What is supply chain optimization?

Supply chain optimization makes the best use of technology and resources like blockchain, AI and IoT to improve efficiency and performance in a supply network. An organization’s supply chain is a critical business process that is crucial for a successful customer experience. A high-performing supply chain enables business efficiency and responsiveness, so customers get what they want, when and where they want it — in a way that is both profitable for the organization and contributes to supply chain sustainability.

There are three phases that occur within a successful supply chain optimization process:

  • Supply chain design: Describes network design processes like where warehouse facilities are located and how product flows between them, and strategic objectives like demand forecasting, establishing supplies, and the planning and scheduling of manufacturing operations.
  • Supply chain planning: Includes the creation of a strategic supply chain deployment plan, inventory planning, and the coordination of assets to optimize delivery of goods, services and information from supplier to customers — balancing supply and demand.
  • Supply chain execution: Focused on execution-oriented applications and systems: warehouse and inventory management, transportation management, global trade management, and other execution applications, such as real-time decision support, supply chain visibility and order management systems.

Why is supply chain optimization important?

Supply chains are complicated, but that complexity pays technological dividends, especially when blockchain is combined with AI and IoT

A well-designed supply chain optimization process addresses the following issues:

Silos

Supply chains can’t get the insight they need because data is siloed, and they lack end-to-end visibility — ultimately this impacts their ability to meet customer needs. A supply chain optimized through connected technology is the best solution for informational silos.

 

Client needs

Rising customer expectations mean supply chains must innovate and optimize every step of the way to meet those needs. Streamlining the supply chain is a priority for organizations that want to continue to meet and exceed customer expectations.

 

Competitive advantage

Supply chains of the past focused on network design — warehouse placement and the distribution fleet. Today optimization is key to building competitive advantage and protecting the brand, with a focus on execution-oriented applications and real-time decision support.

 

Agility

How fast can your supply chain respond to change, whether customer demands, competition or supply disruptions? Modern supply chains must be agile to remain competitive.

 

Sustainability

Supply chains have enormous environmental and social impacts. Today’s customer wants to know if your goods are produced in a sustainable and ethical way, using renewable or low-impact extraction methods.


Key features of effective supply chain optimization

Blockchain is a powerful technology, and when used in conjunction with AI and IoT, its power is dynamically enhanced. The relationship begins with blockchain, which migrates from a traditional business network and brings together data of good quality across partners. Next add AI, which takes blockchain data, derives a meaningful context from it and generates powerful insights concerning potential benefits. Meanwhile, IoT acts as the interface or sensor, working at the edges to convert the physical into the virtual.

Key features of effective supply chain optimization include:

Visibility

Get up-to-the-minute inventory tracking and available-to-promise data

Intelligence

Leverage composable data and AI services for real-time intelligence

Order management

Customize pricing, send quotes, track orders and manage returns

Reporting and analytics

Evaluate patterns in processes to forecast future demand and sales

Inventory tracking

Know exactly where inventory is across the supply chain


Supply chain optimization use cases

Anheuser-Busch: Managing by exceptions

For beverage giant Anheuser-Busch, Labatt Canada, effectively managing a complicated supply chain means successfully leveraging AI, while actually reducing the complexity of supply chain management, so it’s straightforward enough to be enacted by business users and owners — keeping key personnel in control of technical processes.

The company turned to IBM Sterling Supply Chain Business Network to help standardize and centralize its supply chain operations. By using IBM Sterling Delivery Transaction Intelligence with Watson (DTI), Anheuser-Busch, Labatt Canada is able to focus on anomaly detection. The ultimate goal is managing by exceptions – having such uniform consistency across a product line that it then only becomes necessary to monitor the rare problem.

With IBM Sterling Supply Chain Business Network monitoring the transactional lifecycle of its products, Anheuser-Busch, Labatt Canada is better able to achieve its supply chain goals.

Lenovo: An AI-powered approach

When assembling its risk management strategy, PC maker Lenovo turned to IBM. First, Lenovo participated in the Watson™ Supply Chain Fast Start program. Within only five weeks, three use-case analyses had been completed on the manufacturer’s behalf.

