Today, supply chain is not only an integral part of most businesses. In the wake of the pandemic, it has proven to be crucial to company success and customer satisfaction. Here are 12 supply chain phrases every company needs to know in the 21st century.

1. Supply Chain

Let us start with the basics: What is Supply Chain? A Supply Chain is a network of organizations, people, activities, information, and resources involved in the production, handling, and distribution of goods and services. It includes all the steps required to create and deliver a product or service – from purchasing raw materials and components – to manufacturing, distribution, and delivery to the end customer.

2. Supply Chain Management (SCM)

Supply chain management (SCM) refers to the planning, coordination, and execution of activities involved in the production and delivery of goods and services from the supplier to the end customer. SCM involves managing the flow of goods, information, and finances across the entire supply chain. The goal of SCM is to optimize the supply chain to maximize efficiency, minimize costs, and improve customer satisfaction. Activities include procurement, production, inventory management, logistics, transportation, and distribution. SCM also involves collaborating with suppliers and other partners in the supply chain to ensure that all parties are working towards a common goal.

3. Value Chain

Value Chain is a concept used in corporate management and strategic planning to describe the various activities carried out within an organization to create value for their customers. A Value Chain consists of several activities. They range from the start of the production process to the delivery of the final product to the customer. The activities in a Value Chain can be divided into primary and secondary activities. Primary activities are those directly involved in the production of a product or service, such as purchasing, manufacturing, marketing, and sales. Secondary activities are those that support primary activities, such as logistics, technical support, and personnel management.

4. Supply Chain Planning

Supply Chain Planning involves forecasting demand, determining purchasing volumes for safety stock, and scheduling production, transport, and distribution of goods and services. It is an important part of Supply Chain Management, as it helps to ensure that the right products are in the right place, at the right time, and in the right quantities.

Learn more about Supply Chain Planning here.

5. Supply Chain Design

Supply Chain Design involves building an optimal network of organizations, people, activities, information, and resources involved in the production, handling, and distribution of goods and services. It includes strategic decisions for where to place warehouses and manufacturing facilities, how to transport goods, and how to handle the flow of information and resources throughout the supply chain.

Learn more about Supply Chain Design here.

6. Supply Chain Sustainability

Supply Chain Sustainability aims to reduce the environmental impact and improve the social and economic performance of the supply chain. It includes activities such as reducing waste and emissions, promoting ethical and responsible purchasing, and supporting the well-being of employees and communities. Supply Chain Planning & Supply Chain Design are effective methods for minimizing the environmental impact of waste and emissions.

Learn more about Supply Chain Sustainability here.

7. Sales & Operations Planning (S&OP)

Sales & Operations Planning, also known as S&OP, is a process that involves the coordination of sales and operating functions within a company. It involves creating a long-term plan for sales, production, and warehousing and identifying and solving any conflicts or problems that may arise. S&OP helps to ensure that the company can meet customer demand while maximizing efficiency and profitability.

Learn more about Sales & Operations Planning here.

8. Supply Chain Optimization

Supply Chain Optimization is the process of improving and simplifying the supply chain by identifying and eliminating inefficiency and improving the flows of goods, services, and information. This can be done through various techniques such as forecasting, warehouse management, logistics, and transport management. The ultimate goal is to increase efficiency, reduce costs, and improve customer service.

9. Supply Chain Digital Twin

A Digital Twin is a virtual representation of real-world supply chain operations. The live data can be used in everything from quality control to inventory management. A Digital Twin can be used by engineering, production, and maintenance teams to experiment with new approaches and what-if scenarios without disrupting the actual production. The data can be fed to Machine Learning predictive models to discover previously unknown operational patterns and aberrations. It can also be automatically input into decision models. A Digital Twin will ultimately help teams explore and understand the key drivers and trade-offs in optimized plans and decisions.

