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What are the benefits of using OR applications in supply chain management?

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Supply chain management (SCM) is the process of planning, executing, and controlling the flow of goods and services from suppliers to customers. It involves various activities such as sourcing, production, inventory, transportation, distribution, and customer service. SCM is crucial for any business that wants to optimize its operations, reduce costs, improve quality, and satisfy customer demand.

However, SCM is also a complex and dynamic system that faces many challenges and uncertainties. Factors such as demand fluctuations, supply disruptions, price changes, environmental regulations, and global competition can affect the performance and profitability of a supply chain. How can a business cope with these challenges and make better decisions in SCM?

This is where operations research (OR) comes in. OR is a discipline that applies mathematical models, methods, and tools to analyze and solve problems in various domains, including SCM. OR can help a business design, evaluate, and improve its supply chain processes and strategies by using data, logic, and optimization techniques. In this article, we will explore some of the benefits of using OR applications in SCM.

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Prangya Mishra

Associate Vice President - IT & Digital Solutions at JSW Steel | Head-MES | APS | IIoT Architect | ML, AI at Edge | Ex-…

1 Data-driven insights

One of the benefits of using OR applications in SCM is that they can provide data-driven insights into the current state and performance of a supply chain. OR applications can collect, process, and analyze data from various sources, such as historical records, market trends, customer feedback, and sensor networks. By using techniques such as descriptive analytics, predictive analytics, and prescriptive analytics, OR applications can help a business understand what is happening in its supply chain, what might happen in the future, and what actions to take to achieve its goals. For example, OR applications can help a business forecast demand, monitor inventory levels, identify bottlenecks, and evaluate trade-offs.

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Mohammad Waleed Ilyas

Procurement Specialist | SAP S/4 HANA (MM) | SAP ARIBA | SAP ECC 6.0 (MM) | Pak-Arab Refinery Limited
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more near to accurate predictions could be made for future demands, and consumptions. This helps the supply chain to be proactive in case of any uncertainty.

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2 Optimal solutions

Another benefit of using OR applications in SCM is that they can help a business find optimal solutions for its supply chain problems. OR applications can use mathematical models to represent the structure, objectives, and constraints of a supply chain problem. Then, they can use optimization methods, such as linear programming, integer programming, or network optimization, to find the best possible solution that maximizes or minimizes a certain criterion, such as profit, cost, or service level. For example, OR applications can help a business determine the optimal location and capacity of its facilities, the optimal allocation and routing of its resources, and the optimal pricing and promotion of its products.

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Prangya Mishra

Associate Vice President - IT & Digital Solutions at JSW Steel | Head-MES | APS | IIoT Architect | ML, AI at Edge | Ex- Accenture, Schneider Electric, Wipro, Alvarez & Marsal | Metals SME | Creator of "Process In a Box"
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The decision derived using OR is globally optimum in contrast to manually driven decision where the solution in most of the cases are locally optimum. When blended with Machine Learning, OR solution can generate solutions to scenarios which are far beyond manually feasible to create due to the volume of data.

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3 Robust decisions

A third benefit of using OR applications in SCM is that they can help a business make robust decisions in uncertain and dynamic environments. OR applications can use techniques such as stochastic modeling, simulation, and scenario analysis to incorporate uncertainty and variability into their models and methods. By doing so, they can help a business evaluate the impact and risk of different scenarios and events on its supply chain performance and outcomes. For example, OR applications can help a business estimate the probability and cost of supply disruptions, demand changes, or price fluctuations, and design contingency plans and mitigation strategies.

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4 Competitive advantage

A final benefit of using OR applications in SCM is that they can help a business gain a competitive advantage in the market. OR applications can help a business improve its efficiency, effectiveness, and responsiveness in its supply chain operations. By using OR applications, a business can reduce its operational costs, increase its customer satisfaction, and enhance its innovation and differentiation. For example, OR applications can help a business adopt lean, agile, or green supply chain practices, develop customized and personalized products and services, and leverage new technologies and platforms.

OR applications can offer many benefits to a business that wants to improve its supply chain management. By using OR applications, a business can gain data-driven insights, optimal solutions, robust decisions, and competitive advantage in its supply chain processes and strategies. OR applications can help a business cope with the challenges and uncertainties of SCM and achieve its operational and strategic goals.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Rafael Matos, MSc.

Data Tech Manager at Neon | Credit Risk Modeling | IFRS 9 | Loan Loss Provisions | Quantitative Finance | Retail Banking | Machine Learning | Data Science | Complex Systems MSc.
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In fact, OR is pretty much a child of supply chain concerns. I like to think that the very birth of OR is the K?nigsberg problem, with the efforts of L. P. Euler.

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What are the benefits of using OR applications in supply chain management?

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1 Data-driven insights

2 Optimal solutions

3 Robust decisions

4 Competitive advantage

5 Here’s what else to consider

Operations Research

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What are the benefits of using OR applications in supply chain management?

1

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3

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5

1 Data-driven insights

2 Optimal solutions

3 Robust decisions

4 Competitive advantage

5 Here’s what else to consider

Operations Research

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