A new case study is available highlighting how Johnson Controls uses LogicNet Plus to model and improve their closed-loop battery supply chain.
The following is a quote from Johnson Control's Supply Chain Network Strategy Manager, Chad Montgomery:
"I’m using LNP XE every week to perform modeling on a variety of projects from small capacity analysis/capital investment decisions to quarterly financial forecasting and annual budgeting for capacity utilization, plant manufacturing, and shipping territories. LNP XE has allowed us to create clear pictures of our network, starting with a best-case utopia state and then quantifying the impact of each constraint. This clarity can reveal hidden savings opportunities as well as gives complete insight into the main drivers of our supply chain”
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?
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.
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".
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.
Deciding where to locate your manufacturing plants or where to make a product can have significant impact on your overall cost and your ability to serve your customers. However, this is not a trivial decision and depends on many factors.
Over the last several years, the press has reported on the move of manufacturing from the US to China. However, two recent in articles in The Wall Street Journal and Bloomberg Businessweek, show that the issue is much more complex.
Both articles point out that rising wages in China erode the labor cost advantage. And, the rising cost of commodities and especially oil, tip the scales even further. Both articles indicate that there will be a speed up in new manufacturing capacity being built in the U.S.
Certainly, moving production to China was not the answer for many firms. The Wall Street Journal article points out that rising productivity has allowed US manufacturing output to actually double from four decades ago. And, many firms chose to keep manufacturing in the U.S. to protect intellectual property, to be closer to the market, or to minimize inventory investments.
At the same time, over just the last five to ten years, we have seen firms build manufacturing capacity in China for the China market. So, as consumer demand increases in China, more manufacturing capacity is needed to service these markets. This new demand must be accounted for in decisions on where to locate manufacturing capacity.
Deciding where to locate manufacturing capacity becomes even tougher when you factor in the impact of taxes, inventory, and risk.
So, how should you determine where to locate your manufacturing capacity? The answer is not simple, but should consider the following:
An analytical tool to consider all the cost impacts (labor, transportation, raw materials), tax implications, inventory implications, and service levels.
A analysis of the amount of flexibility. Some questions include: Should plants make all products and service their local markets? Should plants be more focused to increase productivity? How much flexibility should we have?
A risk analysis. How much risk are you willing to tolerate? What is the cost if something happens to one of your facilities? What is the cost of building redundancy in the supply chain and is it worth it?
Product analysis to determine what to make where. Even within a fixed network of plants, you have choices in what should be made where. By doing this correctly, you can significantly improve your performance.
This type of analysis is not a one-time event. You have a chance to mold your strategy everytime you make a capital investment in your supply chain. And, the more facilities you have, the more opportunities you have to adjust your supply chain when market conditions change.
IBM's ILOG and Sterling supply chain teams have been named to the Top 100 Logistics IT Providers for 2011 by Inbound Logistics.
This echos the comment from last year from SupplyChainDigest that" Somewhat quietly, IBM is building a formidable portfolio of supply chain software solutions that has the potential to shake up the existing market."
The Dec 2010 issue of Inbound Logistics reported that McKesson Corporation is using "IBM's Supply Chain Sustainability Management Solution to aggregate supply chain, sales, and geographic data to create "what-if" scenarios that enable distribution network modeling, supply planning, inventory positioning, vehicle routing, and sustainability management."
When optimization and analytics are applied to a firm's supply chain, you can often see significant returns on your investment. When you make this capability part of an overall framework, like McKesson did, you create a repeatable process to continually drive improvements in your supply chain.
A SupplyChainDigest article from earlier this year noted that "IBM is building a formidable portfolio of supply chain software solutions that has the potential to shake up the existing market."
Now that IBM has completed the Sterling Commerce acquisition, IBM has much more to offer to the ILOG Supply Chain customers.
The IBM ILOG supply chain group provides supply chain planning capability (LogicNet Plus XE), inventory planning (Inventory and Product Flow Analyst), strategic transportation planning (Transportation Analyst), and production planning and scheduling (Plant PowerOps).
Sterling provides a strong set of supply chain execution and visibility products. These products include:
Transportation Management System (TMS), offered as a Software as a Service (Saas)
Warehouse Management System (WMS)
Supply Chain Visibility
Yard Management System (YMS)
The supply chain products from Sterling and ILOG complement each other and allow our customers to make better plans and efficiently execute against those plans.
Fidelitone Logistics recently announced that they are using LogicNet Plus XE to help analyze their customer's supply chains. They state that they can help remove 15-20% of costs:
"Based on customer order data, we were able to use ILOG to run several
scenarios and analyze the geographic impact multiple locations would
have on service and cost," explained Chuck Perry,
director of customer solutions for Fidelitone. "This fact-based
analysis shifted the client's assumptions and created a 15-20 percent
reduction in cost for them. Additionally, the fact-based nature of the
analysis enables us to be more competitive with pricing as our
confidence level in the analysis has proven true with each application
of the technology."