Believe in Big Data, Improve Your Supply Chain!

New and more powerful software is providing new insights into efficiency on a large scale. However, a few experts in the logistics industry are claiming that a large number of companies aren’t prepared to think on the scale required to benefit from it. Problems that were untouchable as little as a decade ago can now be solved.

This is because we now have much improved data collection capacities, unrelenting growth in computational power, as well as recent mathematical innovations—especially in analytics and big data. Supply chain consultancies can now build huge, complex models to look into everything from the cost of raw materials to dealing with import taxes. From these, they can find possibilities for more efficiency in scheduling, sourcing and routing where humans would struggle unaided. The consultancy claims that the models can cut costs by as much as 15%.

There are problems within companies, which means that consultancies are prevented from doing their job properly, and these can usually be sourced to internal politics. Manufacturing departments can have an inflated view of themselves, controlling an empire that would seemingly rather fall than let outsiders in.

When it comes to route planning, humans will always seek to avoid the “drive by,” traveling from one pickup to the third, going past a second on the way. Computers may find that it is more efficient to find a drive by, but humans will not easily perceive the benefits and often ignore what the computer tells them.

As analytics become more engrained in the everyday life of companies, these conflicts are only going to deepen. Real efficiency can only be achieved when companies work to align their objectives with the way units are motivated, and ensure that the executive board is playing along.

As we are gaining the ability to look at the operations of a company as one big picture, the position of conventional business structures are under great pressure. It could be said that the same short sightedness led to the scramble to outsource to China in the 90’s, in search of cheap labor, without thinking about the costs that would arise elsewhere. When the cost of labor rises, the planning for these decisions looks very weak.

Companies who are after large-scale efficiency will be able to reward leaders according to overall performance, but it’s difficult to put into practice.

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