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What is Supply Chain Analytics? A Complete Guide

What is Supply Chain Analytics? A Complete Guide

In today’s complex global supply chains, tight coordination among stakeholders is crucial for flexibility, resilience, and quick time-to-market. Modern supply chain data analytics offers end-to-end visibility and real-time demand and supply shaping, providing specific benefits like enhanced efficiency, improved decision-making, and better customer service for your organization. In this article, we’ll explore the various types of Supply Chain Analytics and learn how they can significantly improve the efficiency of overall operations.

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What is Supply Chain Analytics?

A supply chain is a group of people that exchange material, knowledge, or monetary resources with the objective of satisfying consumer requests. Companies that use data and analytics can acquire deep insights into their supply chain processes and make informed decisions to optimize operations.

Supply chain analytics refers to organizational techniques for analyzing and extracting value from large amounts of data associated with the acquisition, processing, and delivery of commodities. This is an essential component of supply chain management (SCM) since it provides critical insights into the complexities of the supply chain.

Also, explore the bullwhip effect in supply chain management and its impact on inventory, costs, and customer satisfaction.

How Does Supply Chain Analytics Works

By employing supply chain analytics, organizations can make informed decisions, enhance operational efficiency, minimize risks, and maintain a competitive edge in the dynamic business landscape. Here are the following steps to look forward to: 

Step 1: Data Collection – The process of supply chain analytics starts with relevant data collection from multiple points through the supply chain. It includes information from suppliers, manufacturers, logistics providers, retailers, and other stakeholders. Key data points may include inventory levels, demand forecasts, transportation costs, lead times, and quality metrics.

Step 2: Data Integration – The collected data from the various points is integrated into a unified platform, allowing for data processing and analysis. The integration ensures that all data is consistent and up-to-date, providing a comprehensive view of the entire supply chain.

Step 3: Data Cleansing – Prior to the data analysis, the data is cleansed to remove duplicates, errors, and inconsistencies. Clean data is crucial for accurate and reliable insights.

Step 4: Descriptive Analytics – This stage involves using historical data to gain a retrospective view of the supply chain’s performance. Key performance indicators (KPIs) are measured to identify trends, patterns, and potential areas for improvement.

Step 5: Predictive Analytics – Using machine learning algorithms, predictive analytics forecasts future supply chain events and potential risks. Demand forecasting, lead time prediction, and inventory optimization are common applications.

Step 6: Prescriptive Analytics – Based on the insights gained from predictive analytics, prescriptive analytics recommends optimal actions to address potential challenges or opportunities proactively.

Step 7: Real-time Monitoring – Supply chain analytics provides real-time monitoring of key metrics, enabling businesses to respond swiftly to any disruptions or deviations from planned operations.

Step 8: Continuous Improvement – With ongoing data collection and analysis, supply chain analytics supports continuous improvement efforts, fostering agility and resilience in the supply chain.

Check out the blog on supply chain analytics.

Supply Chain Analytics Importance

As the world’s markets persistently undergo a transformation, the demand for proficient and productive supply chain management has never been more pressing. The importance of supply chain analytics is elaborated further: 

Enhanced Visibility

Businesses may gain more visibility into all aspects of their supply chain operations, from procurement to transportation, warehousing, and distribution. All this by utilizing supply chain analytics. This augmented transparency empowers companies to pinpoint areas of inefficiency and prospects for enhancements. This will ultimately lead to a more systematic and cost-efficient supply chain.

Improved Forecasting

Through the utilization of historical data and advanced analytical methodologies, businesses can produce more precise demand and supply predictions. These refined forecasts provide companies with the capability to optimize inventory levels, diminish stockouts, overstocking, and heighten overall customer satisfaction.

Risk Mitigation

Supply chain analytics assist businesses in identifying and addressing potential supply chain disruptions by scrutinizing multiple risk factors. Better forecasts help companies manage their inventory more effectively, so they can avoid situations where they have either too much or too little stock, which can lead to dissatisfied customers. By having a good handle on inventory levels, companies can improve customer satisfaction overall. Therefore, supply chain risk management has a major role to play.

Increased Collaboration

Supply chain analytics establishes a data-driven basis for decision-making which fosters collaboration amongst various stakeholders, suppliers, manufacturers, distributors, and retailers. This elevated collaboration helps in better synchronization of objectives, enhanced communication, and, ultimately, a more productive and efficient supply chain.

