The Insider's Guide to Supply-Chain Optimization

Supply chains are effectively one mega-process made up of lots of connected micro-processes. So a process-first approach is needed to maximize efficiency and improve supply chain performance.  But all these micro-processes are happening in different systems, handled by different people, in different teams, with very little interdepartmental visibility. Systems don’t play well together and departments don’t speak the same language. There’s a missing shared understanding of how the supply chain runs, end-to-end.

Procurement covers areas of the supply chain such as sourcing, where there are a variety of opportunities hidden in processes.  One key area to explore could be supplier management, where process mining is used to discover how suppliers are performing. You can find out where on-time delivery or reliability rates are low, or where prices are higher than expected, and why this is happening.  Fixing a problem and creating value might be as simple as correcting payment terms to prevent late supplier deliveries, updating to more realistic lead times, or linking contracts to purchase orders so materials aren’t at risk of price variability.  When you know where problems are arising and why, it’s easier to find solutions

Tech Data merged with SYNNEX to become TD SYNNEX, the largest IT distributor in the world. It uses Celonis to increase visibility into areas such as procurement, and to provide a foundation of operational excellence.  In one analysis, Tech Data discovered that, among the millions of transactions it processes per year, around 30% of the purchase orders were subject to price changes or cancellation. The team identified the problem and reduced the price change ratio by 27% in six months, which contributed to an overall 57% reduction in procure-to-pay total cycle time in just one year.

Fulfillment covers multiple parts of the supply chain, including production, warehouse, inventory, and logistics. There are almost limitless processes that can be streamlined and improved.

Let’s take Inventory Management as an example. Production and supplier lead times have always been a blind spot when calculating safety stock levels or order points. Usually material planners rely on what the supplier tells them, or their own knowledge, but this results in both excess inventory and stockouts.

With process mining to help, you can identify the actual lead time and use it to calculate the right safety stock and reorder points to meet service levels without risking excess inventory.

For manufacturer Manroland Goss, calculating lead times and safety stock levels used to be a manual process involving SAP exports, quarterly reviews, and lots of Excel spreadsheets. This reliance on manual analysis and lead time information from suppliers resulted in outdated safety stock calculations — which in turn led to both stockouts and excess inventory. 

With the help of the Celonis Planning Parameter Optimization App, the company was able to tailor the lead time formula to focus on demand for specific material types, touching 30% of the business. Material planners can now use the app to review all safety stock levels across over 10,000 materials and €17MM in Procurement spend.

From reviewing materials every three months, the team now has a view that allows them to review safety stock levels daily. And with the ability to automatically update safety stock levels and lead times across all SKUs, Manroland Goss realized value within one month of implementation.

Order Management covers the order and fulfillment stages of the supply chain — the steps between the customer placing an order and money being received. 

Opportunities within Order Management processes could include identifying issues that are preventing on-time delivery — such as unnecessary order limits and credit checks, or unforeseen inventory issues —  and then taking action to resolve these.

They might also include understanding the root causes of order cancellations, rejections, changes or returns. Actions as simple as identifying and eliminating product or shipment entry errors may resolve some of these issues and reduce the need for manual intervention.

Sustainability is an increasingly important component of any organization’s supply chain strategy — and, in some regions, efficient, environmentally conscious business practices are increasingly required by law. Many businesses are already including sustainability in the service levels, cost, cash equation as something that must be accounted for when balancing priorities. 

Taking opportunities to increase efficiency in the supply chain can tangibly improve sustainability metrics using the same process mining technologies used for supply chain optimization. A process-led approach helps organizations improve KPIs such as shipping emissions and sustainable spend.

Why not read The Realist's Guide to Sustainable Supply Chains, our ‘roll up your sleeves’ guide to driving green-line performance at your organization? Learn how to implement green supply chain management with our easy-to-understand ebook.

Celonis enables customers to optimize their business processes. Powered by its leading process mining technology, Celonis provides a unique set of capabilities for business executives and users to continuously find improvement opportunities within and across processes, and execute targeted actions to rapidly enhance process performance. This optimization yields immediate cash impact, radically improves customer experience, and reduces carbon emissions. Celonis has thousands of implementations with global customers and is headquartered in Munich, Germany and New York City, USA with more than 20 offices worldwide. Are you ready to find the opportunities hidden in your supply chain and make it work as one? Start your process-led supply chain transformation now.