Supply chain automation can benefit your business by reducing human error, improving collaboration, enhancing supply chain visibility, lowering overhead costs…
Supply chain management is an important part of your business performance, especially if you deal in large production and shipment across the globe. Although supply chain management has become more complex with various business functions, some businesses are tempted to stick with the manual process.
Some businesses that use manual supply chain processes still handle important functions such as inventory count, packaging, loading, and offloading.
However, sticking to the outdated manual supply chain process contributes to inefficiency and could harm your business’s bottom line. Automated supply chain management improves business performance, engenders customer satisfaction, saves money, and streamlines the flow of goods and services.
This article explains an automated supply chain, the advantages and disadvantages, and ways to automate your supply chain management.
What is supply chain automation?
Supply chain management coordinates the flow of goods and services from one location to another. Automating supply chain management involves using technology in the supply chain process, thus reducing or eliminating human involvement and efforts.
Supply chain automation incorporates artificial intelligence, machine learning, and digital processes in the supply chain. Manual work in your business is reduced, and the workflow is facilitated, contributing to improved efficiency.
Before discussing the eight benefits of supply chain management, let’s examine its basic components.
Five basic components of supply chain management
Supply chain management has five components to enhance the effectiveness of the flow of goods, encourage sustainability, and define the success of the supply chain process. They include:
Planning– The planning process allows you to level operational resources and inventory. Planning also helps you to match supply with demand through analytics. Certain analytical tools such as Material Requirement Planning can help a business plan the needed raw materials based on the predicted market demand. Data from the planning process can also help businesses take advantage of economies of scale by consolidating shipments.
Sourcing– The sourcing component entails identifying vendors who can adapt to the ever-changing customer requirements and preferences. The vendors should meet certain standards to deliver quality goods even during seasonal surges in demand.
If you are sourcing for perishable goods, your vendor should agree to a minimum supplier lead time to accommodate a minimal inventory approach. Conversely, if the product is non-perishable, the supplier should provide goods before inventory hits zero to avoid revenue loss.
Making– The making component can take two forms: converting raw materials into finished goods or purchasing finished goods and repackaging, bundling, dressing, assembling, or stagging them. This supply chain component optimizes or improves the existing products in a win-win situation for manufacturers and suppliers.
Delivering– The delivery process should be seamless and stable. It should handle sudden increases in demand to ensure business continuity. It should also address logistic problems, including poor weather and port congestion.
Returning– Dissatisfied customers will likely return defective products, damaged goods, expired products, or erroneous delivery. Your business can also return low-quality or defective raw materials to suppliers. The return process should be smooth to enhance customer relationships and be closely linked to the refund process.
Benefits of supply chain automation
Although supply chain optimization is not an easy task, it offers several benefits. let’s consider eight of these benefits:
Most companies battle with the proper flow of information. Oracle even suggested that 76% of companies do not have automated information flow in their supply chain process. Automating supply chain management removes bottlenecks and encourages information sharing. Your supply chain leaders will have better access to data that enhances informed decisions.
Better quality control
Poor quality control can increase replacement or repair costs by tenfold at each supply chain stage, damaging your company’s bottom line. On the other hand, having better quality control enables the company to choose the right supplier.
Supply chain automation also helps direct suppliers partner with appropriate secondary suppliers to meet the quality criteria. The company can also implement Management Operating System (MOS) to monitor quality performance indicators such as:
- On-time delivery
- Final product quality
- Reworks and scrap rates
- Customer complaint resolution
Customer demand is versatile, proving a challenge for businesses to meet. A sudden surge in demand can result in a severe shortage and affect business continuity. However, supply chain management automation provides accurate data to predict possible demand surges. This information helps supply chain leaders immediately respond to the changing market conditions and avoid product shortages.
Saves shipping costs
Data from Logistics Management shows that freight transportation cost is on the rise. These rising logistic costs necessitate shipping optimization. To minimize costs, automated supply chain management helps identify the best shipping methods for large and small orders. Minimizing costs will improve your company’s profit margin, which can be passed to consumers for better customer satisfaction.
Reduced human errors
A manual supply chain process could lead to human error since humans are prone to mistakes.
Supply chain management automation removes humans from the equation, thus lowering the chances for preventable mistakes such as:
- Inaccurate data entry from order details
- Order duplication
- Wrong picking or packaging of items in an order
Better supply chain visibility
Maintaining a robust supply chain visibility is not a walk in the park. It requires proper communication, commitment, and connectivity between suppliers, merchants, and service providers.
With automation, players automatically record or update information in real-time. Relevant parties can access information from the supply chain system to help them track inventory and communicate with others.
An automated supply chain also allows you to identify any issues in the process and resolve them to prevent delays and disruptions.
Reduced overhead costs
Since supply chain automation can help companies accurately predict demand, they can minimize overhead costs linked to stocking slow-moving inventory. You will decern which goods have high velocity and stock them to increase revenue.
SCM automation will also help you optimize warehouse layout, adopt better inventory management systems, and implement the right automation solution, thus reducing warehouse fulfillment costs.
Furthermore, automation can help you reduce costs by identifying unnecessary expenditures.
Better risk mitigation
Supply chain automation enables companies to analyze the big picture to identify potential risks. Supply chain managers utilize this information to build a backup plan and respond to unforeseen circumstances. Companies can reduce the negative impact of reacting to disruption in the supply chain process by taking proactive actions.
Limitations of automating supply chain
While supply chain automation is encouraged because of its advantages, it still has some drawbacks you should know.
It is limited to certain tasks.
You cannot automate all supply chain functions. Certain supply chain tasks require human involvement. For instance, you can automatically generate picking lists and use warehouse robots to assist with picking; however, these robots cannot make vital decisions.
It requires a huge capital investment to install an advanced supply chain process. It can cost your company thousands of dollars in licenses and annual fees. Smaller businesses may not have the financial muscle to automate their supply chain management.
What part of the supply chain process can you automate?
Currently, it is viable to automate the whole supply chain process; companies can automate several key tasks to save on resources, money, and time. Consider some of the processes you can automate:
You can automate route optimization by identifying the best routes and assigning the ideal carriers for your goods. This helps you reduce shipping costs and transit time.
Supply chain visibility lets you know your vehicles’ locations in real-time and plan for potential delays.
Automation starts with the ordering process with some software automatically receiving and confirming orders and notifying customers with tracking information.
Some warehouse automation software use robots and machines to assist with the picking process. You can also automate pick-to-light systems, where LED lights and barcodes can help warehouse workers quickly locate and pick the right item.
While most inventory management needs human expertise, you can automate certain of its aspects. For instance, you can automatically set reorder point where the system sends you notifications when your inventory hits a certain threshold.
An automatic inventory system can improve your stock visibility, thus allowing you to know in real-time how much inventory you have in store.
Some parts of the supply chain management you can automate are behind the scenes. Some of these aspects include:
- Procurement of documents such as recipes, delivery orders, and bills.
- Invoicing and payments
- Customer service and communication
- Goal setting and planning process.
Automating the back-office can enhance speed and improve task efficiency for the entire supply chain process.
Supply chain and logistics automation is a necessity for small and big corporations. It helps companies save money, time, and resources and enhance customer experience. Although installing an advanced supply chain management is expensive, the benefits far outweigh the cost. If you still run the manual supply chain systems, you can make the switch by outsourcing the automated one.