
Let’s talk about why supply chain optimization is a game changer for your organization.
But first, let’s cover some basics:
What is optimization?
Businesses have goals related to growth, market share, profitability, sustainability, customer service, and so on. But there are limits, like how much a factory can make, how many workers and materials are available, and how much space there is in a warehouse. To figure out the best way to run the supply chain, you have to look at lots of different options and pick the one that works best for the business. Optimization is a mathematics technique that is best suited to enable businesses to meet their objectives.
What role does optimization play in supply chain management?
Optimization plays a huge role in managing supply chains. Organizations that try to solve supply chain problems with basic rules or spreadsheets often miss out on potential profits and fail to achieve their goals. For example, when it comes to sourcing from various alternative suppliers, simple rules — or a heuristic approach — might suggest prioritizing them based on a specific, predetermined order for each item. However, optimization takes into account multiple criteria like lead times, reliability, costs, and product qualifications to find the best overall sourcing strategy across the entire portfolio.
How Coupa customers use optimization
Coupa customers use optimization to design and improve their manufacturing networks, evolve their transportation strategy, determine optimal inventory positioning, and for strategic sourcing.
Coupa solutions are also being used for S&OE. In the case of one Coupa customer, their production planning process did not look like any other production planning process I’ve been exposed to. They created a model for this unique process, and used Coupa tools to wrap a user interface around the model so that planning could be done on an ongoing basis by planners rather than requiring the use of more skilled industrial engineers that are often the main users of design tools.
— Excerpt from Top Takeaways from Coupa Inspire
What makes Coupa’s supply chain optimization stand out
At Coupa, we have used optimization techniques for decades to help supply chains evolve and adapt. Customers using Coupa’s solutions have achieved significant outcomes in their supply chain. One of the major cloud hyperscalers recently announced that they were able to reduce their carbon emissions by 60% as a result of using Coupa’s sustainability optimization capability. A manufacturer of medical devices who saw a sudden demand increase for respiratory care devices during the pandemic was able to save tens of millions of dollars in cost to serve by better visibility into the end-to-end supply chain costs. A consumer packaged goods company that spent over $100 million in transportation was able to save over 15% of the cost by better optimizing their routes.
The Coupa supply chain design and planning solution employs several optimization techniques such as linear and mixed-integer programming, warm starts, decomposition, constraint programming, and stochastic optimization. These techniques help solve complex problems like analyzing new manufacturing networks, optimizing the flow of goods, minimizing costs, planning efficient transportation routes, scheduling drivers, and optimizing inventory levels across multiple locations.
These optimization algorithms were developed over 20 years of research and in collaboration with customers. They form the basis for a high-fidelity digital twin that can accurately represent real-world constraints, such as sourcing limitations, sustainability goals, optionality, budget considerations, capacity constraints, demand fluctuations, risk, and resource allocation.
Let’s explore what sets Coupa’s optimization apart. It is true that there are several mathematical optimization libraries such as Cplex or Gurobi that can be used for supply chain optimization. However, effective supply chain optimization requires a deep understanding of the supply chain field to translate its complexities into a mathematical model that can then be effectively optimized. This is the secret sauce that Coupa has perfected over the years, with a team that has collectively dedicated over 200 years of experience to supply chain optimization. Coupa’s solution not only provides optimized results, but also explains those results, making it easy for the planning community to trust the system, rather than fearing it. Moreover, Coupa’s solutions are designed to handle the increasing complexity of organizations, capable of solving numerous scenarios simultaneously in just a matter of minutes.
As you consider the best solution for your organization, it’s important to ask yourself a few key questions:
- Are you reaping the full benefits of optimization or settling for basic heuristic rules of thumb?
- Are you using a solution that truly understands the complexities of supply chain management or relying solely on a mathematical library?
- And finally, are you working with a team that is deeply knowledgeable and experienced in supply chain optimization?
These questions will help guide you toward making the most informed decision for your organization’s needs.