IBM Decision Optimization
We are hosting a supply chain users group in San Diego on Sept 26, 2010 just prior to the start of the annual CSCMP Conference. The users group meeting will take place in the same location as the CSCMP event.
For more information on the event, please click here.
We are still finalizing the agenda. If you would like to speak or have ideas on what we should cover, please let us know.
MichaelWatson 270002K5FS Tags:  transportation transportation_analyst ilog supply_chain 3,582 Views
A retailer with multiple different chains of stores produced a specialty food product that was needed by different chains. Since the chains ran independently and had different requirements, they sent separate trucks to each chain. Also, the firm ran static routes so each store could get to better know the driver. These routes did not change frequently.
They used Transportation Analyst to determine the benefits of combining the shipments for the two chains together. For example, a truck would leave the warehouse and visit stores from each chain on a single route. Before they changed their business practices, they wanted to understand the potential benefit. They found they could reduce transportation cost by 7% and while providing better service. While it may seem obvious that combining shipments would yield savings, it is important to quantify these to understand the value of the change prior to making the change.
This study is part of a trend we are seeing. More firms are looking for savings opportunities through new transportation strategies. They are not only applying transportation optimization to the current practices, they are using the technology to look for new ways to do business.
For example, the map on the left shows an example of mode selection--- which customers should be served private, commercial, or LTL carrier, and for the truck load moves, which ones are multi-stop and which ones direct.
In addition, it is also important to analyze the back haul opportunities. That is, your selection of the outbound mode can depend the opportunities for picking up product from a supplier and bringing it back into your facility.
Optimizing inventory is about determining the appropriate reorder points and order sizes so you have the right amount of inventory for every SKU at every location.
The graph to the left shows the results of an inventory study. The SKU's are along the x-axis and the y-axis shows the needed change in inventory.
The SKU's with the red bars show that you should hold less inventory for these items. That is, for these items, you will reduce the amount of inventory. This frees up cash and reduces your cost to finance and hold that inventory.
However, the SKU's with the green bars show items where you should be holding more inventory. What this tells you is that for these items, you are currently either missing sales, providing poor service, or going through extraordinary means to fill the orders (shipping out of territory, expediting, and so on). Of course, these extra costs may not matter to you-- but, our experience has shown that these extra costs or lost sales easily swamp the extra cost of the inventory. And, it is important that you explicitly decide whether you want to hold the right amount of inventory or pay the costs in lost sales, poor service, out of territory shipments, or expediting.
IBM has reorganized its website to highlight it growing power in Analytics. At the beginning of this year, the letter to shareholders spelled out Analytics as one of IBM's four strategic initiatives.
Within IBM's software group, Cognos, SPSS, and ILOG Optimization make up the current pillars of the Analytics offering.
Within ILOG Optimization, you will find information on IBM ILOG CPLEX Optimization Studio, IBM ODME Enterprise, and our supply chain optimization applications.
MillerCoors and IBM will speak at the upcoming CSCMP annual conference in San Diego.
A screen shot from the brochure is to the left showing this talk. This talk will also feature a speaker from Ralph Lauren. I will post an update when CSCMP updates the brochure.
As always, the CSCMP talks are very educational. If you are going to be in San Diego for the event, please stop by for the talk.
MichaelWatson 270002K5FS Tags:  inventory_optimization cscmp inventory_analyst ilog 4,005 Views
Abbott Laboratories and IBM will speak at the upcoming CSCMP annual conference in San Diego.
If you’ve paid much
attention lately, the topic of “smart supply chains” is currently in vogue. But what is a smart
supply chain, exactly? And are you trying to build one at your
company? The idea of smart or
intelligent supply chains has been around for some time – more on that in just a
bit. However, part (but by no means all) of the recent reanimated discussion
about smart supply chains has come from the efforts of IBM, which has made
“smarter” supply chains one of its key marketing messages.
In a report IBM released last year summarizing surveys and interviews with hundreds of senior supply chain executives (promoted in many venues since then, including SCDigest), IBM said that “To deal effectively with risk and meet your business objectives, we believe supply chains must become a lot smarter,” and called on Chief Supply Chain Officers to start building to that new vision right now. Read the full story online at SCDigest.com.
MichaelWatson 270002K5FS Tags:  ilog cognos wall_street_journal spss business_analtyics 4,628 Views
A recent Wall Street Journal, "Products, Products Everywhere," argued that companies do not need so many varieties of similar goods.
Manufacturers are offering more and more products by changing the "sizes, brands, colors, fabrics and flavors."
But, "instead of improving profitability, these tactics often lead to bloated product portfolios that raise a company's costs, reduce supply-chain efficiency, confuse consumers and lead to shortages of popular products."
The article offers tips for reducing the number of SKUs. But, this problem is difficult to tackle-- it involves many different groups and decisions can impact the top line and ability to compete for shelf space. At IBM, our advanced analytics solutions can add to the analysis.
Cognos helps with the Business Intelligence, allowing you to understand the demand and sales price of each SKU in each market. SPSS allows to determine which SKU's actually sell together and estimate what would happen to overall demand if SKU's were reduced. That is, if you eliminate an SKU, what will be the likely uptick in the demand of the remaining products. ILOG can help determine the true landed cost, supply chain efficiencies, and safety stock impact of a reduced SKU count.
Combined, these technologies could help you make the correct decisions on how many SKU's to eliminate and which new varieties to the market.
Gartner recently assessed their view of IBM's acquisition of the ILOG supply chain products In the report, "The IBM ILOG Acquisition: A Progress Report Card, August 4, 2010."
Click here for a link to the report. You will need to be a Gartner member to see this article.