Check out the blog on the evolution of supply chain management.

 History of Supply Chain Analytics

In the past, supply chain analytics was limited to statistical analysis only, and data was stored in dull spreadsheets. During this time, data was gathered directly from the supply chain participants. In the late 1990s, new ways of working were adopted. 

Electronic Data Interchange (EDI) and Enterprise Resource Planning (ERP) were introduced. The role of EDI and ERP was to provide a communication medium between the supply chain nodes and facilitate data gathering. Also, these systems helped organizations design and plan data. 

In 2000, organizations were turning their gaze toward business intelligence and predictive analytics tools. These tools helped them gather data easily and gain in-depth knowledge about supply chain networking, which ultimately helped them optimize the flaw in their supply chain network. 

As per the data published by the concerned organization in 2017, 20% of their total supply chain is monitored in a structured manner, and the rest, 80%, is still unstructured and considered dark data. With the latest trends in 2022, the introduction of AI and ML will help organizations get a glimpse of 50% of their total supply chains, and both structured and unstructured data can be gathered and analyzed. 

Also, check out the list of Supply Chain Management interview questions!

Types of Supply Chain Analytics

There are five types of supply chain analytics, and they are discussed below:

  • Descriptive Analytics:
    • Descriptive Analytics is a branch of data analysis that focuses on understanding historical data to gain insights into past trends and events. 
    • It involves examining and summarizing data to provide a clear picture of what has occurred in a given time frame. 
    • Organizations can derive meaningful patterns and correlations from their data by utilizing techniques such as data aggregation, data mining, and data visualization. 
    • Descriptive Analytics serves as the foundation for other advanced analytical approaches and aids in identifying areas for improvement, understanding customer behavior, and assessing performance.
  • Predictive Analytics:
    • Predictive Analytics delves into future outcomes by using historical data and statistical algorithms. 
    • It involves the use of machine learning and data mining techniques. It identifies patterns and trends that can be extrapolated to predict future events. 
    • By applying these models to current data, organizations can make data-driven forecasts and anticipate potential outcomes. 
    • Predictive Analytics is invaluable for supply chain management as it assists in demand forecasting, inventory optimization, and risk assessment, enhancing decision-making and planning processes.
  • Prescriptive Analytics:
    • Prescriptive Analytics takes predictive insights a step further by offering actionable recommendations and strategies. 
    • It combines historical data, real-time information, and optimization algorithms to suggest the best course of action in a given scenario. 
    • By simulating multiple possible actions, Prescriptive Analytics helps organizations determine the most effective solutions to achieve their goals. 
    • For supply chain analytics, this can lead to improved efficiency, reduced costs, and enhanced customer satisfaction.
  • Diagnostic Analytics:
    • In chain analysis, diagnostic analytics focuses on understanding the reasons behind past outcomes. 
    • It involves analyzing historical data and performance metrics to identify the root causes of specific events or patterns. 
    • Answering the “why” questions, Diagnostic Analytics provides valuable context and helps organizations learn from past successes and failures, guiding their future decision-making.
  • Cognitive Analytics:
    • Cognitive Analytics represents the use of advanced technologies, like AIML and natural language processing, to mimic human thought processes. 
    • Cognitive analytics in the supply chain involves systems that can understand, reason, and learn from data, enabling them to uncover complex patterns and insights. 
    • In chain analytics, Cognitive Analytics can facilitate real-time data analysis, optimize logistics, and enable more informed and strategic decision-making.

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Supply Chain Analytics Use Cases

Supply Chain Analytics Use Cases

Supply chain analytics have numerous applications in a variety of industries. Let’s explore some of the most common use cases:

Inventory Optimization

Through analyzing past sales data and using advanced forecasting techniques, supply chain analytics help businesses manage their inventory levels effectively. This ensures that they have the right amount of inventory at the right time. This leads to lower occurrences of both stockouts and overstocks. This results in satisfied customers and reduced carrying costs.

Warehouse Management

Supply chain analytics can find ways for businesses to make their warehouses work better. This could mean making travel times shorter, using space more efficiently, or improving the way products are picked. By making these changes, companies can save money on warehousing and make their whole supply chain run better.          

Transportation Management

Supply chain analytics can help businesses analyze their transportation data to find the most efficient and cost-effective routes for delivering their products. This can lead to faster delivery times, lower transportation costs, and happier customers.

