Market analytics measures various steps in the procurement process to determine their effectiveness. It’s important in the private and public sectors because it provides insights that go beyond just identifying supply chain strengths and weaknesses. It provides in-depth analysis that is essential to successful supply chain risk management.
For instance, is a supplier facing financial problems that have the potential to affect the entire supply chain?
If it’s apparent that the supplier risk event is more likely than not, you can take steps to mitigate risks or, preferably, avoid supply chain disruptions entirely.
These questions, answers, and insights enable you to make data-driven decisions that avoid internal and external risks and improve supply chain management strategies.
We’re going to look at how market analytics impacts supply chain risks, mitigates risks, and creates opportunities to streamline business operations instead.
To start with …
What Are Supply Chain Risks?
Supply chain risks are the factors that impact the integrity and workflow of your supply chain. They can be divided into five broad categories.
- Economic risks: Bankruptcy is one of the most serious supplier risks
- Environmental risks: Natural disasters like flash floods at a factory
- Political risks: Threats of war that upset global supply chains
- Ethical risks: Fairtrade practices throughout the supply chain, including the procurement of raw materials
- Cybersecurity risks: Stealing sensitive data is a serious business risk that is detrimental to business continuity.
How Can Analytics Reduce Supply Chain Risks?
Supply chain analytics provide real-time insight into procurement and sourcing processes. This enables public sector buyers to spot potential risk factors before they arise or get a good hold on the vulnerable link in the supply chain.
Types of Supply Chain Analytics
There are four types of supply chain analytics.
1) Descriptive
Descriptive analytics look at the past so you can understand what has happened, for example, you can look at the performance of regional suppliers from the past three months to determine which are the most successful.
2) Diagnostic
Diagnostic analytics look at why something happened to see if there is any relationship between variables, for example, why did Supplier A’s performance exceed Supplier B, C, and D?
3) Predictive
Predictive analytics use historical data to look at the potential future, for example, which suppliers are most likely to deliver the best value for money and least likely to cause supply chain disruptions.
4) Prescriptive
Prescriptive analytics determine the best course of action to achieve a goal, for example, how to improve supply chain management to enhance the performance of all suppliers.
Types of Supply Chain Analytics Software
In the overall scheme of things, there are two types of supply chain analytics software: built-into supply chain software and separate software packages.
That’s just the tip of the iceberg, however, because several software sub-divisions perform specific functions.
For example, there are finance analytics that let you view your financial situation from various angles to determine if you’re at risk of supply chain disruption from external risks.
There is predictive analytics that assesses the likelihood of an environmental risk, such as the potential impact of extreme weather events on the supply chain, for example, a heatwave that affects the functioning of refrigeration vehicles.
There is also data text and process mining which transforms raw data into structured data that does things like enhance automation and streamline operations, which plays a role in supply chain risk management.
12 Benefits Of Supply Chain Analytics
Supply chain analytics has many benefits related to managing risks in the supply chain, including risk mitigation.
- Enhanced risk assessment analyses trends and patterns to predict future threats to the supply chain.
- Accurate order management assesses safety stock level patterns to predict how much stock to keep in store to meet demand.
This mitigates low stock risks, as well as the risk of being caught with too much stock should an element in the supply chain go belly up, or storage prices exceed inflation rates and pause supply chain operations. - Streamlined procurement due to enhanced data capture, storage, optimisation, and transparent processes. This improves fairness in the global supply chain, as well as improves supplier relationships, and reduces non-compliance in contract awarding.
- Data visualisation boosts risk management by providing a comprehensive view of all supply chain risks from different viewpoints.
- Real-time analytics identifies immediate red flags, the potential impact of risks on the supply chain, and how to best assess and mitigate the issues through proactive planning and action.
- Real-time analytics also enhances informed decision-making, which has positive effects on the efficiency and efficacy of the entire supply chain.
- Informed decision-making is in part due to the ability to test scenarios and devise the risk mitigation strategy that best addresses risks in local and global retail.
- Advanced analytics also shines a light on other businesses, organisations, and enterprises in the supply chain to ensure they comply with public sector procurement regulations and adhere to practices that enforce ethical operations.
- Artificial intelligence (AI) and automation extract valuable information and organise the data into customised tags, for example, social media and email data feeds.
- Supply chain analytics is beneficial to buyers who operate in multiple locations as it can discern patterns and identify risks in distribution and delivery.
- Some analytics include graphic representations of data to easily identify patterns within their own operations and keep track of suppliers.
How to Mitigate Supply Chain Risks
- Use real-time analytics combined with advanced AI and machine learning technology to enhance visibility up and down the supply chain, and react quickly to risk factors.
- Diversify suppliers by using offshoring, nearshoring, and friend-shoring so that you aren’t crippled by when disaster strikes. Having alternative suppliers improves supply chain resilience because you aren’t reliant on a single supplier.
- Safety stock or Just in Case stock ensures you have sufficient stock to see you through a temporary emergency.
This is opposed to the Just in Time option where you only keep sufficient stock (and a little bit) to see you through a procurement cycle. You place orders for additional stock, just before you run out.
It’s a risky strategy because if there is a major emergency, like a ship stuck in a canal, which seriously disrupts the supply chain, you’ll find yourself in no end of trouble with procurers.
- Increase transparency and enhance visibility so you can detect problems in your global supply chain, like bottlenecks and non-compliance with regulations.
- Develop collaborative vendor relationships to minimise the impact of risks through shared responsibility.
- Develop contingency plans so that you always have risk management options B – Z.
- Invest in analytics software that has a scenario planning feature. This runs scenarios and projects the probable financial effects of risks on your supply chain. This enables you to plan properly for the worst case (as well as the best case, actually).
The Right Risk Management Tools For The Right Job
Market analytics have the potential to revolutionise your supply chain, especially when it comes to risk identification and mitigation. However, you need the right analytics tools to assess and evaluate the data that’s critical to your business.
To do this, you need to examine your procurement processes and find the parameters you want to include in your supply chain risk mitigation strategy. Only buy the software that measures and evaluates those parameters.
On a technical note, the most important function you need from risk management software is seamless integration with your existing systems.
On a personnel note, it’s important to provide proper training for your employees so they know how to use the software to generate the most ROI and avoid the top supply chain risks. You might need ongoing training as the software is updated.
Delta eSourcing offers Delta Market Analytics, which examines buyer and supplier data in real-time. Delta Analytics software is integrated into our intuitive platform that simplifies procurement for public sector buyers and suppliers.
Contact Delta eSourcing to find out more about how our procurement portal benefits your business. Book a free demo and see our software in action.
