Your guide to supply chain optimization (2026)

Supply chain optimization has the power to positively impact your organization’s profitability, customer satisfaction, and competitive advantage—all of which can put you on a trajectory toward greater growth. 

According to research by Accenture, supply chain disruptions caused businesses to miss out on roughly $1.6 trillion in potential revenue growth opportunities each year from 2020 through 2024. With so much money at stake, organizations can benefit greatly from optimizing their supply chains.

The supply chain optimization process will look different for each business based on which aspects are causing delays and where there's the most room for growth. To fully optimize your supply chain, it’s critical to understand the different types of supply chain optimization, the stages, and some general best practices that can benefit almost any organization.

What is supply chain optimization?

Supply chain optimization refers to any activities or changes an organization makes to help improve the efficiency or resilience of its supply chain. Examples of supply chain optimization activities include:

• Balancing inventory levels to meet demand without storing a huge surplus

• Implementing chatbots to auto-reply to simple supplier queries

• Using predictive analytics and demand forecasting to project future needs and adjust plans accordingly

   

Supply chain optimization techniques are a key part of supply chain management, which oversees a product's entire lifecycle until it reaches a buyer. These techniques streamline processes around identifying a need within your organization, sourcing raw materials (if applicable), and delivering the final product to the customer.

Types of supply chain optimization

Companies can improve supply chain efficiency at any stage of the supply chain. A few places where it’s typically introduced include the following:

• The procurement process: Organizations can optimize procurement processes by implementing strategic sourcing, improving supplier relationships, and applying automation to repetitive tasks, such as data entry and invoice approvals. 

• Warehouse operations: You can optimize warehouse operations using efficient shelving and racking systems to maximize space, applying data analytics to inform optimal inventory planning, and designing your warehouse layout to streamline workflows.

• Inventory management: Inventory optimization may involve keeping a safety stock of popular items to prepare for unexpected supply chain disruptions or surges in customer demand. It could also include using past sales data to inform seasonal buying and regularly auditing inventory levels against financial records to find discrepancies.

• Supplier diversity: You can enhance your organization’s resilience and social impact by strategically including diverse-owned businesses, such as small or locally owned businesses, in your supply chain optimization plan.

   

Stages of supply chain optimization

The supply chain optimization process typically involves three stages: design, planning, and execution.

• Supply chain design: The design phase involves creating a supply chain framework that aligns with your overall business objectives and strategy. This may mean selecting suppliers and determining warehousing logistics based on what is most efficient and cost-effective.

• Supply chain planning: The planning stage focuses on establishing your long-term vision, including setting key performance indicators (KPIs) and using forecasting tools to allocate resources properly.

• Supply chain execution: Execution puts your optimization plan into action. Once implemented, your optimization solutions can help you monitor real-time supply chain activities and supplier performance and make adjustments as needed.

   

7 ways procurement teams can optimize their supply chain

While the best supply chain optimization process will look different for everyone, all businesses can benefit from considering broad best practices. Here are seven strategies to help get you started.

1. Use centralized procurement software

Centralized procurement software consolidates procurement activities into a single system, which makes it easier for organizations to control, manage, and monitor the process across departments. Centralization provides end-to-end visibility into your organization’s purchasing, allowing you to identify patterns that enable faster decision-making.

Aside from transparency, centralized procurement software: 

• Promotes consistent purchasing procedures across teams and locations

• Enables the enforcement of internal policies through custom purchasing rules and budgets

• Increases compliance via guided buying features and increased documentation

• Gives you more control over spend to help eliminate the risk of uncontrolled purchasing

   

Implementing a procurement solution can help optimize the entire procurement piece of the supply chain, leading to significant time and cost savings.

2. Use data-driven forecasting

Supply chain optimization software provides access to vital data algorithms such as forecasting tools that inform demand planning and identify potential cost savings associated with changes in business processes. 

You can use the information uncovered to optimize inventory and minimize holding costs, adjust production plans based on expected customer demand, and optimize logistics to reduce transportation costs. Data can also help you improve customer service by enabling you to anticipate needs and manage customer expectations.

