How do large companies analyze and solve complex supply chain challenges? For over a decade, Optilon has helped one of the world’s leading companies in food processing and packaging with supply chain design and network optimization. The result? Improved structure, faster workflows, and greater efficiency.

CHALLENGE

How do we design an optimal supply chain? 

For larger companies, which often have larger and more complex supply chains, evaluating investments or divestments is no simple task. It involves more than just analyzing costs or impacts in one single market – it’s about understanding the ripple effects across multiple factors and how your entire network will be affected.

Take a real-life example: About ten years ago, a world-leading food processing and packaging company faced the challenge of closing a factory in Sweden. Shutting down the factory raised critical questions. How will it affect customers who depend on that site for materials? What happens to the equipment? And how will the overall cost structure evolve?

Previously reliant on time-consuming spreadsheets, they recognized the need for a robust solution to address these types of complex supply chain challenges.

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SOLUTION

Network optimization to ensure a cost-effective blueprint

After exploring various options, the food processing and packaging company chose to partner with Optilon. Through in-depth discussions, we decided to implement a robust system for network optimization – a critical component of supply chain design. While designing a supply chain involves creating a blueprint for how goods, information, and resources flow between locations, network optimization ensures that this blueprint is cost-effective and efficient by analyzing and selecting the best configuration of nodes (such as factories and suppliers) and links (such as transportation and duties).

Our team provided the tools and expertise to guide our customer through every stage, from installation to designing a customized input model. By parameterizing their supply chain in a decision model and integrating it into an optimization solution, we could simulate and optimize various scenarios, such as closing the factory. This allowed our customer to compare their current supply chain network against different scenarios, visualizing how key factors like cost categories, customer supply, lead time, and raw material flows might shift.

During a hands-on collaboration phase, we worked closely to overcome initial challenges and ensure a smooth startup. Once the model was finalized, our aftercare program provided ongoing support to ensure long-term success with the solution.

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RESULT

Results and benefits of Optilon’s supply chain design solution

Upgrading to a robust supply chain design solution has delivered significant benefits to the food processing and packaging company, including improved structure, faster workflows, greater efficiency, and reduced operational costs. The implementation of an automated workflow has eliminated much of the manual labor previously required for data management. From a user’s perspective, the company finds this way of working far superior to Excel, as it handles large volumes of data more effectively.

MAIN BENEFITS

  • Improved structure
  • Enhanced capability to analyze complex problems
  • Increased efficiency
  • Reduced costs
  • Improved ability to analyze different business cases

Today, our customer continues to use the network optimization model to address the very challenges they faced a decade ago, including analyzing factory closures and their ripple effects. Building on this foundation, they now tackle scenarios such as demand reallocation between manufacturing sites and evaluating smaller investments like enhancing capacity or capabilities at specific locations.

Results and benefits of Optilon’s supply chain design solution
Results and benefits of Optilon’s supply chain design solution

For instance, the model is employed to assess the impact of relocating a customer from one factory to another. This enables the company to identify opportunities to optimize transportation costs, improve factory utilization, and leverage favorable import-export tariffs. Additionally, by analyzing raw material fluctuations, they can anticipate operational impacts and prioritize suppliers who meet volume targets within desired cost thresholds.

These applications underscore the system’s ongoing value, transforming complex supply chain challenges into actionable insights that drive better decision-making and long-term efficiency.

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The company has access to Optilon’s technical support for maintaining and enhancing the solution when needed. This includes assistance with tasks such as upgrading the platform, modeling new problem scenarios, or extending its functionality and structure. However, the solution is designed to empower customers to be self-sufficient, enabling them to operate, adapt, and develop it independently. Optilon’s support is available as a trusted partner to provide expertise and guidance whenever additional help is required.

They also turn to Optilon to meet staffing needs. As a relatively small team with specialized expertise, recruiting for roles requiring deep knowledge and an intricate understanding of the company’s supply chain is challenging. For them, the best way to bridge this knowledge gap in the short term is by engaging a consultant from Optilon.

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Are you ready to simplify your supply chain challenges?

