Logistics is pivotal in today’s supply chain management, especially with the disruptions and demand shifts ravaging the market. Advanced analytics are emerging as the beacon of hope to provide valuable insights and enable data-driven decision-making, especially regarding two essential aspects of supply chain management: transportation optimization and distribution optimization.
What is the role of advanced analytics in business?
Advanced analytics is a set of data-driven techniques used to analyze large amounts of data to identify patterns. To use Gartner’s words, advanced analytics is
“the autonomous or semi-autonomous examination of data or content using sophisticated techniques and tools, typically beyond those of traditional business intelligence (BI).”
Advanced analytics in business is used to:
- discover deeper insights, relationships, and patterns among data;
- make accurate predictions;
- generate data-driven recommendations.
It can be applied in many business areas to drive growth, enhance decision-making, and optimize processes; among the key areas, we find marketing, product development, customer care, and supply chain & logistics. This article will focus on the last one, explaining how advanced analytics can be seen as a robust supply chain solution for transportation and distribution optimization.
Advanced analytics in the supply chain: what are the applications?
Excellent coordination is essential for the smooth functioning of the global economy. Supply chain management ensures a solid network between companies, suppliers, manufacturers, and distributors to satisfy consumer needs.
However, this global supply chain is more fragile than we want to think. The pandemic first and then the global wars exposed weaknesses and fragilities of a network indispensable for the world’s economy. In a 2021 survey by Statista, half of the surveyed supply chain professionals found supply chain disruptions very challenging, mentioning response time as one of the most difficult aspects to deal with.
In all this turmoil, supply chain analytics can make a difference for businesses wanting more resilience, faster response time, optimized transport and distribution, and reduced costs.
Let’s look at an important starting point: supply chains generate massive data.
Supply chain analytics help make sense of all this data by revealing patterns and generating insights. AI can read, understand and correlate in real-time enormous amounts of data from different sources, breaking down silos and processing new information. Then, it can rapidly perform advanced analysis based on the interpretation of this data to reach a level of business intelligence never seen before.
There are many applications of AI and advanced analytics in the supply chain. We will focus on transportation and distribution optimization and see how advanced analytics can help visionary businesses achieve a better logistics structure.
The future of mobility: how analytics can transform transportation & distribution
In the world of transportation and distribution, companies are navigating a landscape full of pitfalls. Tight deadlines, strict regulations, high customer expectations, and rising costs are reshaping the logistics industry, leaving supply chain executives with many problems.
According to a recent industry study, the top logistics challenge for companies is keeping transportation costs down; moreover, respondents mentioned other critical challenges affecting transportation, such as carrier capacity, timely delivery, and lack of real-time visibility on shipment status.
High competition, low margins, and ongoing disruptions add even more pressure to the industry, making it crucial for companies to find new ways to optimize transportation and distribution.
According to the Institute of Supply Management, average lead times now are more than double before the pandemic: in China, they increased by 222%, in Europe by 201%, and in the US by 200%.
Data analytics and AI solutions tailored to the transportation and distribution sectors can empower companies to design data-driven strategies, streamline operations, better understand consumers, and optimize processes. Let’s see the four significant ways in which it can do so.
How to use advanced analytics for transportation and distribution optimization
To fully grasp the power of advanced supply chain analytics and its impact on various aspects of the logistics process, it is helpful to understand how supply chain management looks without it and which changes and improvements it can bring.
From reactive to proactive decision-making
In most companies, decisions are made in reaction to events as they happen. Advanced analytics, using predictive analysis, can foresee future events by analyzing large amounts of data to uncover patterns and trends. Accurate forecasting is a cornerstone of effective supply chain management, enabling companies to shift from reactive to proactive decision-making, anticipating events, and working toward overcoming challenges before they happen. Advanced predictive analysis is a vital tool for supercharging forecasting in the supply chain.
Improved demand forecasting
This is a natural consequence of the previous point. With accurate forecasting comes accurate demand sensing, which generates short-term and mid-term predictions on customers’ demand. These predictions are based on real-time data from different sources; they reduce errors in forecasting and are extremely valuable for inventory optimization.
Dynamic inventory management
Once a company has acquired the ability to predict demand accurately, it unlocks a new superpower: the ability to predict the ideal inventory levels for each product. With advanced analytics, inventory levels are dynamically adjusted based on real-time data and predictive models to match fluctuations in demand and optimize costs. This leads to avoiding understocking and overstocking situations.
Optimized logistics
TechTarget defines supply chain traceability as the capability to identify, track, and trace goods as they move along the supply chain.
Supply chain traceability is vital not only to improve visibility and have everything under control but also, to a certain degree, is mandatory by law in many countries. However, according to a survey from KPMG, 56% of supply chain executives say their companies do not utilize tracking tools to enable real-time monitoring, and only 13% affirm that they have complete end-to-end supply chain visibility.
Using AI to track all goods in the supply chain in real-time and then collecting data from the tracking is essential to an efficient digital strategy for supply chain optimization. Moreover, advanced analytics have been proven to be very effective in logistics optimization:
- It can be used for route optimization and scheduling times in order not only to ensure on-time delivery, thus improving customer satisfaction, but also to reduce fuel consumption by choosing the best routes.
- It allows for automation, drastically reducing the manual work needed for fleet management, scheduling, and route planning and eliminating the risks of human errors. AI-powered software can automatically generate optimal routes based on various parameters (delivery windows, vehicle capacity, traffic conditions, etc.) and dynamically adjust routes in real-time to account for unexpected events like road closures or vehicle breakdowns. All of this supports the shift from reactive to proactive supply chain management.
- It supports companies in complying with all existing regulations, automatically considering environmental regulations, adherence to driving hours, and international trade laws when planning for transportation optimization.
These are the main applications in which advanced analytics and AI can supercharge a company’s transportation and distribution efforts, strengthening the supply chain and adopting a proactive and dynamic approach.
Conclusion: invest now in advanced digital solutions for your supply chain
Executives face many intricate challenges in the current supply chain management dynamics. To navigate these complexities, advanced analytics and AI tools are gaining attention thanks to their promises to revolutionize data-driven decision-making.
Supply chain executives shouldn’t see technology as a resource: it’s the key to agility and resilience. Advanced analytics in the supply chain provides a 360° view of the whole business performance and enhances efficiency across the value chain. It promises unprecedented efficiency, incredible cost savings, and predictive insights, but most companies are still lagging.
