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What is supply chain optimization?

Supply chain optimization makes use of technology and resources like blockchain, artificial intelligence (AI), and the Internet of Things (IoT) to maximize 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. This is 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. This is 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.

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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:

Supply chains can’t get the insight that 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 that 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.

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.

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

Play game: Detect anomalies in transaction data
Key features of effective supply chain optimization

Blockchain is a powerful technology, and when used along 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:


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



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 using AI, while reducing the complexity of supply chain management. Making it straightforward enough to be enacted by business users and owners, while 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 using 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

In a pre-Amazon world, supply chain optimization focused on investments in the design phase. Such as how to get the lowest trucking costs, where to locate the warehouse and how to ensure that 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 the 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. These networks can be described as 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.

First looks: Moving to an AI-powered supply chain

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, resulting in an increase and augmentation of the capabilities of humans well beyond what is known today.⁶ Supply chain operators use technologies, such as AI-powered control towers, to provide significant insights into performance, and orchestrate activities across the supply chain. They anticipate anomalies in logistics costs and performance before they occur and have insights into where automation can deliver significant scale advantages. These technologies continue to transform supply chain optimization:

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