If you’re facing similar challenges, let Optilon help you turn complex into simple. With a track record of over 1,000 successfully completed projects and a 30-year integration heritage, Optilon is a trusted supply chain optimization partner.


Book a meeting with us to discuss how we can help you design a tailored supply chain solution that aligns with your business goals.

In today’s fast-paced business world, companies often juggle daily tasks with long-term goals. This is where S&OP steps in to help bridge the gap between strategy and operations, fostering better decision-making and teamwork. However, many organizations face challenges like poor implementation or overly ambitious plans. In this article, we’ll explore how to avoid these pitfalls and maximize the efficiency of your S&OP process. This is mastering S&OP 101.

S&OP: A tactical planning process

S&OP is a tactical planning process. Unlike operational or strategic processes, S&OP connects a company’s strategic goals with its operational activities. S&OP occupies the middle ground, bridging the gap where a tactical process may be lacking. It spans a time horizon longer than operational planning but shorter than strategic planning.

Unlike creating a business plan and reviewing it annually, S&OP is an ongoing process that continuously steers the organization toward its goals. It focuses on aligning operational efforts with the strategic direction, ensuring that decisions are made at the right level. This provides clear guidance to those working on the operational front.

The 5 steps of S&OP

In S&OP, there are five steps. Step one is a necessary preparatory step, whereas step two and three are pivotal, as they ensure alignment between what the market demands and what the company can deliver. Step one to four are the repetitive steps followed in S&OP, typically on a month-to-month basis.

Step 1. Portfolio Management

Portfolio Management is an activity that provides input to the following four steps in S&OP by determining which products should be included in the assortment. What products should we introduce, and which should we discontinue? This process ensures a balanced product lineup that aligns with customer demand and company goals.

Step 2. Demand Review

In step two, the focus is on assessing and forecasting market needs on an aggregated level. How much do we anticipate selling, and which product families will be in demand, month by month? This requires consensus across the entire sales organization, focusing on what can be sold. At this stage, it’s not about production limitations but sales potential.

Step 3. Supply Review

Once demand is understood, it’s time to evaluate the company’s ability to meet that demand. Operations, procurement, and logistics teams come together to discuss capacity, inventory levels, and any constraints that may affect production. Can we meet the demand? Do we have the necessary equipment, workforce, and materials in place? This step assesses the feasibility of delivering on sales expectations.

Step 4. Preparing for the executive meeting

By step four, the groundwork has been laid, but challenges may still remain. At this stage, senior management gets involved to address and resolve any remaining issues. Representatives from both sales and operations collaborate to clear the final hurdles, ensuring alignment across departments.

Step 5. Decision Making

In step five, leadership reviews the consolidated data, and decisions are aligned with the company’s strategy, such as determining which markets will receive supply when demand exceeds available resources. This is where the plan is finalized. Key activities, actions, and even smaller investments are confirmed, solidifying the path forward. 

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Common pitfalls when implementing S&OP as a process

When companies fall into chaos, it is often this very chaos that drives change. In the hustle of daily operations – putting out fires, managing fluctuating inventory, and struggling to keep pace with rapid growth – it’s easy to lose sight of long-term goals. Service levels dip, operational inefficiencies pile up, and ambitious targets start to feel out of reach. Meanwhile, the company’s entrepreneurial spirit, where everyone rolls up their sleeves and works harder and harder, begins to look unsustainable.

At this point, it’s important to ask: Can we truly achieve our growth objectives if we keep operating this way? More often than not, the answer is no. The company reaches a point of organizational burnout, where the workload threatens the business’s future.

Rushing into making changes without a structured approach

All too often, companies rush into making changes, jumping straight into the hard work without a structured approach. Before attempting any improvements, it’s crucial to fully understand the existing system. Without this understanding, you’re not truly improving the system – you’re simply making changes. 

Always start with the “why,” followed by the “what,” and lastly the “how.’ The “why” becomes the driving force for change, and this is where the pain points come into play.

The next step is to identify the core issues: Where is the real pain? What’s not working today – and maybe hasn’t worked for a long time? Often, it’s a lack of long-term tactical planning. Companies focus on short-term fixes, overlooking the chance to plan ahead and strengthen resilience.

