SupplyChainDesign Archives

Is your supply chain a growth driver for your business? If not, it is time to take a closer look at supply chain design. A well-designed supply chain can transform your business by increasing efficiency, reducing costs, improving customer satisfaction, and providing a competitive edge. In this blog post, we will explore 7 ways supply chain design can transform your business and turn challenges into opportunities.

What is supply chain design?

Supply chain design is the process of creating an optimal strategy for moving goods from suppliers to end customers. It involves building an optimal network of organizations, people, activities, information, and resources involved in the production, handling, and transportation of goods. It includes a range of tactical as well as strategic decisions.

Some examples are defining the optimal warehouse footprint or where to invest in production capacity based on a point-of-gravity or greenfield analysis. Other decisions involve optimizing sourcing based on total landed cost, analyzing the transportation system, or managing resources throughout the supply chain. Additional examples are balancing supply and demand based on lowest cost or highest profit or conducting a cost-to-serve analysis to gain insight into the actual cost of reaching each customer.

Now that we have sorted out what supply chain design is, let us explore 7 ways supply chain design can transform your business.

1. Become proactive rather than reactive

One common misconception about implementing supply chain design is that it is a large and complicated task that only needs to be done occasionally. This cannot be any further from the truth. Yet, many companies engage in supply chain design reactively, after a crisis, or repetitively but too rarely.

By using a structured supply chain data model, companies can empower their supply chain design process and become proactive rather than reactive. By testing different strategies in a sandbox environment, companies can improve their supply chain design and be better prepared when crises occur – or avoid them altogether.

2. Effectively balance supply chain key factors

While supply chains are becoming increasingly complex and data volumes continue to rise, businesses are facing greater challenges in achieving the optimal balance between cost, service, risk, and sustainability. Making the best decisions in this context requires a delicate equilibrium between all these dimensions.

Fortunately, advanced algorithms offer a way for companies to continually review and adapt their strategies, ensuring they are making the most informed decisions that effectively balance these key factors. By leveraging the power of data-driven insights, businesses can fine-tune their operations to reduce cost, deliver exceptional service, minimize risk, and promote sustainability.

3. Respond more effectively to changes

The current macroeconomic situation has created a pressing need for businesses to reduce the time it takes to answer critical business questions. Supply chain leaders are exposed to more questions in shorter time spans than ever before.

A robust supply chain design process that incorporates an end-to-end data model and purpose-built applications empowers leaders to take control of their data and develop strategies to respond more effectively to changes. By adopting new technologies and a continuous supply chain design process, companies can respond more effectively to changes and turn their supply chain challenges into competitive advantages.

4. Make fact-based supply chain decisions

Given the complexity of supply chain and the increasing demand for fast decisions, it can sometimes be challenging for companies to find the time to get the facts on the table and conduct a thorough analysis. Many companies still rely on spreadsheets, which often lead to hasty shortcuts and inaccuracies.

To stay ahead of the competition, leading companies are turning to modern technologies to fundamentally rethink and transform their supply chain processes. By using advanced tools and techniques, they are able to gain a deeper understanding of the complexities of their supply chain networks and leverage continuous scenario planning.

Companies that successfully incorporate network optimization applications into their decision-making processes gain insights that were previously impossible to obtain solely through experience. Furthermore, these tools provide an objective view of the data, which can challenge long-held assumptions and lead to more accurate decision-making.

5. Increase long-term supply chain resiliency

In supply chain design, the traditional trade-offs have been focused on cost, service, and risk. In recent years, also sustainability has been taken into account while ESG (Environmental, Social, and Governance) has become increasingly important. However, the prevailing approach has still prioritized cost, giving it a higher weight in decision-making. This has led to trade-offs that prioritize short-term cost savings over long-term resilience. But fact remains that a resilient supply chain is critical not only during times of crisis but also in everyday business operations.

To address this challenge, it is essential for companies to balance resilient thinking with the need for faster decision-making. This requires having alternative options already in place and maintaining them over time, so that reactive decision-making can be avoided in favor of strategic analysis. By adopting a long-term perspective, companies can ensure that cost-efficient decisions are also resilient and sustainable over time.