Supplier Performance Evaluation

Supply chain analytics helps companies assess their suppliers’ performance in areas like delivering goods on time, product quality, and cost. This information allows companies to make better decisions about which suppliers to work with and how to manage those relationships. This, in turn, leads to a more dependable and cost-efficient supply chain. 

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Essential Tools for Supply Chain Analytics

Businesses must have the necessary technologies in place to fully leverage the power of supply chain analytics. The following are some of the most popular and extensively used in supply chain analytics:

Data Warehousing Solutions

A data warehouse is similar to a large storage room where businesses save all of their vital data. This information might originate from a variety of sources and in a variety of formats. Special tools, such as Amazon Redshift, Google BigQuery, and Snowflake, assist businesses in organizing and analyzing big data. This is critical for supply chain analytics, which assists businesses in making better decisions regarding their supply networks.                                                                      

Also, check out the blog on Digital Transformation in Supply Chain Management.

Business Intelligence (BI) Platforms

Business intelligence (BI) systems such as Tableau, Power BI, and Looker enable companies to quickly visualize and understand their supply chain data. This makes it easy to identify trends, patterns, and areas for improvement. BI technologies also enable users to generate interactive dashboards and reports, making data-driven decisions across the organization much easier to make.

Advanced Analytics Solutions

Advanced analytical solutions such as R, Python, and SAS have become essential tools for businesses performing sophisticated data analysis. These techniques enable predictive modeling, machine learning, and optimization, resulting in very accurate forecasts. Furthermore, they assist firms in identifying potential dangers and reveal hidden opportunities within their supply chains. This makes them a vital asset for organizations wanting to maintain a competitive advantage in today’s data-driven world.

Are you thinking of making a career as a supply chain analyst? Read this blog to learn more.

Challenges in Supply Chain Analytics

Challenges in Supply Chain Analytics

While supply chain analytics has various advantages, it is not without its limitations. The following are some of the most prevalent challenges that firms face while implementing supply chain analytics:

Data Quality and Integration

To generate meaningful insights, businesses require access to consistent, up-to-date, and high-quality data. However, the process of integrating data from multiple sources and guaranteeing its accuracy can be a challenging and lengthy endeavor.

Skill Gap

Effective supply chain analytics demands a distinctive blend of competencies, comprising proficiency in data analysis, supply chain management, and business intelligence(BI) tools. Numerous organizations face challenges in locating and retaining the skilled personnel essential for implementing and sustaining efficient supply chain analytics initiatives.

Cost and Complexity

Introducing an all-encompassing supply chain analytics solution can be a costly and intricate undertaking, especially for small and medium-sized businesses with constrained resources. Organizations must meticulously evaluate the expenses and advantages of investing in supply chain analytics to guarantee a favorable return on investment.

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The Future of Supply Chain Analytics

The relentless advancement of technology means the future of supply chain analytics is bright, as the role of IT in supply chain management is increasing at a faster pace. The following are some of the most exciting developments in this field

Artificial Intelligence (AI) and Machine Learning

The ongoing progression of AI and machine learning algorithms imply that their implementation in supply chain analytics will keep expanding. These advancements possess the potential to transform supply chain management by automating intricate tasks, recognizing patterns and trends that may elude human perception, and empowering businesses to make more precise forecasts and decisions.

Internet of Things (IoT)

The Internet of Things (IoT) denotes a system of linked devices, sensors, and software that gather and share data. With an increasing number of devices being connected, the quantity of data open for analysis will surge exponentially. This data will furnish fresh perspectives on supply chain operations, permitting businesses to enhance their processes and amplify efficiency.

Blockchain Technology

The prospective influence of blockchain technology on supply chain analytics is substantial as it offers a secure, transparent, and decentralized approach to tracking goods and transactions throughout the supply chain. This augmented visibility and traceability can facilitate businesses in recognizing bottlenecks, guaranteeing the genuineness of their products, and diminishing the likelihood of fraud and counterfeit goods.


Supply chain analytics represents a potent instrument that businesses can utilize to refine their supply chain operations. Through the analysis of data from diverse sources, businesses can acquire insight into their inefficiencies and identify areas that require improvements. By implementing the proper tools and technology, businesses can augment their supply chain analytics capabilities and gain an edge in the dynamic and rapidly-evolving business environment of today.

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About the Author

With a decade-long immersion in the field of testing and as a Software Tester, Varija is well-versed in tools such as Selenium, JIRA, and various testing frameworks. Her proficiency in Testing adds value to her content writing.