A recent brochure from IBM Research noted that "for the last 60 years, Research has been one of IBM's key differentiators in the marketplace, making the kind of discoveries that shape the future of business, government, academia, and society."
This brochure highlights work ranging from improved water management, to traffic management, to sensing complications in premature infants before they happen. This report also highlights the value of strategic network modeling.
The report highlights the work IBM did with the Chinese shipping giant, COSCO. They were able to reduce the number of distribution centers from 100 to 40, reduce logistics costs by 25%, and reduce CO2 emissions by 15%.
The image shows the conceptual view of the before and after of the supply chain.
Many firms are able to find savings like this through strategic network design studies.
For more details on some of IBM's software capabilities in strategic network design be sure to watch our two part (15 minute total) video: part one
and part two.
In yesterday's broadcast of the weekly Supply Chain Video News sponsored by the Supply Chain Television Channel and CSCMP, we were interviewed about the new multi-objective optimization capability. If you click here, it will take you to the video. The interview starts at about the 7:00 minute mark.
This type of technology fits in with IBM's broader strategy of Smarter Commerce. IBM is seeing the trend towards much more complicated supply chains with a much more connected customers at the center. These customers have great access to information through their smart phones and social networks and are buying through many different channels. IBM's Smarter Commerce strategy helps companies thrive in this new environment.
Making sure the supply chain is properly designed is an important component of Smarter Commerce. The multi-objective optimization is the technology that gives full visibility to potentially conflicting objectives of various components of a value chain and analyzes the trade-offs between them. This technology is an attempt to replace the traditional optimization questions such as "what is the least-cost supply chain?" with questions such as "what is the ideal value chain for my customers, partners and my own organization".
We had the privilege of speaking with MillerCoors at the annual CSCMP conference in San Diego earlier this year. In that talk, they discussed how a significant amount of the $750 million in synergies came from the combining of the Miller and Coors supply chain.
The press release reports on the progress of the supply chain transformation as well as the on-going efforts to improve the supply chain:
In the third quarter, MillerCoors successfully completed initial product
transitions within its national brewery network. The company will
continue to focus on further network optimization through peak/non-peak
season sourcing changes, as well as opportunities for increased
We see many firms relying on advanced analytical solutions, like LogicNet Plus XE, to help drive savings in the supply chain. The savings can come from combining distribution networks, optimizing production decisions across the supply chain, and reacting to the changes in demand patterns throughout the year.
We've recently written an educational book on network design. This book is aimed at both those who do network design projects for a living and for use in the classroom.
For those who do these studies, you will develop better intuition on how these models are solved and new ideas for modeling your supply chain. It can also be a good guide for people who are new to the discipline within your organization.
For those of you who teach, this book will introduce your students to the topic and provide them with a wide ranges of realistically sized models to work on. You can use with the IBM ILOG LogicNet Plus XE software from the academic initiative to allow your students to learn the topic with the use of commercial software.
Ability to run the optimization with multiple user-defined
objectives and automatically build detailed trade-off curves.
Traditional network design limits you to one objective. This innovative
feature allows you to make better supply chain decisions by weighing
Detailed Landed Cost reporting and analysis
visualization for easy model building, visual understanding of the
structure of your supply chain, and detailed analysis of the output
This releases enhances LogicNet Plus XE's leadership position in the supply chain network design market. It includes many cutting edge and innovate features that will allow you run new types of optimization , and gain deeper analytical insight. Highlights of the new release include:
Ability to run the optimization with multiple user-defined objectives and automatically build detailed trade-off curves. Traditional network design limits you to one objective. This innovative feature allows you to make better supply chain decisions by weighing multiple objectives.
Detailed Landed Cost reporting and analysis
Lane visualization for easy model building, visual understanding of the structure of your supply chain, and detailed analysis of the output
New interface for improved ease-of-use
Center of Gravity modelling
Stochastic inventory planning
This is the third major release of LogicNet Plus XE since 2009 and shows IBM's continued investment in the product.
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.
Earlier, we recorded a session with SupplyChainDigest on strategic sourcing. This session covers how firms can better use their manufacturing network. For example, where should a product be made and at how many of the plants. These decisions can impact manufacturing costs, transportation costs, and the ability of your supply chain to meet its objectives.
This use of LogicNet Plus XE (LNP XE) is part of a larger trend. More firms are using LNP XE on an on-going basis to gain a competitive advantage in the market. This can range from strategic sourcing to budgeting to contingency planning. This is a way to leverage your supply chain data and bring advanced analytics to your supply chain.
Click on this link for a video on strategic sourcing. You will need to submit your email to register and you will be all set.
An important part of merger and acquisitions is the value created when the two supply chains come together. For example, MillerCoors reported on the progress toward their $750M savings goal on May 4, 2010:
"Supply chain integration continues to proceed on schedule. The brewery
optimization project is nearing completion, as product moves are more
than 90 percent complete."
Without a analytics modeling tool, like IBM's LogicNet Plus XE (click here for a video introduction), it can be difficult to properly merge the two supply chain. Each firm has unique products, unique manufacturing locations or vendors, unique warehouses, unique customers, and different business strategies. By modeling and optimizing the supply chain, you can evaluate the various trade-offs, understand where there is true overlap, and understand where separate supply chains are still needed. This modeling process allows you to accommodate the two businesses, deliver savings, and avoid creating a situation where the costs go up for both firms.
MarWrigley spoke at CSCMP about their modeling experience and noted the value in just getting a baseline model built. That is, as part of the merger process, there is value to seeing the combined supply chain in one place.
Whirlpool mentioned the importance of getting off to a fast start. Often a merger is known about long before the two firms can legally talk to each other. Therefore, it is important that you start as soon as it is legally possible. The investment community usually expects to see some quick savings.
In some firms, the supply chain modeling team is often an input to the acquisition process. Some firms model potential acquisition targets to approximate supply chain savings. And, this type of analysis can help determine if part of the business should be spun off.
At the May 2011 Manufacturing Leadership Summit, The Dow Chemical Co. won a Supply Network Mastery award for their global supply chain optimization initiatives.
The award sited a few examples of the type of work they did:
"One Pacific-area team used a Network Optimization Work Process to
evaluate tank usage. Optimizing tank usage for multiple products cut
costs, improved service levels, and reduced GHG emissions; the latter
has become a key performance metric in the Network Optimization Work
Process. Each network project looks not only at cost and customer
service, but also provides key carbon footprint data to reveal
opportunities for GHG reduction.
After the April 2009 acquisition of Rohm and Haas, D&MSC Work
Processes helped teams capitalize on synergy opportunities and optimize
the company’s Europe warehouse network. The evaluation identified
savings through consolidation of shipments to warehouses and reductions
in freight and warehousing costs. "
The award mentioned that these projects and others saved the firm $5 million during 2009-2010.
The article mentions that LogicNet Plus was part of the toolkit. For the a link to the full article, click here.
On Wed Nov 16 at 11:30 ET, we will be presenting a videocast with Supply Chain Digest on multi-objective optimization. This is a nice breakthrough technology that will allow you to gain deeper insights into your supply chain and dramatically increase your productivity. In the videocast we will talk about bigger trends in supply chain and optimization that make this possible, what multi-objective optimization is all about, and a case study to show how it works in practice.