3. Focus on total cost of ownership

Because total cost of ownership considers the entire supply chain process, it can be one of the most crucial metrics to consider when trying to decide where to optimize your supply chain. The metric covers direct and indirect costs associated with using a product or service, including expenses related to acquisition, maintenance, disposal, and sustainability. 

Focusing on this number can help you make better decisions and improve resource allocation based on a holistic view of expenses. It can also help you address hidden costs and areas for improvement.

4. Evaluate and collaborate with suppliers regularly

The goal of optimization is using limited organizational resources as efficiently as possible, which is why it’s critical to evaluate your suppliers consistently—even if you’ve worked with them for years. The quality of a product or service can change over time, just like a supplier’s reliability and financial stability.

Checking with suppliers regularly and comparing them to competitors can help ensure you’re still getting the best value for your money. It could also help you lower costs by negotiating better deals through long-term relationships.

5. Maintain safety stock levels

To avoid lost sales from increased demand or supply chain disruptions, consider keeping a safety stock or extra inventory to account for unpredictable times. Demand forecasting proves especially useful in this situation.

Forecasting tools help you balance how much surplus stock to keep on hand without paying for unnecessary storage space. This way, you’ve covered your bases, but you’re also not wasting funds.

6. Adopt modular product designs

By reducing complexity in the manufacturing and logistics processes, modular products can lower costs, increase supply chain flexibility, and streamline operations. Their smaller, standardized, interchangeable design makes them easier to handle and reusable across product variants, minimizing the need for separate production lines. Since modular designs use preexisting components across products, they also simplify inventory management and accelerate time-to-market.

7. Align procurement strategies with responsible purchasing goals

Aligning your procurement strategy with your responsible purchasing goals can help optimize your supply chain by minimizing risks related to ethical lapses, increasing regulatory compliance, and improving supply chain resilience. It can also create a competitive advantage among socially conscious consumers by enhancing your reputation.

You can align your procurement and responsible purchasing strategies by:

• Developing a responsible purchasing policy

• Embedding your new policy into your supplier selection criteria

• Intentionally choosing suppliers that demonstrate responsible practices

• Prioritizing suppliers from diverse backgrounds

• Establishing KPIs for sustainable procurement

   

Lesser-known benefits of supply chain optimization

While some benefits of optimizing your supply chain network—such as cost savings, improved efficiency, and increased revenue—are relatively obvious, there are some lesser-known benefits to consider when deciding on optimization initiatives:

• Enhanced supplier innovation: Working closely with suppliers during the optimization process can spark new ideas and innovations that lead to organizational advancements.

• Improved customer satisfaction: Supply chain optimization often results in faster, more accurate fulfillment, enhancing the customer experience.

• Increased agility and responsiveness: Companies with optimized supply chains can often adapt better to changes in market conditions or demand.

• Improved sustainability: Outside of sourcing from more sustainable suppliers, supply chain optimization can help reduce your environmental footprint by minimizing transportation and waste.

   

How Amazon Business helps optimize supply chain networks

Given its significant potential to impact profit margins and operating costs, an effective optimization strategy is critical for the modern supply chain. It can also be key to shaping your organization’s reputation and customer experience.

One of the best ways to optimize supply chain operations is by using a digital procurement solution (or e-procurement system) to gain access to data and forecasting tools that support clear, informed decision-making. 

Amazon Business is a free, centralized procurement solution that lets you shop business-only pricing from a vast pool of diverse suppliers to find the best deals. Business Prime, a membership available to Amazon Business users, also provides optimization tools like Spend Visibility, Business Analytics, and Guided Buying, which help control employee spending and more.

Start your supply chain optimization journey with an easy and effective tool. Sign up for a free Amazon Business account to streamline procurement and gain better spend visibility, or contact our sales team to learn how Amazon Business can enhance your supply chain optimization efforts with flexible sourcing and procurement solutions.