Data drives better decisions. That’s the foundation underpinning supply chain analytics, a discipline that allows organizations to mine insights from its procurement, manufacturing, inventory management, warehousing, and distribution activities.

 

Leveraging these insights, companies gain the opportunity to reduce costs, increase efficiencies, better manage potential risks, plan more effectively, and create a more resilient supply chain that’s capable of flexing in response to today’s challenges.

 

In this article, we’ll walk you through a complete explanation of supply chain analytics: what it is, why it’s important, what benefits it can offer, and what challenges companies might encounter in this arena. With this understanding, you’ll have a better grasp on this logistics concept—and whether it’s something you want to investigate further.

What Is Supply Chain Analytics?

Supply chain analytics involves analyzing the data from all the activities along the length of a company’s supply chain—including procurement, manufacturing, inventory management, warehousing, and distribution. As a crucial aspect of supply chain optimization, supply chain analytics offers companies the opportunity to make better decisions as they plan, source, produce, and deliver products.

 

Supply chain analytics may gather data from a variety of different systems: inventory management, order management, warehouse management, and transportation management—among others. Some of these systems may come with their own analytics tools already installed. Other companies may choose an external solution that integrates all of their systems and gathers data in a single spot.

 

What Is the Objective of Supply Chain Analytics?

The objective of supply chain analytics is to give an organization the data-driven insights it needs to make better business decisions, both now and into the future. Supply chain analytics offers companies a way to spot emerging problems, better manage future risks, plan more effectively for the future, and create efficiencies that reduce both costs and waste.

What Is an Example of Supply Chain Analytics?

PepsiCo’s Sales Intelligence Platform offers a tangible example of the power of supply chain analytics in practice. The company—whose brands include Lay’s, Doritos, Cheetos, Quaker, and Frito-Lay—uses the platform to combine data from retailers along with data from PepsiCo’s own supply chain predict when items will go out of stock. After all, simply put, if items aren’t available on grocery store shelves, they simply can’t be sold.

 

With the data from their Sales Intelligence Platform, PepsiCo’s field teams can approach store owners with a recommended list of items to stock up on to prevent out-of-stock situations. As a result of its supply chain analytics efforts, PepsiCo has seen a measurable decrease in out-of-stock scenarios, while increasing sales.

What Is the Benefit of Supply Chain Analytics?

Supply chain analytics offer better insight into a company’s operations, including areas that are going well and areas that could be improved. When paired with machine learning tools, supply chain analytics software can transform a massive amount of historical data into useful, actionable information.

 

All of this allows a company to:

 

Create More Accurate Forecasts

Amazon formerly looked to its human team members for forecasting, inventory management, and pricing strategies. However, a few years ago, Amazon started managing these items through machine learning algorithms—refined by historical data from both internal and external sources. The more accurate sales and inventory forecasts convinced Amazon to continue to let the algorithms do their work without the intervention of humans.

Spot Potential Risks Earlier

By analyzing massive amounts of data, supply chain analytics programs can assist in spotting trends—and recognizing potential risks. Without the visibility that supply chain analytics provides, those risks might go unrecognized until they become a true problem.

Additionally, with full visibility along the length of the supply chain, a company can better equip itself to handle any disruptions. Team members will have the information they need to create a plan and minimize impact, as well as prevent similar problems in the future.

Increase Efficiencies & Reduce Costs

By aggregating and analyzing available data, supply chain analytics software can make it easier for supply chain managers to spot inefficiencies. By targeting these areas, they can streamline operations, reduce waste, and reduce expenses.

The Challenges of Supply Chain Analytics

Of course, as with any initiative, companies will experience some challenges in their supply chain analytics activities, which include:

 

Massive Amounts of Data

In the last few years, the amount of data available for analysis has grown exponentially. IBM research comparing 2012 to 2017 estimated that, during those five years, the available data grew by a factor of 50. Additionally, the vast majority of that data is what IBM calls “unstructured or dark data,” which isn’t easy to analyze.

 

Advances in machine learning have assisted in this arena, by parsing data into actionable insights. Without these advances, though, human supply chain managers can find themselves spending significant time and energy to sort through available data to find meaningful information.

 

Lack of Systems Integration

When a company’s complete supply chain activities—from procurement through distribution—pass through a single system, it’s significantly easier to spot trends and potential pitfalls across the entire business.

 

However, when different systems handle different aspects of the business—and those systems don’t talk to each other—generating those business-wide trends can be tough. In other words, some companies may lack the integration—and, therefore, the visibility—to leverage analytics across company activities.

 

Cybersecurity

On the flip side, as companies fully integrate their systems—and leverage technology like IoT devices—they can become more susceptible to cyberattacks. This is especially true if they’re allowing third parties, like suppliers, to connect to their systems. As companies continue to invest in technology, they also need to invest in cybersecurity to protect their systems going forward.

 

Better Data, Better Visibility, Better Decisions

Supply chain analytics offer companies a significant opportunity—a chance to use the past to improve upon the future. This includes the possibility for reducing costs, increasing efficiencies, managing potential risks, and planning more effectively—all of which add up to a supply chain that’s built to last.

Want to talk with our experts further about leveraging technology to manage and optimize your supply chain? Reach out for a complimentary consultation. We’d be happy to help you uncover new efficiencies to help your supply chain perform at its peak.

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