IBM Decision Optimization
In an article in today's Wall Street Journal with the same title as this post, the authors argue that the economic conditions in this recovery are going to be different than the years prior to the recession. Specifically, they mention that capital is going to be much more expense to come by; globalization will continue to put pressure on margins, and rising world demand will drive up commodity costs.
A key part of the article argues that companies will have to learn to finance their growth and investments with their own cash flow.
We are seeing how companies are now adjusting to this reality:
More companies are implementing advanced inventory optimization to reduce inventory to free up working capital for other parts of the business. And, this is not a one-time exercise. These firms are making inventory reduction an on-going part of the business. Our inventory optimization solutions are allowing firms to uncover new strategies to reduce inventory and allow them to maintain optimal inventory levels by integrating this technology with their ERP systems.
If you are going to be at SCOPE East in Orlando in April (17-19), 3M and IBM will be doing a talk. And, the IBM supply chain group will have a booth at the event--- we will be under the Sterling booth.
Here is a description of the talk:
"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 (like the run up in oil prices) to highlight the value from analytics such as network and inventory optimization. 3M will discuss how they are organized to deploy this capability.
Hu (Tiger) Liu, PhD, CSCP, Supply Chain Specialist for Manufacturing & Supply Chain Services, 3M and Michael Watson, PhD, ILOG Supply Chain Solutions Leader, IBM
This map shows a classic network design case. This client was producing most of its product in northwest Mexico with some product coming from the Virginia plant.
Like many firms, they were just distributing product from the plant where the product was made. The baseline map shows the current situation.
They wanted to do an analysis to determine a better distribution strategy. The result on the right shows the optimal distribution strategy. Thy shipped full trucks loads from the plant in Mexico to the warehouse in Virginia and then on to the customer.
This solution has much more expense in transportation from the plant to the warehouse. However, this is more than offset by the savings on shipments to customers. The optimal solution resulted in $5MM in savings (about a 25% reduction in transportation costs).
Although this case looks rather simple, it wasn't clear at the start whether the best solution would have one warehouse in the center of the country, two warehouses not located at the plants, or a third warehouse. And, it wasn't clear how the country should be split. And, finally, with a lot at stake in terms of savings, and moving capabilities, it is important to do a robust study to make sure you have covered all the angles.
MichaelWatson 270002K5FS Tags:  network_optimization logicnet_plus supply_chain logicnetplus ilog 2,980 Views
If you want an educational demo of our network design solution using our LogicNet Plus XE product, check our video on YouTube. Click here for the link.
MichaelWatson 270002K5FS Tags:  logicnetplus supply_chain network_optimization ilog 6,427 Views
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.
Be sure to watch both parts. [UPDATE: Click here for the new link]
If you would like a copy of the video, please contact us.
[UPDATE-- this post was updated to reflect the link to the video]
If you are going the NRF show in New York City next week, stop by our booth and visit us or drop me a note that you will be there.
Our supply chain team will be there and we can talk about what's new with ILOG Supply Chain in 2011. We also have a deep dive session and are giving a few talks.
We look forward to seeing you there.
Here are conferences and events we will attend this year. If you are going to be at any of these events, please let us know.
IBM Impact2011, April 10 - 15, Las Vegas, NV
INFORMS Conference on Business Analytics and Operations Research. April 10 - 12, Chicago, IL
SCOPE East, April 17-19, Orlando, FL
SCOPE West, Aug 29 - 31, Las Vegas, NV
CSCMP Annual Global Conference, Oct 2 - 5, Philadelphia, PA
IBM Information on Demand, Oct 23 - 27, Las Vegas, NV
MichaelWatson 270002K5FS Tags:  supply_chain_strategy supply_chain ilog flexibility 3,935 Views
In a previous post, we mentioned David Simchi-Levi's new book, Operations Rules. We've received a lot of questions about the book and the concepts.
Now, the official website for the book is up and running. Click here for the link.
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
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.
Great New Book by David Simchi-Levi-- Operations Rules: Delivering Customer Value Through Flexible Operations
David Simchi-Levi has a new book coming out in August, 2010, Operations Rules: Delivering Customer Value through Flexible Operations. See the Fall Announcements from MIT Press page 13.
Here is excerpt from the review on the MIT Press website:
Simchi-Levi identifies the crucial element in a company's success: the link between the value it provides its customers and its operations strategies. And, he offers a set of scientifically and empirically based rules that management can follow to achieve a quantum leap in operations performance.
Flexibility, says Simchi-Levi, is the single most important capability that allows firms to innovate their operations and supply chain strategies.
David Simchi-Levi is the founder of LogicTools which is now part of the IBM ILOG Optimization and Supply Chain Solutions group. He is still actively involved in IBM.
This group offers solutions in network optimization, inventory optimization, detailed production scheduling, routing, container optimization, shelf space optimization, and other areas that can help companies implement the ideas from his book.
Headlines: "BP Didn't Plan for Major Oili Spill." Do You Have a Contingency Plan for Your Supply Chain?
The coverage of the oil spill in the gulf is starting to focus on BP's lack of a plan in the event of major oil spill.
This reminds us in Supply Chain about the importance of contingency plans. Do you have a back up plan in case something happens in your supply chain? For example, a warehouse, plant, or supplier is no longer available, a port closes, or a border shuts down.
Although problems with the supply chain are hopefully not as globally bad as a major oil spill, it is still important to you and your organization. A supply chain disruption can cause significant loss of revenue, loss of market share, decreased shareholder value, and lost customers. A supply chain disruption is not pleasant for the managers within the firm.
And, it is no longer acceptable to say that you couldn't have foreseen the problem. With modeling tools like LogicNet Plus, leading companies are building and maintaining models of their supply chain. Well in advance, these firms are using the models to develop contingency plans for a wide variety of problems. When something happens, a plan is in place and can quickly be adjusted to meet the needs of the situation. The ease-of-use, robustness, and ability to integrate LogicNet Plus make all this possible.
In one case we are familiar with, a fire at a neighboring plant shut down production. The company was able to quickly determine the best course of action.
A recent article in the Chicago Tribune noted that his holiday buying season was good for retailers. It also noted that good inventory management was part of the success:
Memories of having to take unexpected markdowns of up to 70 percent on leftover holiday merchandise during the recession prompted retailers to keep inventories low during the critical months of November and December. The strategy has helped retailers better manage their businesses, but it also means clearance racks are expected to be thin.
Good inventory optimization are critical to a firm's success. Only by optimizing inventory across the supply chain can you truly optimize inventory within the stores. This often can involve both the retailer and the suppliers jointly optimizing inventory. Proper inventory optimization can give your supply chain the flexibility to meet unexpected high demand with a minimal amount of inventory invested in the system.
As retailers try to continue the momentum of this holiday season, inventory optimization will play a critical role--- too much inventory creates a financial risk if sales do not materialize and too little inventory creates a risk of losing revenue or market share.
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:
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.
We received a lot of good feedback from the virtual users group meetings in 2010. These 1-hours 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.
Like last year, we are open for ideas for sessions. Please send us your ideas. If you are not on the invite list for the events, please let us know and we'll make sure we add you.
Here is the schedule for 2011. The times will be announced closer to the meeting in the invite.
February 1st - Tuesday. Topic: Transportation Optimization Capabilities in relation to Network Design
March 1st - Wednesday. Topic: Advanced Tableau Capabilities
April 1st - Friday
May 4th - Wednesday
June 1st - Wednesday
August 2nd - Tuesday
September 1st - Thursday
October 7th - Friday
November 2nd - Wednesday
December 2nd - Friday
These dates may be subject to change. We look forward to seeing you at the meetings.