The May 22, 2012 edition of the Wall Street Journal featured an article about manufacturing moving back to the US. (Click here for the article-- it may be restricted to subscribers). The article cited statistics from David Simchi-Levi of MIT stating that 39% of companies surveyed were considering moving production back to the US.
Of course, several factors were mentioned for this trend including changes in the relative cost of labor, the price of oil, and the ability to respond faster. Although not touched on in this article, making product closer to the demand can reduce the required inventory.
What is also interesting is that over the last 5 years, China has become a market where companies sell product. It used to be that companies just received product from China. Soon, firms found that their China plants were well-suited to cover the demand in China.
From a network design perspective, this brings up some interesting questions: should you make product for each region of the world in that region? Which products should you make in China and which ones in the US? And, what is the break-point for the price of labor and oil where it makes sense to move product from China to the US?
The website highlights why the concepts from the book are important. For example, Jim Champy, the coauthor of Reengineering the Corporation says:
"Companies today are faced with an increasing number of choices in
operational and supply chain strategies. This book goes beyond just
showing how to make the right operational decisions. It makes the
critical link between operations and providing more value to customers.
It's a must read for anyone involved in operations and strategy."
Also, a key concept discussed is the fact that many companies offer different value propositions through different channels or brands. These different value propositions imply that the company may have different supply chains. However, the company cannot simply operate their supply chains separately. They need to take advantage of synergies where it makes sense. Click on the S&OP video in this link for more information
As data becomes more available, firms are revisiting their S&OP process to add more analytics to the process. In fact, the lack of analytics and optimization is often a reason that firms do not get the full value from their S&OP process. That is, without optimization-based technology, the S&OP process can become just a demand planning exercise with minimal analysis of the operations and supply.
By combining the Cognos S&OP solution with integration to LogicNet Plus XE, firms can now create optimized plans. That is, Cognos provides the descriptive analytics, an S&OP dashboard, the detailed reporting, the platform for demand consensus, the ability to standardize data from multiple sources to create a single S&OP view, and the ability to tie it back to financial systems. Cognos becomes the enterprise level platform for S&OP. LogicNet Plus XE then receives data from Cognos, allows the planner to run multiple scenarios, and feed the operations plan back into Cognos.
The operational plan considers capacity of the facilities, starting inventory positions, the demand plan from the S&OP process, and alternatives for meeting demand. Using this capability, it creates integrity in the process by coming up with operational plans that match the demand plans.
We have a short video available for additional information.
As banks and financial institutions start to emerge from a prolonged financial downturn, they face a host of challenges. Disruptive forces continue to ripple through the finance industry changing the market and impacting the businesses, such as:
• New regulations • New capital requirements
• New technologies
Optimisation technologies have become key tools in making important business decisions that increase competitive advantage. Optimisation, through the use of advanced mathematics and computer science techniques, is used to assist organisations with solving their complex business problems. The models which capture trade-off between optimum resource allocation and risk minimisation are gaining increasing importance in Banking, Portfolio Construction, Asset and Liability Management, Trade Settlement and Clearing and Cash Management. Recent developments and growing applications of quadratic optimisation, stochastic optimisation and robust optimisation in these domains and the role of modelling systems and solvers will be presented and discussed.
BENEFITS OF ATTENDING:
Understand the role of optimisation in financial analytics and gain an understanding of the leading issues of financial analytics Learn about the latest thinking and practices in the domain of Portfolio Optimisation and Asset and Liability Management Learn how companies have been able to use optimisation technology to help determine how to most effectively allocate capital, balance business risks, uncover novel solutions for their customers and gain insights into their toughest challenges for maximum return with limited risk
Join our monthly IBM ILOG Supply Chain Management Virtual User Group (VUG) sessions.
These 1-hour meetings are
a quick way to brush up on your IBM ILOG supply chain modeling skills, meet
other people using the products, ask questions to the community, and learn
about what's new. These sessions will be led by our experts and have plenty
of time for discussions and Q&A.
May 4th 2001: Topic: "Applying Supply Chain Analytics: Benefits of
a Central Group" This talk addresses the value firms can achieve by
deploying advanced supply chain analytics and how a group should be structured.
We will use case studies and recent events to highlight the value from
business analytics such as network and inventory optimization. We will discuss
how 3M Corporation is organized to deploy this capability.