The absence of well-established operational processes

Another pitfall is the absence of well-established operational processes, such as demand forecasting, inventory management, replenishment planning, and production planning. Without these processes functioning at a high level of quality, it becomes impossible to aggregate plans from the ground up effectively. As a result, decisions made at the executive S&OP level fail to translate into operational success.

Another challenge lies in the disconnect between sales and operations. These teams often function in isolation, tossing demands back and forth and blaming one another when issues arise. Establishing a shared vision for collaboration becomes essential. Company cultures, traditions, and especially divergent reward systems frequently pull departments in opposite directions.

On top of this, poor data control can render aggregated information either incomplete or so corrupted that it’s unusable. This issue spans from inaccurate or incomplete sales data to outdated BOM (Bill of Materials) and capacity data, severely impacting operational efficiency.

The method itself becomes more important than the results

In some cases, the method itself becomes more important than the results. When the focus shifts toward change for its own sake, you loose the original goal of improvement. This often results in friction and transitions that drain energy rather than drive progress.

There may also be resistance right from the outset. People remember past attempts that failed, fostering a mindset of “we’ve tried this before, and it didn’t work.” The organization carries the memory of previous initiatives that fell short, where they missed targets, and ultimately abandoned the effort due to poor outcomes.

How to successfully implement S&OP

You can implement an S&OP process without transforming the entire organization to embrace a process-oriented mindset. With the S&OP process as the base, you are able to describe and perform hands-on activities. Starting small, focusing on critical areas, and building on those successes can lead to meaningful progress without the pitfalls of overambition or resistance. It’s about introducing a new mindset and way of working that prioritizes a holistic view, communication, and continuous improvement.

First and foremost, you need to consider what you want to achieve. Has upper management decided that the company must become process-oriented because it’s the only way to survive? Or is the focus more on continuous small improvements and ongoing development? In the latter case, the chances of success are higher.

It’s also about perspective and method. There are many different methods, approaches, and philosophies, with S&OP being one of them. Companies already have processes, whether or not they formally recognize them. The problem arises because no one actively manages these processes when they go unacknowledged.”

When companies organize by function rather than process, each department focuses on optimizing its own work and results. There’s often little time to communicate. The holistic perspective is lost, and the various functions fail to synchronize. For example, a production department may focus on maximizing its efficiency without considering whether it creates bottlenecks in the supply chain or issues for the sales department. Ultimately, this type of sub-optimization can prevent the company from delivering products on time, in the right quantity, or with the quality that customers expect.

The value of using S&OP as a tactical planning process

S&OP provides a common language across the organization. By helping everyone understand how things work and how different departments interact, it ensures that employees know what to do, when to do it, and how to do it. This approach enables teams to move from reactive firefighting to proactive management.

Once you understand the system, teams can work toward better outcomes. Instead of relying on luck or guesswork when implementing changes, S&OP establishes a “baseline” that tracks progress, identifies areas for improvement, and supports necessary adjustments to drive continuous improvement.

At its core, S&OP fosters a holistic view of the business. It promotes collaboration and open communication, aligning efforts across the organization. By defining clear processes and uniting departments under a shared vision, S&OP ensures that everyone is working toward common goals, with streamlined information flow driving efficiency. 

Establishing a clear structure is also key. By distinguishing immediate operational tasks from long-term strategies, teams can focus on the right priorities at the right time.

Moreover, this structure offers a strategic advantage. When customer demand shifts, the organization can adapt confidently, knowing it has processes in place to handle changes smoothly and without stress. Ultimately, it’s about driving sustainable growth while fostering a healthier organization.

Ready to take control of your operational efficiency?

Don’t let common S&OP pitfalls hold you back. Reach out to our experts today and discover how we can help you implement a streamlined S&OP process tailored to your business needs. Let’s turn tactical planning into a competitive advantage.

Contact us now to started!

Nissens faced significant challenges in their S&OP process, using manual spreadsheets that hindered efficiency and business growth. With their mind set on transitioning from a people-dependent to a process-driven approach, Nissens turned to Optilon for a robust solution.

