Resources Archive - Page 20 of 21

Complexity, one of the most used and ambiguous terms in business, is increasingly present in several layers of businesses today.
Due to its nature of being cognitively challenging to understand, complexity has a bad reputation in business. For instance, complexity in Supply Chain offers many challenges. However, complexity is not inherently bad as it can offer many benefits for businesses. Recently, Harvard Business Review wrote a striking piece about the strengths and costs of complexity in a business environment. Not the least, the paper offers methods for embracing complexity while eliminating costs and escalating benefits.

The many sides of complexity

Complexity comes in many colors and forms offering both strengths and costs. Harvard Business Review summarizes the most significant strengths and costs caused by complexity in a business context:

Strengths:

Increased resilience – due to an enhanced ability to be responsive when faced with unforeseen opportunities and threats. Complexity also gives increased buffering capacity and more fallback options.
A bigger diversity leads to increased adaptability. As it is easier to try out new ways of serving the customer by recombining existing elements in a new way. This will help companies sustain business performance.
Better coordination – since smaller groups/entities have a high interconnectivity making them easier to steer and manage.
Complexity often results to inimitability, since companies’ complex interrelationships among multiple elements are hard to copy.

Costs:

Managing a variety of elements in a complex company setup can lead to increased costs as efficiency is reduced.
The understandability decreases, as it can be a struggle for a business leader to identify the root cause of certain problems.
Unmanageability increase as it is harder to identify values and functions of every individual element and know when to intervene to manage performance – The organization becomes less like a machine and more like a complex natural system with a life of its own
The former leads to increased unpredictability as spontaneous and unexpected events can emerge. With lacking insights, interventions based on gut feeling can have undesired effects.
Leaders lose the grasp of how all elements are intertwined making it hard to predict what effects business decisions can have on the entire company

Solution for Taming Complexity in Supply Chain – Optimize Globally

As removing elements to reduce complexity is uncommon, leaders tend to move forward with new elements that add value on a more obvious and immediate level. Therefore, finding methods to retain the benefits of complexity and diminish the costs is of high priority. At Optilon we strongly believe in embracing the complexity and utilizing technology to gain competitive advantages – especially when handling high complexity in Supply Chain.

The evaluation of new processes, and structures should not only be based on how it will impact a certain group or entity of a company, but more importantly how they impact the company on a holistic level. This will help companies balance the trade-offs of a business decision. For instance, when evaluating future supply chain network models it is important to realize that the benefits of any single location may be concentrated in a smaller area, whereas the complexity costs may be distributed across the organization. By utilizing modern technology to create simplified overviews indulging the entire complexity in supply chain, companies can truly assess all potential costs and benefits following any operational, tactical or strategic supply chain decision.

Link to the HBR article

With a combination of front edge supply chain consulting and market superior supply chain applications, Optilon creates sustainable business value through supply chain optimization. By optimizing the flow of products throughout the entire supply chain we help companies increase revenue by reducing lost sales and expenditure of resources.. Learn more about Optilon here.

The retail industry is transforming through a period of unprecedented change. Emerging technologies such as Artificial intelligence (AI) and automation technologies have vastly altered every stage of the retail journey, from inventory management to customer service. Retailers are also integrating data analytics into every touchpoint of their business, including sales predictions, store optimization and product recommendations.

The ability of actors in retail to effectively use AI, data analytics and other emerging technologies to meet changing customer expectations will be a key determinant of becoming a winner in the new decade. These technologies will also dramatically impact operational activities, such as workforce management, inventory and sustainability efforts.

Robert Hetu, a research vice president with the Gartner retail industry services team, has gathered his thoughts around how emerging technologies will shape the future of retail. Optilon has summarized the most important trends from Hetu’s thoughts.

By 2024, Tier 1 retailers will reduce inventory carrying costs by 30%, dramatically freeing up working capital for digital investment, while revamping balance sheets.

Combining AI with a modern approach for demand forecasting, creating tailored market assortments and optimizing safety stocks will affect how much capital companies are tying in safety stock. A potential inventory reduction of 20% was already displayed in a recent report from Optilon.

By 2025, at least four of the top 10 global nonfood retail actors will establish a recommerce program as part of their global targets for zero carbon and sustainability.

While Gen Z and Millennials are more prone to sustainable practices, all generations are now a priority for sustainable consumption. Recommerce, meaning selling of previously owned products, is quickly growing in popularity. The secondhand apparel global market value reached $24 billion in 2018, with projections to achieve $51 billion by 2023.

By 2025, the top 10 retailers globally will leverage AI to facilitate prescriptive product recommendations, transactions and forward deployment of inventory for immediate delivery to consumers.

“Generation AI”, born after 2010 and that has always been influenced by AI, will start spending their money in the next decade. This generation will rely on technology to preselect the best offerings for them taking prices, ratings and product specifications into account. Retailers that will not be able to leverage prescriptive product recommendations will lose existing customers and won’t be able to attract new customers. This is due to lacking ability to stay relevant and influence their customers.

Link to article

Would you like to learn more about Optilon’s work within retail?