10. Supply Chain Visibility

Supply Chain Visibility means having control and insight into the entire supply chain, from suppliers to customers, to make informed decisions and handle any problems or deviations. Businesses can achieve through technology that collects data from relevant sources, such as Enterprise Resource Planning (ERP) Systems, Transport Management Systems (TMS), or Warehouse Management Systems. These can provide real-time data on key figures, such as warehouse product flows and estimated delivery times.

11. Scenario Planning

Supply Chain Scenario Planning aims to identify and analyze possible future events and their impact on the supply chain. This involves creating different hypotheses and evaluating how the supply chain would respond to each one. It helps organizations predict and prepare for any disruptions or changes in demand and make well-informed decisions on how to reduce risks and optimize the supply chain. Scenario Planning can also help organizations identify opportunities for improvement and develop backup plans for unexpected events. It is a proactive method for managing uncertainty and risks in the supply chain.

12. Demand Forecasting

Demand Forecasting is the process of estimating the amount of a product or service that customers will buy. Companies use Demand Forecasting to make well-informed business decisions about how much stock they need, how much they should produce, and what prices to set. It also helps companies identify trends and patterns in consumer behavior and predict changes in demand.

Is your supply chain resilient enough?

I hope you found these supply chain phrases helpful. In the past few years, supply chain resilience has become a hot topic – and with good reason. To ensure business continuity, mitigate risks, enhance customer satisfaction, improve operational efficiency, and meet regulatory and social expectations, today’s companies need to create future-proof supply chains. How resilient is yours?

Optilon focuses on helping customers utilize their resources where they generate the most value. We are a company founded by engineers that combine world-leading technology with Nordic expertise in supply chain.

Let one of our dedicated supply chain experts help you. Book a meeting today!

That supply chains are not only the backbone of any business, but fundamental for success, has become evident in the past few years. Staying up to date with trends is imperative for any Nordic business to plan for the future and stay competitive in the global market. In this article, I share 7 global supply chain trends in 2023 to help you out.

1. Shifting focus from only cost to also risk

Looking back at the past decade, the majority of companies in Scandinavia and Northern Europe have been characterized by outsourcing their production to low-cost countries such as China. The same goes for sourcing raw materials and components. But in the past few years, the world as we know it was turned upside down. The dramatic events of the COVID-19 pandemic, the Suez Canal blockage, and the invasion of Ukraine all caused significant disruption to global supply chains.

As a result, Scandinavia and Northern European companies have started to realize that although cost-efficient, single sourcing from Asia is not very resilient to changes – regardless of size – may they be massive, like a pandemic, or small, such as fluctuation in market demand. This has now led to more companies shifting focus from only cost to also risk. And minimizing those risks has rapidly risen to the top of their agendas.

2. Reshoring – bringing production home

As part of this shift, Scandinavian and Northern European companies that are outsourcing from Asia are considering buying a return ticket. In fact, we are already starting to see examples of reshoring in Scandinavia and the Nordic countries where businesses are bringing their entire or parts of their production home.

By moving their entire production home or sourcing from both Asia and Europe, they are looking to increase their chances of withstanding failure in the primary supply chain and reduce their overall supply chain vulnerability. However, to do that, it is important to have the right tools in place for efficient supply chain planning and smart use of resources.

3. Moving towards differentiation

In the aftermath of the pandemic and invasion of Ukraine, we are also seeing an increased focus on differentiation, where companies are looking to set themselves apart from the competition through new price points and inventory strategies.

With inflation pressures, consumer behaviors and customer demands are shifting from high-end products to more affordable ones. At the same time, businesses are focusing on cost efficiency to prevent their capital from going through the roof.

To meet the demands for availability and service level – while at the same time keeping inventory costs under control – companies realize they need to become more granular and specific in how they control and optimize their inventories.

As a result, we are now seeing more businesses moving away from manual and semi-manual processes and using “one size fits all” types of rules toward differentiation, digitalization, and automation.

4. Prioritising supply chain design

Another strong trend that has emerged as a result of the increased supply chain awareness is the need for companies to improve their supply chain design. This is particularly noticeable in companies with high supply chain complexity.