CHALLENGE

People-dependent and inefficient planning

Nissens were facing substantial challenges in their S&OP planning. Many tasks were done manually using spreadsheets, which slowed them down and hindered growth. This manual approach also made it difficult to adapt to changes and make improvements.

Nissens needed a solution that allowed them to plan their sales and operations more efficiently. They wanted to increase their forecast quality to optimize stock levels in their warehouses and provide better service to their customers. It wasn’t just about making things run smoother; it would also be an important step to refining their planning policies.

To achieve this, Nissens knew they had to move away from a people-dependent to a more process-driven approach. It was time to find a robust, sustainable, and reliable solution for their sales and operations planning.

SOLUTION

A smart system for Sales & Operations Planning

After evaluating a pool of candidates, Nissens invited a select few supply chain partners to present their solutions. After analyzing the pros and cons and engaging in discussions, Nissens chose Optilon, whose S&OP system best matched Nissens’ business needs.

Collaborating closely with Optilon’s dedicated team, Nissens shared valuable insights about their process, paving the way for Optilon to start the implementation phase. During this stage, Optilon built a customized solution tailored to Nissens’ unique business needs.

The implementation phase went smoothly. Optilon provided Nissens with structured files detailing the information required for the system. Nissens then extracted and shared data files with Optilon.

An extensive test period proved valuable

Nissens, together with Optilon, devoted over six months to rigorous testing. This allowed them to track and validate outcomes and ensure their new system aligned with their business goals. As some product groups would sell more during specific seasons, they focused on optimizing forecast accuracy and determining minimum stock levels for these groups. The system was set up with multiple individual season keys and forecast models tailored for each specific product group or even item number.

RESULT

Results and benefits of Optilon’s S&OP solution

As with most big changes, it took some time for Nissens to bring the organization on board. Listening to and getting feedback from the planning team was an important part of building confidence in the new system. But once everyone embraced it, the benefits became clear.

Nissens significantly reduced complexity in their planning department. In contrast to their previous system, which relied heavily on a single individual for manual updates, the new system truly transformed their process. Previously, the weekly task of adjusting reorder points, minimum stocks, and forecasts was laborious and time-consuming. Now, with improved data accessibility, Nissens’ system remains consistently updated.

Nissens discovered not only newfound efficiency but also other unexpected benefits. The shift from a high-risk, people-dependent setup to a process-driven one also aided digitalization and a shared perspective among team members.

MAIN BENEFITS

  • Optimized sales planning
  • Enhanced operations planning
  • Improved forecast quality
  • Optimized stock turnover
  • Increased growth
  • Enhanced efficiency

The new system has significantly enhanced Nissens’ S&OP processes, improving forecast accuracy, optimizing stock turnover, and ensuring OTIF performance. A huge benefit for the company is that it aligns with their ongoing digitalization efforts. Nissens has been able to integrate relevant data into their BI system and now gets a full view of everything across the organization. They can share real-time insights, whether dealing with warehouse availability challenges or showcasing their projected trajectory. This allows them to present a clear short-term outlook, ensuring everyone is on the same page, and a long-term perspective, providing a roadmap for the company’s collective future.

Increased growth and transparency

The new S&OP system has also played an important part in supporting Nissens’ business growth. In 2021, Nissens acquired a new company, which doubled their planning scope from 8,000 to 16,000 items, achieved with minimal additional resources. By sharing information with suppliers, purchasers, warehouses, and the finance team, they have been able to make more informed decisions and secure the necessary resources for sustained growth. This strategic approach has not only optimized Nissens’ internal capacities but also enhanced their overall operational efficiency.

Embarking on this sales and operations planning journey, integrating an efficient S&OP process that works has truly paid off for Nissens. It has brought value across the entire organization and will continue to support their business goals, also in the future.

About Nissens

Nissens is a leading manufacturer of essential thermal system components for the automotive industry. The company supplies the global aftermarket, offering a range of products covering everything from fast-moving to exotic parts for European, Asian, and American brands. With more than 10,000 products, Nissens has one of the most extensive selections of engine cooling parts in the industry.

Are you struggling with your S&OP setup?

Are you relying on spreadsheet programs such as Excel or rule-based processes in ERP systems to manage your S&OP? Have you come to the conclusion that these tools are not sufficient for supply chain optimization and critical business decisions?

With a track record of over 1,000 successfully completed projects and a 30-year integration heritage, Optilon is a trusted supply chain optimization partner.

Book a meeting with us to discuss how we can help you create a tailored S&OP solution that aligns with your specific needs and future business goals.

ABC inventory classification has been around for so long that most planners just assume it is the only way to segment inventory. Spoiler alert: it is not. And it is far from the best way. This method hails from the 1960s, a time when computers were room-sized giants. Today’s tech can do so much more. Let us dive into how inventory management has evolved into multi-echelon inventory optimization (MEIO), helping companies minimize inventory investment while hitting service-level targets and improving profitability.

How does ABC classification work? (And what is wrong with it?)

To understand why ABC inventory classification falls short, let us unpack how it works. Traditional inventory management applications calculate safety stock for each individual Item-Location (warehouse) combination in isolation. For such an application to work, the planner needs to assign a service level target (%) for every combination.

With companies often managing tens or hundreds of thousands, or even millions, of Item-Location combinations, it is impractical to set service levels individually. A simplification is necessary, and ABC classification is one way of doing it.

A common approach is to use a 3×3 matrix with volume value on the Y-axis and order lines on the X-axis, creating a “double” ABC classification. Typically, 80% of the volume value is assigned to A items, 15% to B items, and 5% to C items. The same 80/15/5 breakdown applies to the number of order lines. A few high-volume value items usually hit the 80% threshold of the AA category quickly, leaving most items in the CC category.

Example of ABC classification.

Service levels are then assigned to each ABC class through a “trial-and-error” process. The AA class typically gets the highest service level targets, and the CC class gets the lowest. 

If the aggregated service level doesn’t meet the company’s overall target, say, 95.o%, adjustments are made to the service level targets per class. Once the settings are in line with, or slightly above, the company´s overall target, 95.5% in this example, the process stops. 

Now every item in each ABC class shares the same service level target. For example, if there are 10,000 stocked items in a location, all 5,400 items (54% from the ABC classification example above) in the CC class will have the same target. Safety stock levels can then be calculated.

The drawbacks of ABC classification

Now, let us pause and think for a moment.

The stock investment depends on the service levels set for each ABC class. Could other service level combinations achieve the same 95.5% result? Absolutely. There are countless combinations that could give the same 95.5% overall service level, all with different stock investments.

So, how do we know if our chosen assignment of service level per ABC class is optimal? We don’t. That’s why we call it inventory management – not inventory optimization.

The example above describes one level, but supply chains are often more complex, with multiple levels/tiers (central, regional, and local warehouses). Some traditional inventory management software uses an 8×8 ABC matrix for each location. With many locations, setting up and maintaining this system can become a very labor-intensive task. And we still can’t be sure if we have the optimal set-up.

Why inventory optimization beats traditional inventory management

So, is there a better way to segment items, assign service level targets, and optimize safety stock levels today? Yes, there is.

While traditional ABC classification focuses on operational logistics, often ignoring sales, marketing, and customer needs, inventory optimization looks at the product range and the business.

This modern approach uses “Service Classes,“ for example, “Accessories”, “High-margin products”, “own-brands”, and “Critical spare parts”. This categorization is more relevant to sales and marketing, who might not even understand ABC classification.

Stock-to-service for better inventory management

In inventory optimization, you set service level targets per service class, not ABC class. The software optimizes each Item-Location’s service level and safety stock level using a “stock-to-service” curve. This ensures that you meet the aggregated service class target but with minimal stock investment. Let´s think about this. Using the ABC approach, all items in a class are assigned the same service level as an input. In inventory optimization, the software optimizes the individual Item-Location service level, this is an output,

Schematic Stock-to-Service curve (Efficient frontier).

This automated differentiation of service levels (known as mix optimization) within each service class, considering lower bounds, is an outstanding way to reduce stock investment and increase service level at the same time. For example, “Accessories” might have an overall target of 93%, with a lower bound of 90%. The software then assigns service levels between 90% and 99.99% in such a way that the service class still reaches 93% as a group but with minimum stock investment, i.e. optimization. Similarly, “Critical spare parts” may target 99.5%, with a lower bound of 99.0%, still giving the system some level of freedom in the mix optimization step.

The result? Each item in each location is optimized individually but in relation to all other items in the same service class and in relation to upstream and downstream locations (known as Multi-Echelon Inventory Optimization, MEIO). Actually, they compete about the stock investment among each other you could say. In inventory management, items are treated as isolated entities. Inventory optimization software models tens of variables such as demand variability, standard cost, order quantity, lead time, lead time variability and more – unmanageable with the traditional approach.

Modern inventory optimization automates the planning of complex supply chains with hundreds of thousands of Item-Location combinations, guaranteeing service levels with minimum stock investment. This is all done with a very limited number of planners.

Ready to upgrade your inventory management?

Are you still relying on old inventory management methods? Transform your inventory strategy today with cutting-edge inventory optimization tools. Say goodbye to outdated ABC classification and hello to smart, efficient, and cost-effective inventory optimization.

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In today’s fast-paced business landscape, optimization is key, especially in supply chain. With the right system in place, companies can boost efficiency and ultimately drive greater success. Yet, rolling out a new supply chain planning system is a complex task – and pushing that button can feel quite daunting. To pave the way for success, here are 7 tips to help you go live with your new supply chain planning system.

The need for an advanced supply chain planning system

There are many reasons for implementing a new advanced supply chain planning system. While some companies want to reduce tied-up capital and improve agility, others want to optimize inventory levels and refine forecasting processes.

In an increasingly turbulent world, businesses are also looking to invest in more robust systems to mitigate risks and increase operational resilience. They want a flexible solution that can navigate the rapid changes of the global landscape and offer security.

There is also a growing demand for automation among businesses that rely on manual data entry and individual expertise. These businesses want to move away from a high-risk, people-dependent set-up to a more process-driven approach that enables growth and scalability without personnel dependency.

Are you one of those companies, eager to adopt a future-ready solution, yet cautious about ensuring a flawless launch on the scheduled date?

How to successfully go live with your new supply chain system

To pave the way for success, here are 7 tips to help you go live with your new supply chain planning system.

1. Define clear and measurable goals

When implementing a new supply chain planning system, it is crucial to establish goals that clearly articulate what you aim to achieve with it. These goals should be specific, quantifiable, and measurable so that you can track progress over time. They should address specific pain points or areas of improvement within the supply chain that are aligned with your organization’s strategic priorities. Setting clear goals also makes it easier to communicate the purpose and expected outcomes to your organization. Also establish a timeline to create a sense of urgency and accountability. This will help you focus efforts and ensure timely progress towards implementation milestones.

2. Get involved and take ownership already in the design phase

The design phase of a new supply chain planning system lays the foundation for its success in many ways. It is during this stage that key decisions are made regarding system architecture, functionality, and user experience. While it may seem tempting to leave the design solely in the hands of experts, getting involved early on is important for understanding how the new system works, ensuring it meets your organization’s needs, and taking part in the decision-making process. Even though you may have experts handling the technical aspects of the system design, it is essential for you to take ownership of the process. By doing so, you not only increase the likelihood of successful implementation but also foster a sense of buy-in among the users in your organization.

3. Make sure to get everyone on board – especially the sceptics

In the journey of implementing a new supply chain planning system, effective change management is essential for success. The impact of this transformation usually extends beyond the project team, often including finance, sales, sourcing, and procurement, either directly or indirectly. Identifying key people and engaging them is critical for project success, especially in addressing sceptics and dissenters. Winning over these hesitant voices can serve as a catalyst for internal project advocacy. Once convinced, you will often find that these people evolve into project ambassadors, championing its cause.

