What Is Supply Chain Optimization?

Supply chain optimization has risen to the top of corporate agendas as companies face a continuous swirl of economic, political, and logistical adversity. Supply chains are being rattled by recurring waves of global trade tensions, war-induced scarcities, extreme weather events, and other reversals of fortune. Supply shocks like these have repeatedly caused higher costs, factory stoppages, delivery delays, customer dissatisfaction, and lost revenue. Uncertainty about where the next outbreak will occur is just compounding corporate anxiety. For all these reasons, more companies are turning to supply chain optimization so they can create more resilient supply chains that will have the flexibility to keep goods flowing while not causing costs to spiral higher.

What Is Supply Chain Optimization?

Supply chain optimization involves analyzing and improving all aspects of a supply network to maximize value and minimize risk in everything from supplier relationships and inventory management to distribution networks and technological integration.

Global executives cited supply chain optimization as their No. 1 cost improvement priority in a late 2024 survey by the Boston Consulting Group (BCG)—and 40% of them said they felt unprepared for market shocks expected in 2025.

Supply Chain Optimization Explained

Companies can take several key steps to optimize their supply chains:

• Streamline operations by standardizing procedures and automating repetitive tasks.
• Integrate technology systems to improve visibility and coordination among departments and suppliers—notably including the tier 2 and tier 3 suppliers from which a company’s tier 1 suppliers are sourcing.
• Implement data-driven demand forecasting, including using artificial intelligence capabilities to better align inventory with customer needs.
• Develop flexible supplier networks that can adapt to changing market conditions.
• Create robust risk management processes to identify and address potential disruptions before they impact operations.

Depending on a company’s size and type, supply chain costs make up 10% to 20% of total revenue, according to the Oliver Wyman management consultancy. Effective supply chain optimization can reduce those costs as much as 25%.