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March 5, 2025
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December 15, 2023
Improving supply network efficiency and performance to give customers what they want, when and where they want it, while making the business profitable and sustainable.
Have you ever wondered how retail giants like Walmart manage to handle billions of dollars worth of goods efficiently? The secret lies in supply chain optimization, a strategic process that ensures smooth operations, timely deliveries, and cost-effective inventory management.
Now,
Alright, let's break it down. Supply chain optimization is like having a well-choreographed dance between suppliers, manufacturers, logistics, and retailers. It's about finding the most efficient and cost-effective way to get products from the manufacturer to the customer while meeting demand and keeping costs in check.
Picture this: Walmart deals with a staggering volume of goods. Without an optimized supply chain, chaos could reign. There might be excess inventory gathering dust or frustrating stock outs that annoy customers. Supply chain optimization ensures that the right products are in the right place at the right time, which is a win-win for both Walmart and its customers.
Now let's Dive into the Processes:
So, let's imagine you're a data analyst at Walmart, tasked with making sure everything in this intricate dance of goods runs smoothly.
Your mission is to analyze critical supply chain KPIs (Key Performance Indicators) to optimize inventory levels and cut costs, all through the magic of data-driven analysis.
First things first, you gather data related to the supply chain. Orders, deliveries, inventory levels, supplier performance, financial data—you name it! If it's got something to do with the supply chain, you're on it.
Now comes the "clean-up" phase. You roll up your sleeves and dive into cleaning and processing the data to ensure it's accurate and consistent. You’ll make sure that there are no missing values, outliers, and messy formats.
Now, let's have some fun! You dig into the data using exploratory data analysis. You're asking questions like,
1. What is the current On-Time Delivery Rate, and how can it be improved to enhance customer satisfaction?
2. What is the Inventory Turnover Ratio, and how can we optimize inventory levels to reduce carrying costs?
You're crunching numbers, using formulas, and getting insights that will guide the next steps.
Here are two formulas for this use case:
1. On−Time Delivery Rate = [ Number of on−time deliveries / Total number of deliveries]×100%
2. Inventory Turnover Ratio= Cost of Goods Sold / Average Inventory Value
To assess the health of your supply chain and identify areas for improvement, you may need to calculate 10 more key performance indicators (KPIs) using appropriate formulas. Here's a quick overview of some of the essential KPIs:
Once you've calculated these KPIs, it's time to analyze the results. Identify strengths, weaknesses, and areas for improvement in your supply chain. Address critical business questions using the KPIs and propose actionable recommendations.
1. What is the current On-Time Delivery Rate, and how can it be improved to enhance customer satisfaction?
2. What is the Inventory Turnover Ratio, and how can we optimize inventory levels to reduce carrying costs?
3. How accurate is our demand forecasting, and what strategies can be implemented to improve it?
4. What is the Supplier Performance Score, and which suppliers should we focus on strengthening relationships with?
5. What is the current lead time variability, and how can we reduce it to improve planning?
6. How long does it take, on average, to fulfill an order, and how can we streamline order processing for greater efficiency?
7. What is the Transportation Cost per Unit, and what opportunities exist to optimize logistics and reduce transportation expenses?
8. What is the Cash-to-Cash Cycle Time, and how can we improve cash flow and working capital management?
Here's what the analysis of the data revealed: Now in this process you’ll make sense of what you discovered in EDA, for example you may discover the followings:
In this step you’ll provide some actionable insights to the team: you may recommend the followings:
On-Time Delivery Rate-
Action 1: Collaborate with suppliers to improve on-time delivery rates through clear expectations, better communication, and perhaps renegotiating contracts to include stricter delivery timelines.
Action 2: Implement a supplier performance monitoring system, rewarding punctuality and reliability. This can foster a sense of accountability and motivate suppliers to meet delivery deadlines consistently.
Inventory Turnover Ratio -
Action 1: Reduce inventory levels in overstocked categories by closely monitoring inventory turnover ratios and optimizing order quantities. This might involve renegotiating purchase agreements and adjusting ordering patterns to align with actual demand.
Action 2: Conduct a thorough analysis of consumer demand patterns for products in the overstocked categories. Utilize this insight to re-strategize marketing efforts and potentially boost sales, aligning demand with inventory levels.
Action 3: Consider implementing automated inventory tracking systems that provide real-time data on product movement. This will aid in proactive inventory management, ensuring products are neither overstocked nor out of stock.
Next you’ll develop predictive models to identify market trends, forecast customer demand, enabling the company to allocate resources efficiently.
Finally, you’ll organize everything you’ve discovered and present them on dashboarding softwares like PowerBI, Tableau, or good ol' PowerPoint, you craft visualizations and presentations that tell your supply chain story. You'll make it easy for everyone to understand what's happening and what needs to be done.
In a nutshell, that's how a data analyst at Walmart optimizes the supply chain. Making sure that billion-dollar goods move gracefully and efficiently is no small feat, but hey, someone's got to do it, right?
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