Capstone: Optimize a Supply Chain

Your Complete Supply Chain Optimization

🔄 Quick Recall: In the previous lesson, we built AI analytics dashboards for monitoring supply chain performance. Now you’ll apply every technique from the course to analyze and optimize a complete supply chain.

This capstone walks you through a realistic supply chain optimization scenario. You can use the example provided or substitute your own business data for a personalized project.

The Scenario

GreenGlow Candle Co. is a small e-commerce business selling handmade soy candles. Here’s their current situation:

• Products: 15 candle varieties in 3 sizes
• Monthly orders: ~800
• Suppliers: 3 (wax from Supplier A, wicks/fragrance from Supplier B, packaging from Supplier C)
• Warehouse: Home garage + rented storage unit
• Shipping: USPS Priority Mail for all orders
• Problems: Frequent stockouts on bestsellers, high shipping costs, Supplier B often delivers late

Phase 1: Map the Chain (Lesson 2)

First, map every step from raw materials to customer delivery:

Sourcing → Procurement → Production → Storage → Fulfillment → Delivery → Returns

For GreenGlow:

1. Order wax, wicks, fragrance, packaging from 3 suppliers
2. Receive materials (lead times: A=14 days, B=21 days, C=7 days)
3. Produce candles (batch production, 2 days per batch)
4. Store finished inventory (garage + storage unit)
5. Receive customer orders via Shopify
6. Pick, pack, label, and ship via USPS
7. Handle returns/exchanges (~3% return rate)

✅ Quick Check: Can you identify the bottleneck in this chain? (Hint: which supplier has the longest lead time and reliability issues?)

Using AI

“Here’s GreenGlow’s supply chain map: [paste above]. Identify the 3 biggest vulnerabilities and rank them by risk impact.”

Phase 2: Inventory Analysis (Lesson 3)

Apply ABC analysis to GreenGlow’s 15 products:

Category A (top 3 candles, 70% of revenue): Lavender Dreams, Ocean Breeze, Vanilla Chai Category B (5 candles, 20% of revenue): Citrus Burst, Pine Forest, Cinnamon Spice, Rose Garden, Eucalyptus Category C (7 candles, 10% of revenue): Seasonal and specialty varieties

Action: Calculate reorder points for Category A products using the formula from Lesson 3.

Using AI

“Lavender Dreams sells 120 units/month (4/day). Supplier B provides wicks with a 21-day lead time and delivers late ~25% of the time. Calculate the reorder point with appropriate safety stock. How many units should GreenGlow keep on hand?”

Phase 3: Demand Forecasting (Lesson 4)

GreenGlow’s monthly sales data shows clear seasonality:

Action: Build a seasonal forecast for the next 6 months.

Using AI

“Based on GreenGlow’s 12-month sales data: [list], create a seasonal forecast for the next 6 months. Account for a 10% year-over-year growth trend. Show the seasonal index for each month.”

Phase 4: Vendor Optimization (Lesson 5)

Score GreenGlow’s suppliers:

Action: Supplier B has the lowest scores. Evaluate whether to negotiate improvements or find an alternative.

Phase 5: Cost Optimization (Lesson 6)

GreenGlow’s current cost breakdown per candle (average):

Retail price: $28. Margin: $13 (46%).

Shipping is 45% of cost. That’s the Pareto target.

Using AI

“GreenGlow spends $6.80/order on USPS Priority Mail. They ship ~800 orders/month. Suggest 3 shipping cost optimization strategies with estimated savings. Consider: carrier comparison, packaging optimization, shipping tier alternatives, and regional carriers.”

Phase 6: Build the Dashboard (Lesson 7)

Design a weekly KPI dashboard for GreenGlow:

• Order accuracy rate
• On-time delivery rate
• Stockout events per week
• Average shipping cost per order
• Supplier on-time delivery rate
• Inventory days of supply (for A items)

Course Review

Here’s a summary of your supply chain management toolkit:

The Optimization Summary

For GreenGlow, the top 3 recommendations:

1. Fix Supplier B reliability — Negotiate SLA with penalties for late delivery; qualify a backup supplier for wicks and fragrance
2. Optimize shipping costs — Switch to USPS Ground Advantage for non-expedited orders (estimated savings: $2.50/order × 800 = $2,000/month)
3. Increase safety stock on Category A — Reorder points should account for Supplier B’s 25% late delivery rate

Combined estimated annual savings: $28,000+

Key Takeaways

• Always start with an end-to-end chain map before optimizing individual components
• Use Pareto analysis to focus on the highest-impact cost categories first
• Supplier reliability directly impacts your ability to serve customers—score and manage it actively
• Seasonal forecasting prevents both stockouts and overstock
• Continuous monitoring with a KPI dashboard turns one-time optimization into lasting improvement

Congratulations!

You’ve completed Supply Chain Basics with AI!

You now have a practical toolkit for managing any supply chain—from forecasting demand and managing inventory to evaluating suppliers and optimizing costs. These skills directly improve profitability, customer satisfaction, and operational efficiency for any business.

Your final step: Pass the quiz above, then click “Get Your Certificate” to claim your certificate of completion.