Tackling Inflation in Supply Chains with Digital Tech

Accurate demand forecasting is critical to optimising supply chain efficiencies. Underestimating demand can result in shortages that impact revenue, or higher costs as expedient measures are taken to boost supply. Overestimating can create excessive inventory that incurs storage costs and ties up capital. Good demand forecasting requires detailed real-time access to supply chain data which helps companies monitor production rates and identify bottlenecks. It is also necessary to have access to data on external forces such as weather and seasonality, that can change demand by volume or location, and enable the supply chain to respond optimally to these forces. Aggregating all available datasets across ERP and CRM systems, as well as external sources, gives organisations a more holistic and accurate picture of demand.

To maximise efficiency and guard against disruptions, manufacturers need real-time insights into every stage of a supply chain, from the gathering of raw materials to the packaging of the final product. They must be able to pinpoint the cost of every stage of manufacturing a product, identify any changes in supplier pricing as they happen to ensure the best value, and negotiate if required. They also need to be able to quickly mitigate any emerging shortfalls or bottlenecks that can disrupt manufacturing and create costly delays and unfulfilled orders.

Gaining this insight can be achieved by using a manufacturing execution system (MES), a software that connects and monitors all the machines on the factory floor and documents the process of transforming raw materials into finished goods. By enabling automated data capture from all machines, production lines and ancillary equipment, and by communicating this with ERP systems, MES can provide a real-time view of the state of the factory with visual controls and user-friendly, role-based interfaces that are essential to optimising procurement and mitigating disruptions.

Achieving optimal pricing presents many challenges. Consumer pricing must obviously cover production costs (which requires accurate cost-tracking in the first place), but in most cases, consumer pricing must also be competitive and create a level of demand that makes production sustainable. It’s very difficult to properly understand this and make adjustments accordingly without the help of data analytics.

Data analytics can be used to price products more accurately and, in the case of consumer products, drive innovation in product sizing and packaging based on consumer affordability and intent to pay. Tracking sales metrics, customer reaction, inventory levels and competitors’ pricing can enable a manufacturer to optimise pricing, and identify opportunities for new products or new customer segments.

Even with the best tools in the world providing end-to-end supply chain visibility and in-depth data on all components of a supply chain, making intelligent sourcing decisions, effectively responding to demand, optimising procurement and setting prices can consume significant human resources.

Many aspects of these processes can be automated instead, freeing up valuable human resources for more strategic activities. Moving towards a digital supply chain can deliver greater predictability, which enables manufacturers to identify opportunities for optimisation with the click of a button. Automation essentially takes the sea of data generated throughout the supply chain and condenses this into clear, actionable insights, taking the heavy lifting out of the equation.

During difficult times, it can be tempting to cut back on as non-essential expenses, but investing in technologies that deliver greater insights into supply chains, enable optimisation, and increase resilience can often lead to positive returns.

The primary investment should be in tools that deliver greater visibility into all aspects of supply chains—you cannot optimise what you cannot measure. Once CEOs have access to in-depth data, they are better placed to understand the challenges in their supply chains; simplify and standardise internal processes; and then intelligently analyse their supply chains to improve, optimise, identify new opportunities and automate where appropriate.

Written by: 

Colin Strang
Global Vice President – Pre Sales