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 are presenting a SC Digest Videocast on Tuesday, December 14 at 11:30 EST. Here is a description of the Videocast:
Increased complexity requires a complete supply
chain network based approach to sourcing that incorporates end to end
cost from supplier to customer and all of the associated manufacturing,
logistics and inventory costs in between.
A network based approach enables
the ability to meet sales demand, reduced transport miles, efficient
production, improved asset utilization and capital deferment, which,
results in increased revenues, lower production costs, lower
transportation costs, and increased manufacturing capacity. Another key
component is understanding how robust the supply chain is to different
events or risks and designing the supply chain to withstand 'shocks'
frequently experienced in today's large global supply chains.
Join IBM ILOG to learn how top
performing Consumer Products companies are leveraging sourcing
optimization to drive customer service and system profitability through
effective asset use.
On Sept 15, SupplyChainDigest and IBM will be hosting a videocast on building smarter consumer products supply chains. Click here to sign up for this event.
The following is the text from the registration site with more information: ------------------------------------------------------------------------
Videocast Series: Building Smarter Consumer Product Company Supply Chains
Part II: Capitalizing on Supply Chain Complexity and Your ERP Investment in the Consumer Products industry
the first part of this series, we covered the importance of mastering
operational dexterity in the Consumer Products (CP) industry to enable
fast and flexible operations that help businesses find advantages in
Next in this IBM series on Building Smarter Consumer Products Supply Chains,
we will explore the ways in which companies are capitalizing on supply
chain complexity and ERP investments. We will discuss top executive and
supply chain challenges in the consumer products industry, including
customer case studies focusing on the following issues:
High speed of M&A activity
Globalization of the food supply
Focused consumer markets requesting niche products, pressuring the complexity of the supply chain
Increased retailer collaboration and price pressures
We explore all this and more in this outstanding broadcast. Featured speakers include:
Remzi Ural, Global Supply Chain Solutions Manager, Consumer Products Industry, IBM
Michael Watson, IBM Optimization & Supply Chain Solutions, Technical Sales Lead
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.
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.
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.
If you want an educational demo of our network design solution using our LogicNet Plus XE product, check our video on YouTube.
The video gives you an introduction to the concepts of network design and takes you through a case study. The focus of this video is on traditional network design-- locating the optimal number, location, size, and territories of warehouses.
Correctly positioning and buffering inventory can help you create a more flexible supply chain with lower costs.
In the military, it is common practice to pay suppliers on a "cost plus" basis. Effectively, this makes all the suppliers a "make to order" location. That is, the suppliers can only make product when there is a firm order. There is no mechanism for the supplier to make product in advance, sit on safety stock, and provide faster service.
Keeping helicopters flying is not trivial. They are made up of many parts and operated in tough conditions. Many of the key parts(drive shafts, sycn shafts, blades) require many sub-components and must be made with specialized materials in a high-precision manufacturing environment.
The supply chain for these key parts can be very long (measured in many months), and it is expensive to keep enough of these items around as spare parts.
With the current system, each key part had to either be stored in inventory as safety stock (waiting to be needed) or the the military had to wait for the supply chain to produce another (creating a backlog of demand and a helicopter that was grounded). Neither alternative was great.
A better solution is to optimize the placement of strategic buffers in this supply chain. The chart below on the left shows the existing supply chain. The yellow box on the right represents the customer (the military) and a key part. The gray boxes to the left represent all the steps in the supply chain needed to make this particular part. You can see the complexity of the supply chain. In the baseline, the entire buffer is held by military, represented by the red bar.
In the optimal case, the suppliers hold buffers. These buffers are seen by the red bars. The inventory optimization identifies where and how big these buffers should be. Now, the military can keep the helicopters flying with much less money tied up in working capital (or worse, with many helicopters not being able to fly).
Of course, implementing this solution is not trivial. Contracts with the suppliers have to be re-worked to allow them to create and maintain the safety stock buffers.
IBM released its 2010 Global CEO study, Capitalizing on Complexity. "Previously, CEOs have consistently identified change as their most
pressing challenge. Today, CEOs are telling us that the complexity of
operating in an increasingly volatile and uncertain world is their
primary challenge. And, a surprising number of them told us that they
feel ill-equipped to succeed in this drastically different world."
One of the key insights is the CEO's desire to build operational dexterity: "CEOs are mastering complexity in
countless ways. They are redesigning operating strategies for ultimate
speed and flexibility. They embed complexity that creates value in
elegantly simple products, services and customer interactions."
This focus on "speed and flexibility" fits well with our recent work on flexibility and the ILOG Optimization and Supply Chain solutions. For example:
manufacturing firms are looking to determine which plant should make which product
retailers are looking to build in flexibility with better flow path strategies and better shelf space planning,
plant managers are looking for advanced scheduling optimization to create more day to day flexibility
shipping companies looking to create flexibility by quickly and cheaply getting empty containers back to the correct location
inventory planners are building better flexibility and responsiveness by maintaining correct inventory levels and identifying the root causes of inventory issues.
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
quietly, IBM is building a formidable portfolio of supply chain
software solutions that has the potential to shake up the existing
Also, the article noted IBM's existing solutions in network optimization, inventory optimization, and factory scheduling and that "IBM
has been very aggressive in promoting these solutions, such as by
adapting them for new opportunities into the retail sector."
Bajaj, Head – Solutions and SCM Strategy at AFL’s Logistics Division
said: “AFL chose IBM’s iLOG software for several reasons, chief among
them – robustness, post-purchase support and a clever user interface
that makes data modelling both simple and secure. This unique
combination of AFL’s domain expertise in logistics and iLOG’s superior
design and modelling capabilities, have helped us unlock significant
value in our clients’ supply chain metrics.”