A Few Things About Data-Driven Decisions and Your Supply Chain
Making data-driven decisions is essential for any business. It is the core of how businesses should ideally already be handling themselves. Without accurate data, how would you know which product to stock more of, how many materials to procure for the next big shipment, and so on?
Answering all of these questions is especially vital for companies with complex or otherwise large supply chains.
The supply chain begins with the sourcing of materials and ends with the delivery of the final product to the customer. Due to this hierarchical structure, it can be tricky to properly collect, retain and employ data from every segment of a large supply chain.
In order to do so effectively, businesses need to have a good understanding of the data that is collected throughout the network in an effort to act concisely on it and in a timely manner. Supply chain analytics can help businesses make better decisions by collating data and providing insights into areas such as inventory levels, supplier performance, and customer demand.
In this blog post, we will discuss the benefits of supply chain analytics and provide examples of how data-driven decisions are used to improve overall business performance.
What is data-driven decision-making?
Data-driven decision-making (DDM) is the process of making decisions based solely or in part on business data. It is a key component of effective decision-making and it is essential for achieving optimal supply chain performance.
There are different types of data that can be used for DDM. These types of data sets include financial, operational, and marketing data. Each type of data has its own advantages and disadvantages and must be used in the right context in order to achieve optimal results. What this means for one company may mean something entirely different for another.
It is once you have this large pool of data that you can begin to compare, benchmark, and adjust operations accordingly to your specific business needs. Lastly, the progress around pain points to which you’ve applied solutions in this way should be revisited within a specific timeframe, comparisons made and more tweaks applied if needed.
Regardless of what approach you take to gathering, analyzing, and using that data, simply beginning the process is the most important step you will take.
How data-driven decisions help reduce enterprise risk
Supply chain management (SCM) is an essential function within any business and a huge part of SCM is the ability to make data-driven decisions. By understanding the various sources of enterprise risk and how decisions made based on data reduce them, businesses can improve their overall operational efficiency and resilience.
There are three primary sources of enterprise risk: financial, operational, and compliance.
By understanding and utilizing data to make informed decisions about inventory, production, procurement, and shipping, businesses can reduce the risk associated with each of those three areas. For example, by understanding the demand for a product and adjusting production accordingly, businesses can reduce the risk of out-of-stock situations and hasten or slow the influx of inventory accordingly to this ebb and flow.
In addition, by accurately forecasting customer demand, businesses can mitigate the risk of undersupply and disruptions in production.
In what areas are data-driven decisions used?
The broad answer to this question is that all decision-making that is driven by current and accurate data is essential in all areas of any industry.
But when we talk about the supply chain, there are specific segments of it that are going to rely more heavily upon these sets of data than others. These areas generally include production planning, procurement, and inventory management.
By properly interpreting the collected data, companies can make informed decisions about how to best allocate resources and optimize their operations. Having the ability to know when it would be optimal to adjust capacity utilization and even right down to the product mix is a huge benefit.
All of this is based on data that reflects growing or waning demand for one product over another.
Ready to put your data to work for your supply chain?
Redwood has a team of experienced and well-versed logistics industry professionals and we offer a wide range of supply chain services. Reach out to us here and let our team show you not only how to begin collecting the right data but also how to then put that data to good use.