Analytics-Driven Supply Chain Design: The New Competitive Edge

1. The first opportunity is to extend the scope of supply chain design beyond its traditional focus on cost minimization in order to incorporate a larger set of considerations. These include, for example, design for global and diverse markets, design for value creation, and design for value creation, and design for sustainability.
2. The second opportunity is to integrate more granular, tactical components into strategic decision-support tools to reduce gaps between anticipated and actual performance of supply chain networks. This is relevant to a number of tactical planning areas, such as source optimization, production planning, inventory decisions, and transportation planning.
3. The third opportunity is to put greater emphasis on the consideration of various sources of risk and uncertainty in supply chain design and structurally incorporating risk-mitigation and resilience measures into analytical decision-making support tools.
4. The fourth opportunity is to embrace new design methods and practices that incorporate new technologies and business models, supporting the design of digitally enabled, customer-centric supply chains that are both flexible and profitable.

For more details on these opportunities, please download the “The New Competitive Edge: Analytics-Driven Supply Chain Design, An Executive Guide.”

This white paper is the fruit of a collaboration between the Massachusetts Institute of Technology’s Center for Transportation & Logistics (MIT CTL) and Coupa, the provider of artificial intelligence (AI)-powered supply chain analytics software. New trends and challenges are reshaping the role of supply chains in enabling companies to compete successfully in changing markets. The paper addresses the growing need to rethink how companies approach supply chain design in this context.

So much is changing in the commercial environment where today’s supply chains compete. Global supply chains are becoming increasingly complex. The number of actors involved is increasing, consumer expectations are rising, and industry trends such as the growth of omnichannel marketing and direct-to-consumer services are redefining supply chains, especially over the last mile.

As a result, tactics for managing and mitigating risk, building resilience, and supporting sustainability now play a more important role in the design of supply chain networks than was the case just a decade ago. From a strategic perspective, supply chain design has become a major source of competitive advantage. But to capitalize on this advantage, companies must adopt and implement design practices that meet the demands of today’s competitive environment.

As markets and technology continue to evolve at a rapid pace, traditional supply chain design methods have become outdated, and companies that follow them risk putting themselves at a competitive disadvantage. The challenge for supply chain leaders, therefore, is not just to respond to market developments; they must also acquire the tools and flexibility to keep up with the accelerating speed of change.

MIT CTL and Coupa have combined the knowledge and experience gained from state-of-the-art academic research and many hours working with companies to establish a vision for future-proof, analytics-driven supply chain design and planning approaches. This vision is elucidated in the following paper. We present an overview of the current state of practice in supply chain design and offer specific strategies—supported by real-world examples—for putting our vision into practice.

For supply chain professionals, there has never been a time in history like the past two years. Virtually every supply chain worldwide has had to contend with supply, production, labor, and logistical bottlenecks caused (or at least exacerbated) by the Covid-19 pandemic. Strategies like Just-in-Time and low-cost-country sourcing—for decades, the unquestioned building blocks of global commerce—are coming under fresh scrutiny as companies consider whether their current supply chain networks are resilient enough to withstand ever-growing risks.

The speed with which disruptions upended operations made it painfully clear that successful supply chains must be flexible and adaptable. But being able to quickly respond to changing markets and competitive priorities is not solely a pandemic-era concern. Increasing supply chain complexity, the exponential growth of e-commerce and omnichannel fulfillment, and the mandate for sustainability are not new, but successfully managing them requires similar capabilities.

For all these reasons and more, traditional supply chain designs and methodologies have become outdated, creating risk for today’s businesses. To model a new world, you need new thinking and new tools. We hope this timely paper will help you to reconsider and reshape your network design strategy at a time when it’s never been more important.