shines a light on supply chain policies, procedures, and practices stretching from distant suppliers to the receipt of goods by the customer. The goal: highlighting missed opportunities to drive down cost, drive up efficiencies, and improve customer service and satisfaction.

How? Let’s take a look at supply chain analytics in action.

Supply chain analytics and procurement spend

ERP systems do a great job when it comes to carrying out upstream procurement transactions. From raising a requisition to placing a purchase order on a supplier, you can rely on ERP to handle all the paperwork.

But beyond that, it turns out that ERP systems aren’t really equipped to answer some surprisingly basic questions. For that, you need supply chain analytics.

Take sourcing, for instance. Are we buying the same part from multiple suppliers? How much are we spending in total with each of our suppliers? What opportunities exist to consolidate spend on fewer suppliers?

Even more compellingly, supply chain analytics can illuminate issues of contractual compliance. Are agreed prices those that are actually invoiced? Do promised volume discounts get applied? Are we being charged ‘extras’—such as carriage—when we shouldn’t be?

With all of these areas, supply chain analytics can provide valuable insights.

Supply chain analytics and the final mile

And what of the downstream supply chain? Again, supply chain analytics can shine a light.

What opportunities exist to group customer deliveries together? What opportunities exist to re-order delivery routes in order to achieve fewer journey miles, or do more drops per route?

What is the weight profile and distribution profile of our despatches, and would different transport or carriers do the same job more cheaply? Are our terms of business encouraging customers to place uneconomic order quantities on us? And are we missing opportunities to provide superior customer service?

The answers to such questions aren’t complex, but they do require data—data that is difficult to obtain ready-packaged from ERP, even though it’s the ERP system where most of it resides.

So, once again, it’s the job of supply chain analytics to carry out the ‘heavy lifting’, transforming raw data into actionable insight.

Supply chain analytics and inventory management

Finally, supply chain analytics can provide valuable insights into the effectiveness of a business’s inventory management.

How are inventory holdings related to the variability of demand? Do some products regularly stock-pout, while other almost never do? Is the demand for some products linked to the demand for others? Are the assumed replenishment and re-stocking periods that are built-into ERP actually borne out in practice?

Again, such questions aren’t rocket science. But ERP on its own is surprisingly ill-equipped to answer them, leading to missed opportunities to both reduce over-stocking and maximise sales through eliminating stock-outs.

And again, supply chain analytics provides the key to unlock the answers.

Supply chain analytics: the bottom line

How best to deploy supply chain analytics, though? Specialist packages certainly provide a rich compendium of techniques and toolkits.

But such specialist packages don’t come cheaply, and may be considered overkill by businesses which simply want to run periodic analyses to make sure that things are on track.

In which case, a low cost Business Intelligence solution, leveraging the cloud, is probably the simplest, quickest, and cheapest way to get at the answers that supply chain analytics can provide.

And at here Matillion, we’re experts in helping our customers do exactly that.

Download our free Ebook to find out more.