What is Supply Chain Orchestration and Why is it Important for Your Business?

Supply chain orchestration is an expansive strategy that allows businesses to coordinate, manage, and optimize all supply chain activities.

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    This is probably old news, but optimizing supply chain processes goes a long way in helping businesses – in all industries – gain a serious competitive advantage.

    Whether that means slashing costs, boosting profits, or delivering better experiences to all customers and stakeholders, supply chain orchestration is a big piece of that “optimization puzzle.”

    In this blog post, we’ll explain what “supply chain orchestration” means, and from there, look at some of the specific ways it can support your business.

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    What is Supply Chain Orchestration?

    Supply chain orchestration is a comprehensive approach empowering businesses to seamlessly synchronize, oversee, and perpetually refine every facet of their supply chain operations.

    These encompass a wide array of tasks, ranging from inventory management and production planning to logistics, customer service, supplier relations, raw material sourcing, and beyond. Essentially, it encompasses the intricate web of interconnected elements that constitute the supply chain ecosystem.

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    Big picture though, the main goal of supply chain orchestration is weaving together all these disparate parts so that they work together seamlessly – ensuring that you always deliver the right product to the right person – at the right time and the right price point.

    Before we get into the specific benefits of enabling supply chain orchestration, it’s important to understand that digitization enables orchestration.

    See, supply chain orchestration is part of a broader SCM strategy that encompasses things like SC automation and optimization, as well as analog process improvements and cultural or strategic change. That means, tech is important, but it’s not the main event.

    Instead, the primary focus is unifying and aligning people, processes, and tech so they function as a cohesive unit.

    A lot of this boils down to having a centralized platform for managing data from different systems. So, again, that probably means implementing a cloud ERP that spans the entire business, then using that platform as the foundation that supports everything else – supply chain ops, sales, marketing, HR, service, and so on.

    Naturally, integrating all these different systems and data sources is time-consuming, expensive, and, well, just plain difficult — even for seasoned IT pros.

    It’s really hard to ensure that all “links” in the supply chain work together as one cohesive unit. And, even if you do pull it off, you might still experience debilitating visibility, security, or data integrity issues.

    Velosio Consulting Manager Jeff Johnston puts it like this, “the biggest ERP implementation challenge, across the board, is organizational change management. But, if we’re looking specifically at distribution, it’s getting all of these moving parts to work together. Inventory traceability, planning, warehousing efficiency, and managing vendor collaboration.”

    More than that, advanced tech is a key enabler for effective, end-to-end orchestration.

    According to EY, technologies like control towers, IoT sensors, advanced analytics, AI/ML-powered automations, etc. unlock the “differentiating capabilities” distributors need to compete in the 2020s and beyond.

    As you can see in the figure below, supply chain orchestration depends on a really sophisticated digital network.

    supply chain orchestration
    image credit: ey.com

    So, you’ve got your control tower at the center – which then connects to all of the technologies and processes you use to run your business – your online store, your production lines and warehouses, your supplier portals and internal docs, your entire fleet – and the sensors that monitor them. You get the idea.

    Why Supply Chain Orchestration Matters

    Supply chain orchestration offers a long list of business benefits from cost savings and efficiency gains to better customer & employee experiences.

    If you’re thinking these benefits sound like the same benefits offered by the cloud, the IoT, AI, ML, automation, and so on, you’re not wrong. Supply chain orchestration is powered by those same technologies (along with your ERP, all the apps & services linked to that core platform, and massive amounts of big data).

    But, how those technologies are used (and, more importantly, why) makes a difference. To help put that into perspective, let’s look at how supply chain orchestration directly supports some of those broader business goals.

    A few examples:

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    • End-to-End Visibility. Look, no matter what, you need end-to-end visibility across all supply chains, customers, and business operations to effectively analyze millions of data points — then respond to important findings accordingly — and in real-time. Supply chain orchestration both hinges on full visibility and enhances it. That means, you can’t “orchestrate” even the most basic supply chain ops until you’ve implemented an end-to-end digital platform that covers all business operations — and any relevant data sources (no matter how tangential).

    But, once you’ve laid that foundation and made some basic improvements, SC orchestration practices start generating valuable insights on their own that only get better with time. For example, supply chain orchestration can help you understand what’s happening within your supply chains and where — and how to respond. Ultimately, you’re combining multiple data sources, then leveraging the tech you need to monitor events, orders, fleet locations, data sharing, cyberthreats, process data, and more in real-time.

    • Enhanced Agility & Resilience. Well-orchestrated supply chains are lay the foundation for “future-readiness.” End-to-end visibility, real-time insights, and AI/ML-driven support helps orgs build the resilience and agility they may not have had back in 2020 when COVID burst on the scene and changed everything — or, at least, a lot of things — we all took for granted. Three years on, things have relaxed. We’re no longer disinfecting our groceries and Amazon deliveries, and masks have become more exception than rule — across all political climates.

    Still, businesses of all shapes and sizes have emerged from this crisis with a new perspective — largely driven by fear and uncertainty. Supply chain orgs, in particular, are realizing they need to do more to prepare for disaster and disruption, and are prioritizing investments that help them predict and plan for future scenarios.

    For example, they might invest in predictive modeling solutions that simulate the impact various crises might have on their ability to source raw materials, deliver orders on-time, or respond to price hikes.

    • Unlock Efficiency Gains at Every Level. Orchestration supports efficiency gains on multiple fronts. It supports continuous process improvements, accelerates tech implementations, and saves all workers a ton of time. Here’s Jeff again, “effective supply chain orchestration improves inventory accuracy and streamlines warehousing operations. Both of which go a long way in reducing overhead. It also enables more efficient planning and procurement, which, again, lead to reduced carrying costs.” On top of that, streamlining procurement allows you to work with vendors in a more efficient way, thus shortening the procurement cycle. That means, you’ll receive orders faster and suppliers get paid sooner — ensuring you stay in their good graces for the long haul.
    • Boost the Bottom Line. Supply chain orchestration improves financial performance on both ends. It enables orgs to cut costs and unlocks opportunities for growth. Historically, supply chain operations were seen as a cost center— however, according to a recent Accenture report, things are changing. Increasingly, orgs are viewing supply chains as “growth engines” that actively drive value and profitability. On the savings side, orchestration allows orgs to ID inefficiencies, quality issues, and other unnecessary costs eating into their margins. For example, enhanced visibility allows orgs to match supply to actual demand. That way, they’re not stuck with more inventory than they can sell — and all the costs that come with the territory (i.e.: storage, disposal, or fire sale discounts).
    • Automate Change Management & Compliance. Done right, supply chain orchestration can also help you automate change management and enforce compliance. With one central control tower, you can define custom rules, roll out policies across the entire org, and train built-in algorithms to automatically update said policies when regulations change.

    Final Thoughts

    A well-orchestrated supply chain is critical for black swan pivots, disaster response & recovery, and future-readiness. But, it’s also essential for weathering the mundane disruptions and delays companies experience every day.

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    Supply chain orgs that make end-to-end orchestration a top priority stand to see long-term gains — in agility, efficiency, resilience, profitability, and beyond.

    Ultimately, it’s about ensuring that all parts of your supply chain work together so you can reach your goals. And, again, that means leveraging advanced tech — AI, ML, automation, etc. — to make it happen.

    We know that’s a lot to take on without the right experts on hand to guide the process.

    Velosio’s Distribution team has the hands-on experience, technical expertise, and deep industry knowledge it takes to transform supply chain ops into a competitive advantage.

    We offer a range of advisory, deployment, and support services, as well as proprietary solutions designed specifically for distributors.

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