Supply chain complexity can arise from several sources – network nodes and links, internal and external processes, product and service range, product design and development, supplier integration, and information and organizational complexity.

While companies are adding the cost and risk dimensions into their supply chain design, two more dimensions need to be considered to secure resiliency. The first is service level, which includes the ability to offer short lead time to customers. The second is sustainability, which includes the ability to map the current CO2 footprint and find new supply chain set-ups that will reduce CO2 emissions without a large negative impact – or even reduction – on cost or other dimensions. As the global market for emissions credits matures, this will also be part of the equation.

Companies must review their supply chain based on all four dimensions to create a shared view of the supply chain and find their trade-off. If companies can do that, their chances of securing continued competitiveness and obtaining sales will increase.

5. Creating a digital twin of the supply chain

More companies are embracing digital technologies to help them design their supply chains and outsmart disruption. One critical component of this shift is using a digital twin. A digital twin is a digital representation of a company’s end-to-end supply chain network. 

You can look at it as a sandbox extension of your supply chain: By recreating your real supply chain in a virtual world, you can apply what-if scenarios and create versions of the future to model alternative scenarios for uncertain areas within your business. This enables you to efficiently make trade-offs between risks and potential gains and conclude under which pre-conditions to use which supply chain setup or strategy. 

Instead of assessing your supply chain every third year, you can use your digital twin to review your setup annually, semi-annually, or even quarterly, as well as ad-hoc. Slowly but surely, the digital twin is becoming a key component of future supply chains. It will be the common playground for sales, sourcing, supply chain, and sustainability to gather around. It will also help companies break silos and adopt a more holistic approach.

6. Supply chain automation, robotics, and AI

Tapping into digitalization and technology, the use of automation, robotics, and AI in supply chains continues to be a strong trend. Automated solutions for supply chain tracking, inventory and warehouse management, and back-office tasks have allowed for leaps forward in labor productivity performance. The shortage of truck drivers has catapulted the transport industry into the forefront of AI and autonomous vehicles.

Although these new technologies have the potential to reshape the entire supply chain, many of them, especially AI, haven’t fully matured and reached their full potential yet. Inserting AI into a data system (ERP or similar) will not automatically generate a ready-made business strategy. As with any other data analysis, it still takes a lot of work to collect the data, transform it, and ensure it is high-quality and connected. Once that is done, you can start accessing all the business value AI can bring.

While there are efficient AI solutions today for forecasting, promotion planning, and data correction, for example, we will see more and better applications of AI, machine learning, and reinforcement learning for various supply chain problems in the future.

7. Sustainability and transparency in focus

The future consumer market will be shaped by millennials and Gen Z. If a business wants to survive in the next century, its strategies must align with the priorities and values of these consumers. Millennials and Gen Z expect companies to be more visible, active, and transparent. They don’t settle for less than proof and demand sustainable supply chain practices addressing climate change, human rights, and corruption.

As a result, the tracking trend is intensifying. More companies are using RFID tags, QR codes, and blockchain technology to identify and track the entire chain of movement on the way to the end consumer. Tracking also provides companies with better data for improving supply chain operations, reducing costs, and proving a product’s origin.

With the increasing demand from millennials and Gen Z, we are also seeing companies shifting from linear supply chains to circular supply chains to minimize waste and environmental impact. This shift is a no-brainer for some companies, while others struggle to find a suitable circular supply chain model.

How efficiently do you use your resources?

Supply chains are no longer a marginal concern for businesses. Today, supply chain knowledge and experience should have a given place in the boardroom as more companies realize supply chain is about much more than merely cost reduction. It is a possibility to differentiate, create strong offers, and stand out from the competition. At Optilon, we believe Nordic companies have the potential to be the most competitive in the world. They just need to use their recourses more efficiently than their competitors to get there.

Do you need the help of a supply chain expert? Book a meeting today!