Join our LinkedIn Community to receive updates, more detailed information, and Dial-up/Web Meeting access. Schedule-at-a-Glance: May 4th -
Wednesday June 1st -
Wednesday August 2nd -
Tuesday September 1st
- Thursday October 7th -
Friday November 2nd
- Wednesday December 2nd - Friday
In 2008, after undergoing a grueling third-party logistics provider
(3PL) selection process, Navistar chose San Mateo, Calif.-based Menlo
Worldwide Logistics, the global supply chain management subsidiary of
Con-way Inc., to support it in improving its global logistics network,
including managing global transportation providers and regional
warehouses, planning lead times, and modeling net landed costs.
He reports that one of their goals was a 25% reduction in supply chain costs. He reports that at "the end of the partnership’s second year, we will have achieved
11-percent cost savings, out of the 25-percent goal we set for the next
When discussing the reasons Navistar selected Menlo, he mentioned their "global coverage, cross-network planning, and optimization capabilities."
This is a very interesting article discussing the challenges of building a new global supply chain from the ground up. It is also interesting that modeling net landed cost and optimization capabilities were mentioned as key factors in the transformation of the supply chain. This mirrors some other findings that leading supply chains are relying on optimization-based technology to help drive improvements.
While doing some research for an upcoming white paper, I came across a nice article from Nov 2009 from Dan Gilmore at the SupplyChainDigest, "The Real Value of (Less) Inventory." A key line from the article is:
reducing your level of inventories relative to sales and sales growth
can have a dramatic impact on a company’s share price."
The article quotes research and cases to back up this claim. This certainly fits with what our customers are telling us-- they are seeing significant inventory savings through inventory optimization.
The word "permanent" is a great choice of words. Inventory optimization technology, by itself, will not lead to a permanent reduction. As we noted in an earlier post, we have developed an inventory planning playbook to help firms make the right inventory decisions with the right cadence and considering important strategic factors.
If you’ve ever tried to build an application that business decision
makers can use, you know that having a good model of the system you want to manage
isn’t enough. And while you need the best optimization solving technology, line-of-business
managers and executives demand more. They want to see the data supporting the
decisions, they want to try what-if scenarios to validate the proposed options,
and they want planners and schedulers to collaborate across the corporate
organizational lines. And if you want to deploy your solution, you need to
satisfy a bunch of requirements and standards from your IT department.
The Design Guide addresses these issues with concrete
guidance and practical examples derived from IBM’s long experience developing
and deploying analytical decision support solutions in many organizations.
Going beyond how to formulate good models, the Guide shows you how to design
data integration, business user interfaces, client/server architectures, taking
advantage of IBM’s ODM Enterprise to streamline development. The Guide
illustrates the steps using a concrete example derived from a real-world
logistics application. Plus the Guide explores two detailed case studies, one
in manufacturing and the other from insurance.
Need to convince your management that optimization can work
for your organization? The Design Guide can give you the credibility you
Here is a description of the session from the registration site:
Managing a global supply chain is a constant balancing act. Making
sure you’re getting the best results means calculating thousands of
trade-offs. You need to consider every cost and constraint associated
with transportation, production, storage, and global trade, while
keeping service levels as high as possible. And when you consider how
unpredictable high-growth markets can be, the levels of complexity
Attend this IndustryWeek webinar featuring experts from IBM
and GE Healthcare to learn best practices for simplifying the complex.
Find out how your company can calculate the best possible supply chain
network design to meet rapidly expanding business needs.
You will learn:
Why leading companies are integrating ongoing network optimization
into every major supply chain planning activity -- and how you can
benefit from their insights
How major companies such as GE Healthcare are managing their
global supply chain structures in order to reduce costs, improve
customer service, and prevent disruptions
How solutions can help your company simplify the complex though all-in-one packaged network design and planning
Ryan Hahn Global Network Optimization Manager GE Healthcare
A recent article in The Wall Street
Journal discusses the benefits of a foldable shipping container. This would be a big innovation in shipping.
Inbalances in supply and demand means that shipping companies must pay
to get their empty containers back to where customers want them.
importance of moving empty containers is simple:
a huge expense, a huge headache for the industry," says Neil Davidson
of London-based Drewry Shipping Consultants. The net cost of moving
empties is around $7 billion a year, say analysts.
foldable container would reduce the cost of shipping the empties.
However, these foldable containers cost around $4,000, or twice the cost
of the standard containers. And, the technology
has not yet proven robust enough for the realities of "heat, cold and
salt water of the high seas, and the rough handling of
Right now, the industry is not standing still.