Please contact Area Manager Daniel Göransson on +46 70 937 92 88 or daniel.goransson@optilon.se

Watch this 30 minute webinar about how you can apply AI (Artificial Intelligence) in your own company. We provide you with insights, advice and the audience contributes with great questions.

Do you want to know more about AI in supply chain?

Please contact Optilon’s Application Board Director Anders Remnebäck on +46 709 379 282 or anders.remneback@optilon.se.

TO THE WEBINAR

Effective inventory management is one of the single biggest actions a company can take to maximize its competitiveness. It simply ensures that resources are being used smartly. In this blog post, we will look into how you can utilize AI to improve your Supply Chain inventory performance by optimizing your assortment.

Effective inventory management is one of the single biggest actions a company can take to maximize its competitiveness. It simply ensures that resources are being used smartly. That being said, a new report published by Optilon shows that many companies have a blind spot when it comes to inventory management. 22 percent of the inventory is redundant for a Swedish average company. This could be the case for many companies in the Nordics.

It’s not just about having fewer goods in stock. By always having the right mix of goods, missed sales are greatly reduced, while taking up less storage space and reducing the risk of an item being outdated. Having the right mix assures smart use of resources, but what is the effect of also understanding how you should manage your assortment? In this blog text we will look into how you can utilize AI to manage the product portfolio and increase your sales

Why is the right assortment important?
Effective inventory management can have a major impact on a company’s profitability. The findings in the report mean, that these companies have more goods in stock than they need. A product less in the warehouse does not only mean less tied-up capital, but also less warehouse space, reduced distribution, and administration costs and obsolescence (when a product becomes outdated).

Inventory optimization is not just about having fewer goods in stock. By always having the right mix of goods, missed sales are greatly reduced, while taking up less storage space and reducing the risk of an item being outdated. It provides an efficient recoil for the companies. They reduce costs while increasing revenue and freeing up capital.

Companies should reduce the inventory in specific categories of products, removing some SKUs, and minimizing the loss of revenues. They need to optimize the assortment without losing customers, taking into account, that customers may switch (together with all their purchases) to competitors if one of their favorite items is removed and it is not replaceable by any other.

The Traditional Inventory Approach
The Traditional Inventory Approach often entails removing SKUs that perform worst from the inventory, or in other words, remove products from categories that sell the least. Using this approach, it is possible that some clients are specifically interested in these SKUs, so that if they are discarded, customers are lost completely with all the revenues they bring.

A new algorithmic Approach
In contrast to the traditional approach, you can focus on removing SKUs which are indifferent to the consumer. With AI technology you have the possibility to predict if, from the consumer’s point of view, the removed SKU is replaceable by another item and we find the right match in term of profitability. In order to achieve this, our models, using only transactional data, answers the following inventory questions:

Frequent itemset mining – Which items are often sold together from a historical perspective?
Product alternativeness scoring – Which items provide good alternatives for items in the scope of removal?
Volume replacement scoring – How many customers actually buying item A will switch to item B if item A is removed from the inventory?
Revenue replacement scoring – Which portion of revenues is expected to be covered by the replacement product if the replaced product is removed?
Marginal replacement scoring – Which portion of margins are expected to be provided by the replacement product if the replaced product is removed?

Optimization Results
Our algorithmic approach has been tested side-by-side with the traditional method of removing least sold products and the algorithmic approach achieved 88% less estimated sales loss in the set of identified items for removal.

Are you looking for more information about AI and how you can incorporate it into your own Supply Chain – then you can download some of our great content via the below link.

Download whitepaper on AI

Blockchain is not a way station on the road to increased digitalization. It is a paradigm shift in how businesses, customers and partners interact and exchange value. Those who wait until the later phases will be shut out of opportunities to learn, earn value and influence blockchain´s development in the value chain. Blockchain is potentially a disruption of how Supply Chain of the future operates.

Digital advances have enabled businesses to streamline an increase in interactions between customers and value chain partners. Many companies have information-heavy processes that still require multiple entities to exchange private documents. The technologies to do so are un-secure, error-prone and fraud-ridden.

This post will investigate what blockchain is all about and how it can make a difference in the Supply Chain.

What is Supply Chain Blockchain?
For generations, businesses have relied on centralized infrastructures, such as payment systems, insurance, delivery and logistics services, and governments – to execute commercial transactions and manage risk. But these systems were not designed to handle the kinds of machine-to-machine transactions made possible by digital platforms.

Blockchains create decentralized, distributed and digital records of transactions that are anonymous, tamper-proof and unchangeable. This technology establishes trust among unfamiliar or unknown partners by ensuring that every successful transaction is recorded and stored in multiple locations across the entire distributed network.

Complex mechanisms are put in place to validate the accuracy and integrity of transactional information. Finally, in theory, there is no intermediary, although this is not always the case. This greatly eliminates the opportunity for criminal interventions or invalidated transactions.

Blockchain is not a database. Blockchain enables trusted interactions between unknown participants.

How can Blockchain in Supply Chain build the business case?
There are 6 ways that blockchain can support building the business case.

Business growth
Blockchain allows any individual or commercial entity in the world to safely transact with any other without an intermediary. Enabling expansion of markets.
Digitalizing manual processes
It will provide better tools to manage expensive and opaque processes and enable trade in a broad range of assets that until now could not be effectively represented, priced or traded with existing means. Enabling more efficient information exchange.
Making digital processes both safe and transparent, identity authentication (efficiency)
It will move the world economy away from the slow, expensive, analog-based methods we have relied on since the 19^th century to establish identity and legal status in financial transactions. It is a trusted digital environment by combining existing technologies and techniques to form a distributed digital ledger that captures and records the information needed by participants in a network to interact and transact. Simply because it will provide the identity of each participant in the network, without them having to show it to everyone.
Know your customer, leverage customer data to drive sales
Couple the supply chain data end-to-end and utilize it commercially.
Fight counterfeiting
Counterfeiting is a hot topic within blockchain. Many large brands have a need to protect their products from counterfeiting. At the same time, they are yearning for a direct customer relationship instead of via the retailer or ecommerce site.
Visibility/Traceability
Many brands struggle with developing creating a more transparent Supply Chain. Blockchain can help make the transactions in the Supply Chain more visible and traceable by creating a digital twin.

Getting the journey started
Many organizations have not yet focused enough on the type of supply chain decisions or processes that blockchain might enhance.

There is significant experimentation with blockchain across every industry around the world. Corporations that have long relied on centralized systems for control and security are being pushed to accept the concept of decentralization and distributed control that is central to blockchain.

Our advice to you: Experiment, focus on a short term tactical, narrow-scope, deployment. Do that by building a solid proof of concept.

Questions which can help you unlock the business value of Blockchain in Supply Chain:

How will you unlock the value for your business, now and tomorrow when leveraging blockchain?
How will you build the internal capabilities needed to build and manage blockchain platforms?
How will you build the organizational and leadership capabilities needed to engage in this new way?
Which intractable challenges involving access to, exchange of or sovereignty over data could you address?
What simple administrative decisions would you leave to an algorithm to make today?
What would be the priority use cases?
How will you pursue them – independently, as part of a partnership or as part of a consortium?
To what extent are you willing to move away from existing governance and operating models?

Alis Sindbjerg Hemmingsen is a Thought Leader at Optilon. She has more than 25 years of experience within the Supply Chain field. Optilon has a long track record helping companies achieve competitive advantages by improving Supply Chain performance. Learn more about Optilon here.

More blog texts about blockchain

Anti-counterfeiting through Supply Chain blockchain

Onboarding and offboarding blockchain in supply chain

Would you like to learn more about Blockchain in Supply Chain?

Please contact Optilon’s Application Board Director Anders Remnebäck on +46 709 379 282 or anders.remneback@optilon.se.

Every fifth item in stock could be unnecessary at a Swedish average company. This is shown in a new report from Optilon. For Sweden’s 100 largest companies this has an impact of SEK 93 billion / EUR 8.7 billion – that could be invested in more growth promoting activities. The most unnecessary industry vertical is tech and life sciences, and the least unnecessary is industrial and natural resources.

Effective inventory management can have a major impact on a company’s profitability. A new report shows that the impact can be greater than previously anticipated. The Report of Unnecessities, which has studied Sweden’s 100 largest companies, shows that 22 percent of the inventory is redundant for a Swedish average company. This means that they have more goods in stock than they need. A product less in the warehouse does not only mean less tied up capital, but also less warehouse space, reduced distribution, and administration costs and obsolescence (when a product becomes outdated). By eliminating the unnecessary inventory with efficient inventory management, an average company among Sweden’s 100 largest companies could have acquired about SEK 1.2 billion.

– This shows what a blind spot inventory management is for Swedish companies today. It’s not just about having fewer goods in stock. By always having the right mix of goods, missed sales are greatly reduced, while taking up less storage space and reducing the risk of an item being outdated. It provides an efficiency recoil for the companies. They reduce costs while increasing revenue and freeing up capital, says Anders Remnebäck, Supply Chain-expert at Optilon.

That a fifth of the inventory is unnecessary for Sweden’s 100 largest companies equals to an area, which is as large as 586 soccer fields or 151 IKEA warehouses – which is more than 50% of all IKEA Group’s stores. The report shows that with a more efficient inventory management, these companies could together have freed up SEK 93 billion / EUR 8.7 billion. A sum that could have been invested in areas that increase competitiveness and growth. This could be used to pay off loans, invest in R&D or hire more people. The sum equals to about 154,000 job opportunities, which is more than what Apple has employees.

– Effective inventory management is one of the single biggest actions a company can take to maximize its competitiveness. It simply ensures that resources are being used smartly, says Anders Remnebäck.

Most unnecessary stock is tied up in the tech and life science industry vertical. Companies in this industry could, with more efficient inventory management, be able to reduce their inventory by 33 percent, and the number of days a product is on the shelf with 21 days on average. From 63 to 42 days. The most effective industry vertical today is industry and natural resources, where more effective inventory management could free up working capital by 15 percent.

Would you like to know how much unnecessities you have in your company?

Read The Report Here (in Swedish)