techwatch
Should analytics be part
of your routine?
AS COMPANIES SEEK THAT CRITICAL EDGE IN LOGISTICS AND
supply chain management, you might think they’d be intensely
focused on what the competition is doing. But that’s not necessarily
the case. Instead of looking outward, many are looking inward, scrutinizing their own operations for waste, areas of weakness, and so forth.
And oftentimes, that means they’re making supply chain analytics—
the use of software to evaluate and optimize internal operations—a
part of the routine, like freight bill audits or inventory cycle counts.
That’s a marked change from past practice. It used to be that when
companies employed analytical software, it was on a project basis to
address a specific problem. “For a long time, firms have done one-off
analytical studies,” says Mike Watson of IBM. “Now, these firms real-
ize that there are big benefits to using analytics and
optimization on an ongoing basis.”
Also known as “business intelligence” solutions,
supply chain analytics programs basically monitor
and measure supply chain activities from shipping
to storage, from production to inventory. The
applications use special algorithms to spot prob-
lems and then look for the underlying cause. By
scrutinizing millions of pieces of data, the software
can quickly decipher what’s going on throughout
the supply chain and detect minute changes that
could portend trouble later on.
Leading companies are employing this type of
software to gain sharper insight into their logistics
operations. “Companies are increasingly looking at
operational analytics—supply chain analytics, in
particular—as a way to understand how their supply chains are really operating, what they cost, and how effective they are,” says John
Hagerty, a Gartner Inc. analyst who follows this market.
As for how companies are using these solutions, Hagerty says first
and foremost, they’re employing analytical software to get a better
understanding of the factors driving their supply chain costs. In
addition, they’re using analytics to measure supply chain effectiveness, such as customer satisfaction with delivery performance. Once
they see the results, they can zero in on the areas most in need of
improvement.
Analytics are also being applied to get a better handle on demand—
what a company needs to manufacture and what it needs to have in
stock in the distribution center. “Analytics is being used much more
aggressively to take external data, like customer
demand, and translate it into a profitable
response,” says Hagerty.