6. Allow for multiple users of supply chain technology

Historically, advanced technology in supply chain design has only been accessible to a select few. This has resulted in bottlenecks and prevented companies from realizing the full potential of running multiple scenarios in a short time span. But with today’s technology, it is possible to create personalized user experiences and bespoke applications that cater to the needs of a much larger pool of users. This allows for tailored solutions where more stakeholders can conduct the scenario analysis.

7. Improve collaboration through increased visibility

The supply chain design process plays a crucial role in increasing supply chain visibility. It not only offers a holistic view of the end-to-end supply chain. It also includes potential future supply chains generated by what-if scenarios. This enables companies to establish a common analytic platform and view of data, rather than creating silos with multiple versions of the same information.

By adopting this approach, all analytical tasks within the supply chain can be based on the same data and assumptions. These can be governed and maintained in a cross-functional arena, promoting collaboration and enhancing efficiency.

Are you ready to take your supply chain to the next level?

I hope this article gave you some useful knowledge and insights into how supply chain design can transform your business and turn challenges into opportunities. At Optilon, we know that navigating the complexities of supply chain design can be challenging. But the rewards are truly game-changing. By implementing sustainable supply chain design strategies, you increase your chances of beating the competition.

Are you ready to take the leap and revolutionize the way you do business? Our team of experts is here to guide you every step of the way. Don’t let your competitors get ahead – contact us today and let us embark on this exciting journey together.

Yes, I am ready to beat the competition. Let us book a meeting today!

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The past eventful years have had a profound impact on global supply chains. It has exposed vulnerabilities in the system and highlighted the need for resiliency. In this context, supply chain design has become increasingly critical. For many businesses, it may seem like a massive challenge lies ahead. But the reality is the time to embrace supply chain is now. Companies that see and make good use of the opportunities presented in this new supply chain era we are entering can achieve significant competitive advantages now and in the future.

Macroeconomic effects on the global supply chain

A lot has happened in the world lately. We are now living with the legacy of a transformation that has taken place in the past few years. It started with the coronavirus outbreak leading to shutdowns of factories as well as ports worldwide. This had a massive impact on global supply chains and challenged many businesses worldwide. Then, as we all hoped the pandemic would be the worst hit of the decade, the invasion of Ukraine happened. Sanctions against Russia, increased inflation rate, and higher global commodity prices, among other consequences, caused further disruptions in global supply chains.

We now find ourselves in a macroeconomic situation where geopolitical events and new economic conditions are forcing companies to really think about their supply chains: How resilient are they? And what is the best strategy to stay competitive in the global market?

The focus has shifted

Five years ago, few raised an eyebrow when businesses decided to source energy from countries such as Russia or move production to low-cost countries such as China. But now, due to the current state of the world and increased vulnerability, priorities have changed. The focus has shifted from keeping costs down to minimizing risk exposure, shortening lead times, improving service levels, and ensuring supply chain sustainability.

Businesses are no longer willing to take the risks involved in long-distance sourcing, and they are becoming more selective in which countries they choose to do business with. At the same time, supply chain sustainability has emerged as a key corporate goal. Due to stricter laws and regulations but also increased consumer demands, businesses must now navigate a new regulatory landscape and manage both supply chain risks and opportunities related to environmental, social, and governance criteria.

Are local supply chains the answer to vulnerability?

As a response, many companies are considering shifting from a global to a regional supply chain setup. While this has quickly become somewhat of a global megatrend, it is, however, important not to jump on the bandwagon just for the sake of it.

Here is an example: A global medtech company provides the European market with hearing aids. They produce their products in China to keep costs down. But now they decide to move their production closer to their customers in Europe. By moving the production to Europe, they hope to reduce vulnerability in the supply chain. However, in Europe, there are no suppliers that can provide the medtech Company with the material they need to produce their hearing devices. The medtech company ends up having to still source the material from suppliers in China. Although production is now closer to their European customers, the problem remains.

Add to the equation the complexity of a much broader product portfolio with multiple suppliers, production sites, distribution points, logistics partners, network nodes, customer segments, and markets – and you can imagine the challenge.

How to design an optimal supply chain

Shifting from a global to a local supply chain setup is not a universal solution that fits all. In fact, there is no “one size fits all” solution for optimal supply chain design. Each company needs to thoroughly analyze their current supply chain setup to design the best solution for their business. The first question to ask is: What is the most important for my business? Is it reducing cost, minimizing risk exposure, shortening lead times, improving service levels, or ensuring a sustainable supply chain?

