We know that too much inventory (or the wrong inventory), results in waste, ties up capital and incurs operating overheads – but conversely, not having what customers want, when they want, results in lost sales. Supply Network Optimisation (SNO) unravels that dichotomy through three mechanisms:

1. Knowing Demand and Supply

Know demand and supply in all the layers of the supply network (from your supplier’s supplier through to your customers’ customers) by means of

1. 1. forecasting
   2. real time integration
   3. product selection
   4. customer alignment
   5. creating demand through new product development

The people closest to the end customer have the best understanding of the likely demand.  By comparing historic trends, forecast and real time data we can fine tune supply chain models and automate intervention.   We have a trustworthy demand / supply model when we understand the deltas between historic trends, forecast and real time data and can supply just in time.

2. Keeping stock early in the supply chain

Keeping stock (or the cost of inventory) as early in the supply chain as possible, because that is where the partial cost to supply is lowest. Assuming a reliable demand model, you can leverage centralised warehousing, just-in-time shipping and consignment stock / vendor managed inventory to take inventory out of the system, while at the same time drastically improving product availability.

3. Value Based Supply

Maintaining value-based supply relationships (rather than cost based ones). All of this only works if all the parties in the Supply Chain work together – hence calling it a Supply Network. Fortunately, each layer in the supply chain values something else.  If you have to pay a premium to get what you need when you need it, it is still better than not having it. If you understand your suppliers’ and your customers’ value model (and your role in it) pricing becomes an easy conversation and is usually the last point of order.  All the parties working closely together to understand the value exchange ensures successful Supply Network Optimisation.

Benefit

A typical, unoptimised supply network will have double the capital tied up in inventory that it needs to and would rarely achieve better than 90% product availability as opposed to a target 98%.  It does differ from segment to segment and also where in the supply chain you are, but these numbers are not uncommon and are indicative of the impact of SNO.