Imagine a serene lake that’s home to an annual model boat race. The gentle breeze is helping your model boats sail smoothly past leaves and debris. But then, suddenly, you’re swept into a whirlpool alongside other racers. You didn’t see it coming and certainly didn’t expect a deluge 100+ miles away to trigger something so unexpected. That’s similar to what happens when you’re trying to manage logistics alone. You miss the dangers because you’re hyper-focused on your pride and joy–your business. Now, you need to think more strategically if you want to reach the finish line. You need optimization, and that means you have to double down on prioritizing supply chain operations.
Supply chain optimization is more important than ever in today's highly competitive market. Inefficiencies often lead to inflated costs and lost revenue, making it crucial for businesses to identify and address these issues. However, improving the supply chain tends to fly under the radar, overshadowed by expectations for more revenue, sales, and customer service. It’s a delicate dance among all the parts of your business.
Rather than focusing on sales exclusively, consider how improvements in your supply chain could yield dividends beyond imagination. Here are the basics and how they lead to more revenue.
Supply chain operations software is growing in demand
The biggest indicator of growth in supply chain operations and management can be found by reviewing the data surrounding software market size. Consider that the market share for supply chain management software is expanding. As shared by Statista, market share is projected to reach $20.13 billion by the end of 2024. That amounts to a compounded annual growth rate of 4.13%, which will continue through 2029 and amass a market volume of $24.65 billion.
Understanding the hidden costs and transforming supply chain management into a revenue driver are essential steps for businesses seeking to improve their bottom line and stay ahead of the competition. Companies must understand the financial impacts and operational challenges to unlock their supply chain's full potential.
The hidden costs of supply chain inefficiencies
Supply chain inefficiencies can significantly inflate costs and stifle revenue growth. Understanding these hidden costs is the first step toward optimizing your supply chain and turning it into a revenue-generating asset.
Operational complexities in supply chains can inflate costs through inefficient processes, fragmented systems, and poor coordination across nodes. These complexities often lead to delays, increased labor costs, and wasted resources. For instance, a company that lacks integrated systems might struggle with data silos, resulting in miscommunication and process bottlenecks.
Neglected supply chain optimization can have substantial financial impacts. Inefficiencies can drain cash reserves, tying up capital better utilized elsewhere. By identifying and addressing these inefficiencies, businesses can unlock significant financial potential.
For example, a company that effectively reduces inventory holding costs through a stronger inventory allocation across ideal locations can free up capital for investment in growth initiatives.
Does this mean that the company needs to prioritize inventory management?
Maybe, but the true answer lies in understanding if said inventory is actually in the right place in the supply chain. Ergo, maybe a center of gravity analysis is in order. You may also consider how domestic operations are influenced by the global supply chain, much like the rainfall from afar that sent our model boat to the lake's depths.
How better supply chain operations lead to value
Effective supply chain operations can generate revenue by streamlining logistics and enhancing customer service. Remember that the value of a transportation management system (TMS) swells with use and time. The same applies to end-to-end logistics management. Through strategic improvements, businesses can turn their supply chain from a cost center into a revenue driver.
- Using advanced analytics to optimize delivery routes can reduce fuel consumption, lower transportation costs, and improve delivery times.
- Outsourcing logistics to specialized providers can offer numerous benefits, such as increased efficiency and expertise, leveraging greater buying power with carriers, and getting a bird’s-eye view of your whole supply chain.
- Applying real-time data can help your team intervene when a delay appears on the horizon. Similar analytics can help you identify which carriers are best for each type of load.
- Understanding in-house versus outsourced asset utilization for those with dedicated fleets, and considering whether in-house headaches are worth the trouble or only add unnecessary complexity.
Take a moment to think about that last word–complexity. Complexity is the antithesis of an effective supply chain, yet growing complexity is inescapable. Again, we must find a way to dance in the cacophony, finding the ideal solution.
The supply chain, customer service, and AI
Close customer collaboration can lead to better service and reduced costs, ultimately driving revenue growth. Working closely with clients can create joint value by aligning supply chain processes with your customers’ needs.