The answer will be different for every company. Here are a few examples:

For a company that produces standard products, keeping costs down is probably central as their customers are only willing to pay so much. A company that sells spare parts probably prioritizes fast delivery times over cost as their customers will immediately turn to competitors if they have to wait for the products – and they are probably prepared to pay extra for that. A retail company with high requirements for recycling materials and lowering CO2 emissions probably has sustainability on top of its agenda – and so on.

Most companies are likely to seek a balance between all the dimensions – cost, risk, lead time, service level, and sustainability to make trade-offs between risks and gains and conclude when to use which supply chain strategy or setup.

In addition, today’s debate is very much centered around supply chain from a supply perspective. But equally important is the customer perspective. Businesses need to think not only about what provides orders but also what provides customers: What requirements do customers have in terms of cost, time, service, and sustainability? And what are the consequences of these requirements on the supply chain?

The new supply chain era brings possibilities

For many businesses, it may seem like a massive challenge lies ahead. But the reality is the time to embrace supply chain is now. Supply chain has gone from being a decentralized issue to becoming a CEO issue and a boardroom-level topic. In fact, the willingness to invest in supply chain has never been stronger. Now, post-pandemic, we are entering an era full of opportunities – and now is the time to make good use of them.

Do you want your supply chain to be a growth driver and engine for your business? Don’t just go with the flow and follow the next big trend. Ensure you put time and effort into analyzing your current setup in order to create a more agile, customer-focused, and resilient supply chain.

Do you need help from an expert?

Are you considering redesigning your supply chain to stay competitive in the global market? Perhaps, you are unsure what setup is the best for your company or what options or possibilities there are? At Optilon, we are experts in efficient supply chain decision-making. We help businesses build, strengthen, and optimize supply chain design through well-proven processes and technology. We can help you create a future-state roadmap with scenario comparisons and analyses, articulate supply chain complexity and relevant actions, evaluate the consequences and risks, and make decision recommendations. Sounds interesting?

Let Optilon unlock the potential of your supply chain. Book a meeting today!

That supply chains are not only the backbone of any business, but fundamental for success, has become evident in the past few years. Staying up to date with trends is imperative for any Nordic business to plan for the future and stay competitive in the global market. In this article, I share 7 global supply chain trends in 2023 to help you out.

1. Shifting focus from only cost to also risk

Looking back at the past decade, the majority of companies in Scandinavia and Northern Europe have been characterized by outsourcing their production to low-cost countries such as China. The same goes for sourcing raw materials and components. But in the past few years, the world as we know it was turned upside down. The dramatic events of the COVID-19 pandemic, the Suez Canal blockage, and the invasion of Ukraine all caused significant disruption to global supply chains.

As a result, Scandinavia and Northern European companies have started to realize that although cost-efficient, single sourcing from Asia is not very resilient to changes – regardless of size – may they be massive, like a pandemic, or small, such as fluctuation in market demand. This has now led to more companies shifting focus from only cost to also risk. And minimizing those risks has rapidly risen to the top of their agendas.

2. Reshoring – bringing production home

As part of this shift, Scandinavian and Northern European companies that are outsourcing from Asia are considering buying a return ticket. In fact, we are already starting to see examples of reshoring in Scandinavia and the Nordic countries where businesses are bringing their entire or parts of their production home.

By moving their entire production home or sourcing from both Asia and Europe, they are looking to increase their chances of withstanding failure in the primary supply chain and reduce their overall supply chain vulnerability. However, to do that, it is important to have the right tools in place for efficient supply chain planning and smart use of resources.

3. Moving towards differentiation

In the aftermath of the pandemic and invasion of Ukraine, we are also seeing an increased focus on differentiation, where companies are looking to set themselves apart from the competition through new price points and inventory strategies.

With inflation pressures, consumer behaviors and customer demands are shifting from high-end products to more affordable ones. At the same time, businesses are focusing on cost efficiency to prevent their capital from going through the roof.

To meet the demands for availability and service level – while at the same time keeping inventory costs under control – companies realize they need to become more granular and specific in how they control and optimize their inventories.

