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Top Three Applications of Clustering Algorithms in Supply Chain Management

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When running a business, especially a manufacturing unit, having a good supply chain management system is crucial.  A high-efficiency supply chain system ensures that your inventory is done well, and products are flowing as anticipated to the final user. One of the best technologies for enhancing supply chain management is clustering algorithm. 

What is the Clustering Algorithm?

Clustering algorithm is a form of unsupervised machine learning operation, which helps to discover natural data grouping automatically. In logistics, the algorithm is preferred because of its efficiency in enhancing inventory management and warehouse optimization. It is also very effective in finding common supply chain links in different sectors.  

As more companies shift to clustering algorithms to manage their logistics, you should not be left behind. Here are the three main applications of clustering algorithm that you should consider. 

Inventory Classification 

If you have a manufacturing unit or company that deals with a lot of stock-keeping units (SKU), classifying new SKUs to fit well in your system can be challenging. However, you do not have to worry about that anymore because clustering algorithm has simplified the process so much, allowing you to easily group inventories by your preferred category, such as sales margin, manufacturing, design, or value.

Another good thing about the clustering algorithm is that it can be integrated with the automated inventory optimization solution. This implies that every moment you add a new SKU, the algorithm will also assign it a class for safety stock calculation. 

Design of Warehouse and Picking Optimization 

This is an analytical approach that revolves around the idea of grouping correlated inventory and positioning them close to each other. In warehouses, especially the ones that handle different merchandise, the singular value decomposition and principal component analysis are the main models used for clustering. After inventory clustering, most logistics departments use a clustering algorithm to determine where to position the products. 

Route Optimization 

In most companies, route optimization issues are heuristics-related, and most managers find them very difficult to solve. However, a solution has now been found. Studies have demonstrated that leveraging clustering algorithms can help to reduce time significantly

If you handle a lot of products in a warehouse or have a manufacturing unit that deals with many products as outlined here, it is crucial to ensure your inventory and supply chains are carefully optimized for high efficiency. Clustering algorithm came out as a reliable technology with diverse applications in and outside the warehouse. It is also easy to integrate with other management systems, and you should consider using it in your business.

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