For example, sharing real-time truck location and ETA with key customers can help synchronize supply and demand, minimizing disruptions. Also, customers who are kept in the loop are less likely to file complaints or initiate returns. In some cases, such as sensitive pharmaceuticals or food and beverages, tracking granular data amounts to building an ironclad chain of custody. With more data comes the ability to better serve your customers.
There’s another opportunity for applying supply chain operations to boost customer service, too. It centers on demand planning.
Remember demand planning is all about reordering at the ideal time, ensuring you don’t have downstream stockouts. Thus, you need accurate demand forecasting,
Leveraging historical data and market trends helps businesses predict demand more accurately. Of course, this only works when paired with knowing the actual inventory in transit at any given moment. Other options for increasing customer service may even draw on some more recent conversations around artificial intelligence (AI) in logistics.
Now, the AI of the past two years has all been about generative AI, using chatbot-like tools to create fast and human-like copy. However, the application of AI to analyze data has been around for years–although hidden under other names, e.g., advanced analytics, Power BI, machine learning, big data, insights, and more.
But why did a change of descriptors for technologies happen? Well, it all goes back to the old market outlook with each iteration of AI, promised results, and skepticism on actual capabilities.
When AI was introduced as advanced computing power in business conversations in the 80s, it quickly brought huge promises around ROI. Needless to say, it didn’t turn out like some hoped, creating what’s now known as AI winter.
Software and technology developers went in another direction, creating advanced functions under the guise of other capabilities we take for granted. But what did this really look like and how could it be hidden in plain sight with none of us noticing?
Let’s go back to the lake. There are ducks on one side, and there are flags in the shape of ducks near the finish lines. The flags have a whistle and make duck-like calls in the breeze. From the vantage point of onlookers, both look like ducks, but only one is a living, breathing creature. The other is something else entirely.
AI tools can rely on new technologies and vice versa, but really, it is the underlying characteristics that reveal the truth.
Technically, advanced computing functions give a slight perception of machine-based decisions.
Applying this to our view of AI, the visage of AI only needs to be an advanced computing function for the time in which the capability arose to be labeled as AI. Such an understanding could make something we know and love–big data analytics—have a foothold in the AI conversation way beyond what most imagine.
It’s a complex explanation, but remember, there was a time when using common software like Photoshop may have fit the bill for what someone could term an AI-driven program. Elements in Photoshop snap to the grid, and the same thing happens in PowerPoint and Google Slides.
Is Google Slides or PowerPoint what we think of when imagining AI?
Not really, but that doesn’t make something not AI-driven. It’s a computer making the best guess based on what it knows (in this case, graphic or presentation design). That’s all that’s needed to hit the definition of AI.
Only with carefully knowing the facts-that a computer is making decisions-can we realize that they have similarities that extend beyond what we define as AI So, let's take a deeper look into AI uses in supply chain operations that you might have overlooked as relying on computer-made decisions:
- Analyzing routes to identify potential transit times based on pickup and delivery.
- Combing through thousands of rows of data to understand trends in carrier behaviors that are too rare to find with manual review.
- Evaluating potential locations for order fulfillment or expanding an existing warehouse network.
The possibilities are endless, but what AI is and what we think AI should be won't always be obvious. An IL2000 expert in logistics can help you keep on track and in the race, regardless of how technology evolves. IL2000 turns the uses into actions-analyzing routes, carrier behaviors, and location data to get the best result.
The possibilities are endless, but what AI is and what we think AI should be won't always be obvious. An IL2000 expert in logistics can help you keep on track and in the race, regardless of how technology evolves. IL2000 turns the uses into actions-analyzing routes, carrier behaviors, and location data to get the best result.
Boost your revenue with expert supply chain solutions
Okay, so we’ve taken a meander from a boating race to an unexpected whirlpool into a conversation about AI in logistics. At the root of all scenarios is the same thing–using information to make the most informed decision possible to avoid loss. Prioritizing your logistics will help you to unlock new revenue streams and recapture costs. Are you ready to start the next race with a trusted ally? IL2000 is here to be your champion–on and off the lake–and even in the model boat supply chain, if it suits you.
Connect with an IL2000 team member to hoist your sails on a renewed supply chain plan for success.