4. Devote enough time to thorough testing and validation

Ensure you allocate enough time for testing and validating your new supply chain planning system. This process will help identify and address potential issues before going live, facilitating a smoother transition. Address all potential challenges and uncertainties right from the start. Run both systems – your existing and the new one – simultaneously to carefully examine any differences. Compare and analyze the results to uncover underlying reasons for discrepancies and use feedback from pilot testing to make necessary adjustments and improvements. This proactive approach will establish a robust foundation and mitigate risks as you proceed with the implementation.

5. Don’t aim for perfection – stick to the 80/20 rule

While striving for excellence is important, it is essential to acknowledge that achieving absolute perfection is unrealistic. Understand that there will always be corner cases, exceptions, and unforeseen challenges. Embrace this reality and adopt the 80/20 rule: focus on addressing the most critical aspects that will have the greatest impact. Be prepared to address issues as they arise, using a proactive approach to correct any discrepancies. It is crucial to prioritize the optimization of systems for the majority rather than clinging to outdated ones. The effectiveness of any system should be measured by its ability to improve overall functionality for the majority. Striving for adequacy ensures steady progress while maintaining flexibility to address emerging challenges.

6. Time to push that button and go live with your new system

It is easy to fall into the safety net trap. However, after thorough testing and validation, it is crucial to recognize the pivotal moment: the decision to transition to the new supply chain planning system. Summon the courage to push that button and go live! While it may seem daunting, remember that after investing considerable time, money, and resources, proceeding otherwise would be a financial misstep. By initially keeping the old system in parallel, you will have a contingency plan, in case of any unforeseen issues.

7. Start with the most receptive market and let them lead by example

When rolling out a new supply chain planning system across multiple countries, begin with the market most receptive to change. By allowing them to lead by example and create an early success story, you instill motivation and interest in other markets to transition to the new system.  Start the deployment there and then gradually expand to the other markets. This is an effective strategy for promoting the new system internally across your global organization. This approach also acknowledges and empowers the individuals involved in adopting the new system, highlighting their achievements.

Here to support you throughout your supply chain journey

Are you ready to adopt a future-ready supply chain planning system and eager to ensure a flawless launch on your planned schedule? With a track record of over 1,000 successfully completed projects and a 30-year integration heritage, Optilon is a trusted partner in supply chain optimization. From technology selection to seamless implementation, integration, and ongoing support and insights, we are committed to accompanying you every step of the way on your supply chain journey.

Book a meeting today with one of Optilon’s supply chain experts.

A lot is happening in the world right now. Understanding these changes, how they affect our businesses, and the critical role the supply chain plays, is necessary to navigate the future and maintain competitiveness in the market. This article outlines 5 supply chain trends in 2024 by supply chain experts Anders Remnebäck and Fredrik Jersby that you shouldn’t ignore.

1. Robotics and autonomous vehicles will revolutionize last-mile delivery

There is a huge wave of technological progress underway, leading to advancements and breakthroughs. Robotics and autonomous vehicles are at the forefront of this transformation, although it has taken longer and proven to be far more challenging than anticipated.

The ultimate challenge lies in achieving fully autonomous vehicles capable of navigating entirely new urban environments without prior training or constraints in that particular area. This involves more than simply getting from point A to point B; it is about mastering complex real-world scenarios.

Similarly, integrating robotics into human environments presents its own set of challenges. But if we can create bots with human-like abilities, from ordinary tasks to understanding nuanced contexts, and combine this with fully autonomous vehicles, last-mile deliveries will be revolutionized.

Having a vehicle that efficiently travels from point A to point B is one thing. Still, the last 20 meters present a unique challenge: delivering the package, navigating to the building, ringing the doorbell, or leaving the package securely. Without solving this final leg, the efficiency of reaching point B is diminished.

It is evident that we are steadily progressing in this direction, leveraging technologies like reinforced learning, and neural networks. Once all the necessary components align, the impact on the entire supply chain will be profound.

As one of the founders of Skype pointed out, this could even make delivering something as small as a single toothbrush profitable. The question is: How long will it take to fully realize this vision?

2. AI and automated decisions will replace humans

In the past year, there has been explosive growth in reinforced learning and neural networks, opening new possibilities for supply chain planning. We foresee that this advancement will pave the way for digital supply chain planners and autonomous supply chains capable of making decisions based on sophisticated models.

