Top 3 Ways for Supply Chain Optimization in 2024

Supply chain optimization was important even before the Covid-19 pandemic created congested ports and labor shortages in global supply chains. As the global geopolitical situation creates new supply chain challenges (see Figure 1) for organizations around the world, business leaders and governments are putting more effort into strengthening supply chain operations.

Figure 1. Global supply chain disruption level

Source: WEF

This article explores 3 ways to optimize supply chain operations to assist supply chain leaders in operating and growing their businesses in the ever-changing business environment.

1. Strive towards resilience

Prior to the pandemic, most supply chains worked towards lean operations and reduced inventory levels. While working in complex distribution channels with third parties, the main aim was to keep the goods circulating with lower levels of inventory and costs and increasing sales.

However, this system was vulnerable to disruptions such as the pandemic. Now supply chain leaders are focusing on resiliency, or in other words, the supply chain’s ability to be able to respond to sudden fluctuations and volatility in demand and supply.

Here are some ways you can improve supply chain resilience:

Bring production closer

Relying less on offshore suppliers and manufacturers is a way to improve supply chain resilience. Reducing the distance between supply and demand can significantly reduce logistics lead times. 

For example, Ford recently moved its battery producing plant to home (South Michigan) due to increasing demand for electric cars and getting more control over the supply.

Expand supplier network

Having a higher level of inventory with a few suppliers will increase the dependence on those suppliers. If those suppliers fail to deliver, the whole supply chain may shut down. Increasing your supplier network and making it more diversified will help supply chains maneuver through major supply disruptions.

Optimize inventory management

For a market with volatile demand, supply chain leaders are now focusing on implementing a just-in-case inventory model, where inventory is kept in large quantities at different hot spots of the supply chain.

2. Move towards digital 

Even though many business leaders understand the importance of supply chain optimization, few have turned words into actions. Organizations need to focus more on implementing digital solutions to improve their supply chain performance.

Leverage digital solutions

• Implementing digital supply and demand planning tools can help improve predictability. 
• Using centralized supply chain management software can enable integration in your supply chain.
• Technologies such as IoT can help improve shipment tracking.
• Artificial intelligence can enable accurate demand forecasting to eliminate uncertainty in the supply chain and achieve supply chain automation.
• Digital twin technology, or DTO, can also enable supply chain optimization by reducing bottlenecks, making planning more accurate, and improving the anticipation of future disruptions and risks.
• Enhancing supply chain visibility is another way of improving resilience. Through digital collaboration and communication solutions, supply chain managers can have a better view of their vertical and horizontal supply chains.

To learn more, check out our comprehensive article on how digital transformation can improve supply chain and logistics operations.

Balance digital technology and dexterity

Successfully implementing digital solutions in your business requires also transforming your human resource. Reskilling and upskilling the workforce is important to achieve a balance between digital technologies and digital dexterity. 

To learn more, check out our article on how to strengthen digital dexterity in your business.

You can also check our sortable and filterable list of digital transformation consultants to guide your digital transformation journey.

3. Focus on sustainability

Sustainability is considered to be only about environmental issues, but this is not the case. Sustainability can not only help reduce carbon emission but also drive profitability, increase productivity, reduce costs, and ultimately improve the company’s environmental, social, and governance (ESG) score. 

Strive towards environmental sustainability

Customers want more sustainable products, and they are willing to pay for them. This demand will increase as environmental awareness spreads across the globe. Environmental sustainability can also have financial benefits, such as pollution tax-saving and government incentives on emission reduction.

The supply chain accounts for the largest chunk of carbon emissions in an organization, and here are some ways to decarbonize it:

• Encourage a sustainable culture across the organization
• Create a separate department for supply chain sustainability
• Optimize logistics operations with green solutions
• Work with carbon consciousness organizations

To learn more, check out our article on how to reduce your corporate carbon footprint

Strive towards social and economic sustainability

Social sustainability refers to ethical practices within the supply chain. This involves sourcing from sustainable suppliers and encouraging ethical internal and external practices. These unethical practices in the supply chain can lead to expensive lawsuits and can damage the company’s reputation.

Having a positive work environment not only increases employee morale and productivity but also helps avoid the significant costs of firing and hiring new employees. 

Improving supply chain sustainability can also lead to significant economic benefits such as reductions in costs. For example, energy efficiency across the supply chain can reduce substantial costs and carbon emissions at the same time. 

BCG explains the importance of supply chain sustainability:

Attract business partners

By improving supply chain sustainability, potential business partners can get attracted to collaborate. Since collaboration is an important part of supply chain optimization, sustainability can help attract potential suppliers and other business partners to join the supply chain. 

To learn more, check out this quick read on how to improve supply chain sustainability.

Further reading

• Supply chain automation
• Supply chain trends
• Digital transformation in supply chain and logistics
• Improving supply chain sustainability
• Improving supply chain visibility
• Improve supplier relationship management

If you have any questions regarding Supply chain optimization, feel free to contact us: