Data-driven supply chain design: How big is your confidence gap?

  • October 30, 2023

Supply chain network design requires critical resources and assets from a business. Decisions about how to build a supply chain network design can impact business goals, including cost savings, higher profit margins, business growth and greater supply chain resiliency. Whether the impact is positive or negative depends on your team's decisions.

Additionally, supply chain design investments are often multi-millions of dollars, and implementation timelines can span several years. Given the stakes, companies should adhere to supply chain design approaches that yield the best results.

Why a data-driven supply chain approach matters

A data-driven approach to supply chain network design benefits your business because:

  1. It can substantially increase your assurance and narrow your confidence gap, especially compared to other approaches (see chart)
  2. It's much more likely to stand the thorough vetting process
  3. It dramatically increases the likelihood of successful implementations

What is a data-driven approach to supply chain design?

Data is the lifeblood that flows through an entire supply chain design project. It holds value, but only if you use it. A data-driven approach means you leverage available data insight and analysis to make strategic decisions.

Access this diagram to see how data fits into a typical NTT DATA supply chain design effort, including examples of needed data. In the data-driven approach, using data leads objectively to the type of actionable results outlined in the diagram.

Types of supply chain design data

The supply chain design scope will determine exactly what data is required. In general, however, for optimal supply chain design, multiple data sets are required and used, which may include:

  • Primary data from vendors, facilities, plants, distribution centers, customers and products.
  • Operational data, such as order, production, procurement, shipment and inventory history data.
  • Manufacturing data, including plant calendars and staffing, line/SKU capabilities, bills of material and routings and run rates.
  • Cost data from procurement, raw and packaging materials, fixed and variable costs, transportation and inventory holding costs.
  • Design data, such as demand forecasts and greenfield sites, and transportation costs.

Tips for optimizing a supply chain design model

While data is a critical component of the data-driven supply chain design approach, methodology, tools and project team experience are equally important. Whether your organization uses internal resources or an external service provider, here are some tips to increase confidence in your supply chain design:

1. Have a clearly outlined and agreed-upon method

  • The methodology you use for a supply chain design project should outline every step in the process. Be sure to define expected deliverables for each step.
  • The most effective methodology is an open collaboration between company stakeholders and those delivering the supply chain design project.

2. Invest in resources and providers to meet your needs

  • The best supply chain design service providers (whether internal or external) will bring specialized content to the process. Access to reliable freight rates, DC or manufacturing labor costs, real estate and utility costs are examples of essential content providers should offer.
  • Choose wisely. Suppose your supply chain network has unique and challenging characteristics, such as multi-stop private fleets or complex value-added services in your DCs. In that case, you must make sure your chosen provider is qualified to solve your challenges.

3. Trust in proven talent and experience

  • External providers should have a proven track record of delivering actionable supply chain design results.
  • For internal or external providers, be sure they specialize in supply chain. They need to have the required technical skills, methodology and experience. These attributes are rare but essential to producing high-quality results.
  • Be sure your supply chain design providers are truly fact-based and data-driven in their approach. Hidden agendas, like providers who may want to sell or install equipment or fill existing warehouses, can muddy objectivity.

The potential for problem-solving, innovation, growth and profitability is only as good as the data companies collect, curate and, most importantly, use. Data is particularly valuable when executing a successful supply chain design process. You can foster success by using a data-driven supply chain design approach together with the right team and methodology. These choices will spur success and maximize confidence in your supply chain design strategy.

Learn more about NTT DATA’s Supply Chain Consulting practice.

Dan Sobbott

Dan Sobbott is a Managing Director in NTT DATA’s Supply Chain Design practice. He leads a team of strategic and tactical supply chain consultants, focusing on large-scale supply chain transformations and network optimization modeling. These projects help companies deal with challenges such as facility site selection, capacity planning and network rationalization. Dan holds a master’s in business administration from The University of Virginia's Darden School with a concentration in General Management.

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