We are moving towards a future where human involvement in decision-making becomes less prominent, mirroring previous transitions in technology adoption. Historically, we transitioned from manual processes to automation with the introduction of industrial robots, followed by the integration of Enterprise Resource Planning (ERP) and advanced planning tools.

As more decisions become automated, this shift may lead to a reduction in the roles of middle managers. However, humans will continue to play a pivotal role, becoming more involved in dialogue and collaboration with automated systems. Human expertise will remain essential in guiding and fine-tuning these automated processes to align with strategic objectives and evolving market dynamics.

3. Electrification will impact industries unable to transition fast enough

The transition to electrification is a critical trend that calls for urgency. The scale and complexity of shifting the world from fossil fuels to renewable energy are immense but inevitable. It won’t happen overnight; rather, it will unfold gradually, with hybrid solutions emerging before complete electrification.

And there will be winners and losers. For companies reliant on fossil fuel-driven transportation, understanding and planning for this transition is paramount. However, this requires a certain scale and capability. Companies with legacy investments in outdated technologies will struggle, while others, like Tesla, are poised to accelerate this transition through vertical integration.

In Europe, the failure of car manufacturers to adapt to electrification could have significant consequences on jobs and compliance with new regulations, such as bans on gasoline and diesel cars.

In essence, the electrification trend represents not only a technological but also a geopolitical shift with far-reaching consequences. Only companies that proactively plan and innovate will thrive in this new era of sustainable energy.

4. The transition from on-premise software to cloud will bring challenges

There has been a noticeable shift towards cloud services, with companies increasingly favoring web-based solutions over traditional on-premises setups. Initially driven by consumer-oriented needs, this trend has extended to the entire Enterprise Resource Planning (ERP).

Moving critical transactions and data to the cloud offers significant cost benefits. However, this transition may also introduce limitations on flexibility and adaptability, raising concerns about potential lock-in effects, integration costs, and data accessibility.

One pressing question is whether cloud systems will become more closed and rigid or if customers will demand greater access and interoperability. As companies navigate this transition, it is important to carefully evaluate the trade-offs and consider their long-term strategic objectives.

5. A turbulent world will demand a shift in supply chain strategy

We find ourselves in a new era marked by significant turbulence globally. From war and conflicts to climate change and new legislation. This increased unpredictability has underscored the importance of supply chain and the ability to withstand disruptions.

As a result, the interest in scenario modeling and understanding the consequences of events is rapidly growing. More companies recognize the need to invest in people who understand supply chains and systems that can help them swiftly react to events when they happen – and more importantly – proactively anticipate and mitigate risks.

To reduce risk exposure, many are moving towards more regional and local supply chains. This shift represents a departure from the previous focus solely on cost optimization. While centralizing operations can offer cost savings, there are risks associated with a single point of failure. The expenses of redundancy are now outweighed by the potential consequences of its absence.

At the same time, new sustainability legislation is reshaping supply chains, mandating not just reporting but also restructuring supply chain operations for compliance. This means companies will want to balance sustainability with cost and risk as well as service levels to make trade-offs and conclude when to use which strategy.

To navigate these changes effectively, companies must establish robust foundations for decision-making. Planning is key, and continuously exploring alternatives and scenarios and developing action plans are crucial to meet future challenges.

Authors Fredrik Jersby and Anders Remnebäck have deep knowledge and vast experience in the supply chain field.

Do you need the help of a supply chain expert?

Understanding the ramifications of these changes and trends is paramount. Remaining stagnant is not an option; instead, embracing a forward-leaning approach is essential for adaptation and success. The goal is to create supply chains that are resilient, adaptable, and sustainable, capable of weathering the storms of an increasingly turbulent world.

At Optilon, we are experts in efficient supply chain decision-making. Our solutions help businesses design and optimize their supply chains through well-proven processes and technology. We can help you create a future-state roadmap with scenario comparisons and analyses. We can assist in articulating supply chain complexity and relevant actions, evaluate the consequences and risks, and make decision recommendations. Sounds interesting?

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