5 Ways Analytics are Transforming Supply Chains

Download this article in PDF format.

The connection between analytics and supply chain is undeniable in today’s complex global marketplace, where the former generates an incredible volume of data on a minute-by-minute basis. Analytics steps in by transforming that raw data into actionable information that organizations can use for good decision-making.

These realities aren’t lost on companies, which continue to invest in a wide array of supply chain analytics solutions. In fact, market.us says the software sector is on track to reach $44.4 billion in total revenues by 2033, up from just $7.8 billion in 2023. This growth represents a compound annual growth rate (CAGR) of 19.0% during the forecast period and “effectively underscores the critical role that analytics will play in shaping the future of supply chain management,” the research firm says.

What is Supply Chain Analytics?

By definition, supply chain analytics is the use of data analysis tools and techniques to improve the operational efficiency and effectiveness of supply chains. This includes the analysis of everything from inventory levels and supplier performance to logistics and distribution patterns.

The software’s predominant strength is optimizing supply chain operations by providing comprehensive analytics that aid in decision-making. Cloud-based deployment models dominated the field in 2023, with a 67.1% share. According to market.us, this preference “underscores the trend towards scalable and flexible analytical solutions that cloud computing offers.”

The retail and e-commerce sector led industry vertical applications of supply chain analytics in 2023, with a 21.8% share. “The demand for efficient logistics is particularly high in this sector,” the research firm adds, “driven by the need for fast, reliable delivery services, inventory management, and customer satisfaction in a highly competitive market.”

5 Transformational Effects of Analytics

Here are five different ways organizations are using analytics to enhance and optimize their supply chain operations:

Minimized costs, enhanced customer satisfaction and streamlined operations. Manufacturing, retail and e-commerce companies are leveraging these analytics to predict product demand, manage inventory more effectively, and respond proactively to market changes. “The growing complexities of global supply chains and the need for resilience in the face of disruptions such as during global events like trade disputes further bolstered the demand for supply chain analytics,” market.us states.
Real-time gathering and analysis of data. Big data is becoming essential in predicting demand, optimizing routes and enhancing inventory management. “Predictive analytics helps supply chains anticipate risks and reduce costs,” market.us says. “Also, AI is revolutionizing supply chains with intelligent automation in areas like inventory management, demand forecasting, and logistics optimization.”
Improved risk and management. In a recent Gartner survey, 76% of supply chain executives indicated that compared to three years ago, their companies are facing more frequent disruptions in their supply chain. “With such a large majority of companies experiencing significant volatility, understanding and benchmarking the practices that align with analytics-driven improvement are critical to enabling supply chain analytics leaders to prepare,” Gartner’s Noha Tohamy writes in “Key Characteristics of Supply Chain Analytics High Performers.”
Better supplier performance management. Analytics also plays a crucial role in managing supplier performance, allowing businesses to assess and enhance their supplier relationships effectively. “By tracking metrics such as delivery times, quality, and compliance,” market.us points out, “organizations can identify underperforming suppliers and make data-driven decisions or potential replacements.”
Predict potential disruptions and craft effective contingency plans. Reactive supply chain and risk management don’t work anymore. Taking a proactive approach to risk management—supported by accurate, reliable analytics—not only minimizes the impact of disruptions when they occur, but it also enhances the overall resilience of the supply chain. “By maintaining a robust data governance framework and leveraging new technologies for greater visibility,” market.us says, “companies can better prepare for and quickly respond to supply chain uncertainties.”