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Here's why analytics is eating the supply chain

Katherine Noyes | May 2, 2016
New tools are helping companies achieve the supply chain's 'holy grails,' one CIO says.

By segmenting its stock according to demand and other characteristics and focusing on high-value, high-volume and high-urgency items like that rattlesnake antivenom, H. D. Smith can now keep its inventory better aligned with what it will actually sell and when.

"We've achieved an actual reduction in inventory on hand and an improvement in service levels," said Guzman. "Those are the holy grails of supply chain."

Bottom line: H. D. Smith's target service level is to be able to meet demand 98.5 percent of the time. In 2014, before it began fully tapping FusionOps' analytics, it hit that target two months out of the year. Since July 2015, it's hovering around 99 percent, beating its target every time.

Tens of millions of dollars

This is not to say that supply-chain professionals are newcomers to the world of analytics. On the contrary: Demand forecasting, for example, has "been around forever" and relied heavily on data, said Paul Myerson, an author and professor of practice in supply chain management at Lehigh University.

What's new today are the tools.

"Today we have very visual tools that are much quicker to run," Myerson explained. "What used to take overnight can now be done in minutes."

New software is also enabling more collaboration among partners, including key customers and suppliers. Point-of-sale data provides better insight for everyone involved, leading to better forecasting decisions.

"It's about agreeing on forecasts and collaborating on inventory throughout the supply chain," Myerson said. "It really improves efficiency, cost and quality, and not just for manufacturers."

Equipped with better analytics, companies can achieve tens of millions of dollars in savings along with improved service levels, he said.

Multiple organizations are involved in any supply chain, each with its own profit motives and objectives, noted C. John Langley Jr., a professor of supply chain management at Penn State University.

"Each has to fight for their own existence, and each depends on the success of the supply chain to stay in business," Langley said.

All those many pieces mean that supply chains are often made up of many different software silos, said Gary Meyers, CEO of FusionOps.

"There's ERP, there's logistics software for moving the product, there's planning software and more," Meyers said. "The challenge is to see what's going on end-to-end. That's often a real struggle for customers."

'It's table stakes'

Volatility in the marketplace is adding particular urgency to that struggle. Factors such as changing customer preferences, commodity prices, global unrest and weather patterns are all "putting enormous pressure on supply-chain leaders to make sure they get the right product to customers at the right price and the right time," said Rod Johnson, a group vice president with Oracle, whose SCM Cloud offering focuses on providing new visibility across the supply chain.

 

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