Then Lenovo took it further, heavily leveraging IBM Supply Chain Insights to help drive its incremental revenues. Ultimately, it resulted in a dramatic reduction in the time Lenovo lost due to supply chain disruptions, driving down that time from days to minutes – often up to 90% faster.


Supply chain optimization past and future

Past

In a pre-Amazon world, supply chain optimization focused on investments in the design phase – how to get the lowest trucking costs, where to locate the warehouse and how to ensure inventory was in the right place at the right time. This worked because the world moved at a slower pace and change was manageable. Emerging technologies – artificial intelligence (AI), cloud, blockchain and the Internet of Things (IoT) – have created a different landscape. Customer demands have evolved. Sustainability issues are critical. Supply chains need answers in real time. 

Today we live in an increasingly complex global network where events happen fast. Traffic exceptions, natural disaster exceptions, customer complaints leading to image problems, and more. This creates uncertainty. How do you manage it? How do you enable decision making across the supply chain? No matter how well you plan, the forecast can go wrong.

Supply chain optimization keeps supply chains on schedule — even when conditions become less than optimal. Like when there are unexpected disruptions to a local labor supply, or when extreme weather events impact distribution, or when a looming medical crisis forces a company to rethink how it transacts business globally. Supply chain optimization helps keep your operations steady, despite potential disruptions.

Supply chain optimization today uses technology to provide superior exception management. It’s key to remaining competitive. Businesses have better visibility across the supply chain, and better decision-making capabilities in real time – not just across their own organization, but across the entire business partner ecosystem. 

Another factor in the evolution of supply chain optimization is this movement toward business networks – communities of trading partners who work and communicate on business processes that extend across multiple enterprises, with an end-to-end shared focus.⁵ These multi-enterprise business networks (MEBN) facilitate better business processes through real-time collaboration.

Future

Globalization, technology and empowered consumers are changing the way businesses manage their supply chains. According to Gartner, the supply chains of the future will self-regulate and take appropriate actions, and as a result, will increase and augment the capabilities of humans well beyond what is known today.⁶ Supply chain operators will use technologies, such as AI-powered control towers, to provide significant insights into performance, and orchestrate activities across the supply chain. They’ll anticipate anomalies in logistics costs and performance before they occur and have insights into where automation can deliver significant scale advantages. These technologies will continue to transform supply chain optimization:

  • Artificial intelligence: Intelligent, self-correcting AI will make inventory monitoring more accurate and reduce material waste.
  • Internet of Things: Data from IoT sensors will provide insight into inventory location and status.
  • Blockchain: Will verify authenticity, improve traceability and visibility, and improve transactional trust.
  • Intelligent order management: Supply chains will master inventory visibility with improved demand forecasting and automation.
  • Quantum computing: Unprecedented computational power will solve previously unsolvable problems.
  • Digital twins: Digital twins – virtual representations of complex creations – let you track objects through entire lifecycles.

Learn more about supply chain optimization

IBM Sterling Supply Chain Blog

Insights on building an intelligent, self-correcting supply chain.

IBM Supply Chain Community

Discover more about B2B Integration, Managed File Transfer and Order Management solutions and best practices from a community of users and experts.

IBM Supply Chain Events

View all our upcoming events, such as THINK, webinars and more.

Related IBM solutions

IBM Sterling Inventory Visibility

Enables up-to-the minute inventory tracking and accurate available-to-promise data, even in businesses with high volumes and many SKUs.

IBM Sterling Supply Chain Business Network

View all relevant transactions from a single dashboard to quickly pinpoint and assess issues allowing resolution in minutes, not hours.

IBM Sterling Supply Chain Insights with Watson

Predict, quickly asses and more effectively mitigate disruptions and risks to optimize supply chain performance with AI-powered capabilities.

IBM Sterling Delivery Transaction Intelligence with Watson

Provide permissioned trading partners with an immutable shared record of real-time, security-rich digital transactions powered by IBM Blockchain.