IBM's ILOG Optimization solutions are being used to optimize the return
of the empty containers. The goal of the optimization is to get empty
containers to where they
are needed at the lowest cost. Of course, the containers do not have to
return from where they started and there are options for leasing or
buying new containers.
The problem can be difficult when you
start to consider such things as the different container types, the
capacities of ships, the costs of different modes of transportation, and
the long ocean shipping times.
Besides reducing costs, the
shipping companies using this technology
are seeing benefits in customer service by having the needed empty
containers in the right place at the right time and having the ability
to quickly re-plan when conditions change.
commitment to Analytics and Smarter Planet, provides additional benefits to this problem:
First, since there is variability in demand and supply, it is important
to correctly set the safety stock levels for empty containers at key
locations. Second, it is important to track and trace the containers so
you have better visibility but also to know when a container needs to
be replaced or repaired.
According to an article in Businessweek, "Companies from Tiffany & Co. to Home Depot Inc. are restocking
shelves in a move that will boost economic growth and may keep the
recovery on track through 2010."
The questions many retailers are asking is "what should I restock with?"
Today, we recorded an educational webinar with SC Digest on shelf space optimization-- a great way to answer the question about how to stock your stores. The objective is to keep customers happy at every single store with the right products and, in turn, drive up revenues and profits.
SC Digest will keep the Webinar available for 12 months for viewing. You just need to register to watch it. Click here for the link.
Today, we announced the release of a new version of our multi-echelon inventory optimization product, Inventory and Product Flow Analyst (IPFA) v7.6
We have put a lot of investment in IPFA so that it fits within the workflow of an organization. That is, it is important to be able to answer strategic inventory optimization questions, but it is even more important to maintain the right inventory targets. You maintain these targets with strong work flow capabilities.
By maintaining the right inventory targets at all levels in the supply chain, you can avoid lost sales, minimize late shipments, minimize expediting, and keep inventory to a minimum. And, since IPFA directly accounts for demand forecast error and supply variability, you get value even when your forecasting is not very robust. For more details on the strategic importance of inventory optimization, click here.
Highlights of this new release include:
Simulation capability: Inventory planners can now analyze inventory and service level performance against simulated customer demands.
More powerful Multi-Echelon optimization: Inventory and
supply chain planners can now optimize total inventory costs based on
variable committed service times or variable upstream service levels.
Forecast error and supplier performance analysis: Inventory
and supply chain planners can now analyze forecast error and take into
account forecast bias in the inventory optimization process. They can
also measure supplier performance with an automated calculation of lead
time variability and receipt period.
Ease-of-use enhancements: Enable inventory planners to perform their tasks more effectively.
Many S&OP processes stop with the sales planning. When you extend your S&OP process to include optimization through a tool like LogicNet Plus XE, you can reap many benefits.
The picture to the left is shows some highlights from an S&OP case from a beer company. On a monthly basis, as part of the S&OP process, the operations of this beer company are modeled and optimized in LogicNet Plus XE. The details below the map provide information on how much beer, by product by month, is shipped to each of warehouses and how much product is produced in each month. The graph shows the inventory build up in the supply chain by warehouses.
Besides providing insight into the operational cost and capacity implications of a given sales plan, the results also show the impact on total revenue, operational gross profit, and total pre-build inventory.
These results can also provide insight into the sales plan. For example, it can determine the cost and feasibility of promotions, it can suggest additional demand shaping activities by looking at under-utilized capacity.
In this case, the firm analyzed different demand plans around the implications of a marketing program to grow demand in a region, the implications of a promotion for a specialty product, and the implications of a price increase.
The article does a great job of explaining how firms need to embed mathematical optimization deep into their organizations to really take advantage of their investment in IT and data.
"One of his [Steve Shashihara] most interesting arguments is that a great deal of the effort
spent on information gathering and analysis is wasted — or, at least,
used sub-optimally — when it’s used to feed business intelligence
systems that produce reports that ultimately wind up with being fed into
spreadsheets and PowerPoint slides. Managers then sit around in a
conference room listening to presentations and debating what the data
means and what decisions should be made about it — when, in many cases,
good software could make the decision itself."
The article mentions that IBM and IBM's ILOG CPLEX have the ability to address the need for more automated optimization. This article confirms the value we've seen in Optimization: