Cost Optimisation
December 12, 2023

Leveraging Technology for Cost-Effective Supply Chain Management

Technology's Impact on Supply Chain Management: A Cost Perspective
Romain Fayolle

The supply chain management landscape has gained the senior leadership's attention, with a lot of focus on technology at its core. In the face of global competition and high customer expectations post-pandemic, adopting tech in the supply chain is crucial for businesses aiming to stay in the race.

Technology has really changed a lot of business areas. It has also helped build some new companies altogether, but it hasn't been used as much in supply chains. A McKinsey study shows that supply chains are less than 43% digitalized compared to other parts of the business, like products, marketing, and business processes. But, technology has an enormous potential to make supply chains better.

There are many reasons for using more technology in supply chains. It can be getting better and faster information, better visibility, high efficiency and sync. It also helps in being more accurate through data-driven decisions. All these advantages, when combined, can help your company build a competitive service moat ahead of competitors.

There are many ways in which technology can help manage the company's costs. The money saved via the supply chain adds value to the bottom line.

Technology's Impact on Supply Chain Management: A Cost Perspective

Integrating technology into Supply Chain Management (SCM) not only transforms operations but also significantly reduces costs in many ways, like:

  • Tracking Technologies like GPS and RFID provide enhanced visibility throughout the supply chain. This level of insight allows for proactive management and quick response to issues, moving to Plan Bs faster. All this reduces costly delays and inefficiencies.
  • With better tracking, companies can optimize routes and inventory levels, significantly saving transportation and warehousing costs.
  • Big data demand analytics and demand sensing are crucial in understanding market demand movements. Accurate demand forecasting and short-term demand sensing prevent overstocking or understocking. This brings down costs associated with excess inventory or urgent shipments.
  • By analyzing historical data, companies can identify patterns and optimize their supply chain operations, leading to cost-effective decisions and reduced waste.
  • Robotics and AI-driven tools in the supply chain automate repetitive and labor-intensive tasks. One great example already deployed is AS/RS in warehousing. This increases efficiency by up to 67%, reduces space requirement by 85%, and significantly cuts labor costs.
  • Automated systems reduce the likelihood of human error while providing accuracy of almost 100%, which can be costly in terms of wasted resources, product defects, and customer dissatisfaction.
  • ERP (Enterprise Resource Planning) systems integrate various aspects of the supply chain from procurement to distribution. This integration streamlines processes, reducing the time and administrative costs of managing separate systems.
  • By providing a unified view of operations, ERP systems enable better resource planning and allocation, which optimizes costs and improves overall supply chain efficiency.

Technology integration into SCM is a strategic move towards modernizing operations and significantly cutting down costs. But, getting a good ROI on the tech investment requires a specialized approach to the implementation process. Next, we will discuss a 5-step process for correctly implementing tech in the Supply Chain.

A 5-Step Process to Implementing Technology in SCM

  1. Identify Needs: Start with a thorough supply chain assessment. Identify areas where technology needs intervention or an upgrade. This process blueprinting could range from inventory management to customer relationship management. This setups the base for the whole implementation process.
  2. Research and Select Appropriate Technologies: Based on the outcome of the process blueprint, research technologies that align with your specific needs. Consider factors like compatibility with existing systems, scalability, future readiness, and user-friendliness.
  3. Develop an Implementation Plan: Make a detailed project plan outlining the implementation stages, timelines, and responsible people. Use an Agile methodology to ensure faster implementation and controlled costs.
  4. Train and Equip Your Team: Preparing your workforce for the transition is crucial. Provide comprehensive training. Support the team to ensure the smooth adoption of the new technology.
  5. Watch, Test, and Iterate: Post-implementation, continuously check the performance of the new systems. Be prepared to make adjustments and improvements based on feedback and performance metrics.

Navigating the Future of SCM with Technology

Integrating technology in supply chain management is not just a trend. Instead, it's a necessity for modern businesses. Technology can significantly enhance SCM efficiency and cost-effectiveness. Holocene is your partner in this journey.

Holocene can help transform your supply chain into a robust, agile, cost-effective system. Reach out to the Holocene team today to navigate the digital era of supply chain management.