As a result, we are now seeing more businesses moving away from manual and semi-manual processes and using “one size fits all” types of rules toward differentiation, digitalization, and automation.

4. Prioritising supply chain design

Another strong trend that has emerged as a result of the increased supply chain awareness is the need for companies to improve their supply chain design. This is particularly noticeable in companies with high supply chain complexity.

Supply chain complexity can arise from several sources – network nodes and links, internal and external processes, product and service range, product design and development, supplier integration, and information and organizational complexity.

While companies are adding the cost and risk dimensions into their supply chain design, two more dimensions need to be considered to secure resiliency. The first is service level, which includes the ability to offer short lead time to customers. The second is sustainability, which includes the ability to map the current CO2 footprint and find new supply chain set-ups that will reduce CO2 emissions without a large negative impact – or even reduction – on cost or other dimensions. As the global market for emissions credits matures, this will also be part of the equation.

Companies must review their supply chain based on all four dimensions to create a shared view of the supply chain and find their trade-off. If companies can do that, their chances of securing continued competitiveness and obtaining sales will increase.

5. Creating a digital twin of the supply chain

More companies are embracing digital technologies to help them design their supply chains and outsmart disruption. One critical component of this shift is using a digital twin. A digital twin is a digital representation of a company’s end-to-end supply chain network.

You can look at it as a sandbox extension of your supply chain: By recreating your real supply chain in a virtual world, you can apply what-if scenarios and create versions of the future to model alternative scenarios for uncertain areas within your business. This enables you to efficiently make trade-offs between risks and potential gains and conclude under which pre-conditions to use which supply chain setup or strategy.

Instead of assessing your supply chain every third year, you can use your digital twin to review your setup annually, semi-annually, or even quarterly, as well as ad-hoc. Slowly but surely, the digital twin is becoming a key component of future supply chains. It will be the common playground for sales, sourcing, supply chain, and sustainability to gather around. It will also help companies break silos and adopt a more holistic approach.

6. Supply chain automation, robotics, and AI

Tapping into digitalization and technology, the use of automation, robotics, and AI in supply chains continues to be a strong trend. Automated solutions for supply chain tracking, inventory and warehouse management, and back-office tasks have allowed for leaps forward in labor productivity performance. The shortage of truck drivers has catapulted the transport industry into the forefront of AI and autonomous vehicles.

Although these new technologies have the potential to reshape the entire supply chain, many of them, especially AI, haven’t fully matured and reached their full potential yet. Inserting AI into a data system (ERP or similar) will not automatically generate a ready-made business strategy. As with any other data analysis, it still takes a lot of work to collect the data, transform it, and ensure it is high-quality and connected. Once that is done, you can start accessing all the business value AI can bring.

While there are efficient AI solutions today for forecasting, promotion planning, and data correction, for example, we will see more and better applications of AI, machine learning, and reinforcement learning for various supply chain problems in the future.

7. Sustainability and transparency in focus

The future consumer market will be shaped by millennials and Gen Z. If a business wants to survive in the next century, its strategies must align with the priorities and values of these consumers. Millennials and Gen Z expect companies to be more visible, active, and transparent. They don’t settle for less than proof and demand sustainable supply chain practices addressing climate change, human rights, and corruption.

As a result, the tracking trend is intensifying. More companies are using RFID tags, QR codes, and blockchain technology to identify and track the entire chain of movement on the way to the end consumer. Tracking also provides companies with better data for improving supply chain operations, reducing costs, and proving a product’s origin.

With the increasing demand from millennials and Gen Z, we are also seeing companies shifting from linear supply chains to circular supply chains to minimize waste and environmental impact. This shift is a no-brainer for some companies, while others struggle to find a suitable circular supply chain model.

How efficiently do you use your resources?

Supply chains are no longer a marginal concern for businesses. Today, supply chain knowledge and experience should have a given place in the boardroom as more companies realize supply chain is about much more than merely cost reduction. It is a possibility to differentiate, create strong offers, and stand out from the competition. At Optilon, we believe Nordic companies have the potential to be the most competitive in the world. They just need to use their recourses more efficiently than their competitors to get there.

Do you need the help of a supply chain expert? Book a meeting today!