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."
Join our monthly IBM ILOG Supply Chain Management Virtual User Group (VUG) sessions.
These 1-hour 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.
May 4th 2001: Topic: "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 to highlight the value from
business analytics such as network and inventory optimization. We will discuss
how 3M Corporation is organized to deploy this capability.
Join our LinkedIn Community to receive updates, more detailed information, and Dial-up/Web Meeting access. Schedule-at-a-Glance: May 4th -
Wednesday June 1st -
Wednesday August 2nd -
Tuesday September 1st
- Thursday October 7th -
Friday November 2nd
- Wednesday December 2nd - Friday
Fulfilling the Three A's: Adaptability, Agility and Alignment
In the recent
years, we have seen a transformation in consumer behavior. The use of social
media allows consumers to exchange thoughts; the migration from controlled
media and monitored media. Easy information access combined with more educated
consumers is making promotion planning more important. Finally, the chase for
"value" is not only changing the timing of purchases but also
location and brand. All these changes on the demand side are forcing consumer
products companies to think about supply side in terms of: Demand Driven Supply
The supply chains are
being transformed into complex supply networks with the introduction of
co-packers, co-manufacturers and service providers. Commodity price increases
and fluctuations are adding to volatility and margin pressures. Overall,
changing consumer behavior, and increases in complexity, globalization and cost
reduction pressures all force consumer products supply chains to fulfill the
three A's: Adaptability, Agility and Alignment.
The crux of these
strategies relies upon the application of Business Analytics to help close the
gap between planning and execution. In this case, Closed-Loop Dynamic Inventory
Optimization is leveraged to set appropriate inventory targets throughout the
global supply chain and ensure that the right products are positioned in front
of the right customers at the right time.
Inventory Optimization is a core process that regularly tunes policies across
the supply chain to keep inventory closely aligned with changing conditions.
But, the organizational value of such an approach goes beyond the more obvious
metrics of improving service levels, order lead times, and inventory
positioning. For example:
Higher performing supply
chains can incur lower selling costs
Better replenishment enables
faster collection of receivables
Utilization of optimal
inventory targets results in less cash tied up in inventory
Optimal use of existing
distribution assets (warehouses, fleet) reduces need for capital
cash flow from lowered supply chain costs and unnecessary assets drive
higher credit rating and lower borrowing costs
application of Business Analytics on top of traditional supply chain planning
and execution solutions gives CP Manufacturers the unprecedented ability to
continuously improve operational efficiency, reduce costs, and enhance the
Michael S. Watson, Ph.D., WW Optimization & Supply Chain Lead at IBM,
Ural, Global Supply Chain Management Solutions Lead, Consumer Products
Industry at IBM
Transportation providers are struggling to meet the ever changing demand in the
market. According to a recent Gartner study, current transportation market
conditions including rapidly shifting customer demands, capacity constraints and
congestion threaten to propel logistics costs. Demand for transportation
providers will increase and shipper uncertainty will continue to become a
reality, driving the need for new intelligence and insight, better
transportation asset utilization, greater connectivity and transparency, and
improved customer service. These challenges will require transport providers to
better manage their operational networks.
about the transformative technologies that power IBM's Watson, the new Jeopardy!
Champion, that can help transportation providers implement strategies that will
enable them to gain insight, optimize results and lead the transformation to
smarter business and operating models.
Despite the turmoil of
the transportation market there are advanced technologies to help steward firms
through rate hikes, oil prices, driver shortage, congestion, and capacity
constraints while managing today's network complexities.
The imperative for
companies who want to outpace competitors is to reconsider how they apply
optimization to take advantage of limited resources. Executives are looking to
technology solutions to provide the tools they need for daily execution and long
term strategic transportation decisions.
Executives Walter Heil
and Dan Vanden Brink will discuss how the application of business analytics in
conjunction with "as a Service" (SaaS) Transportation Management Systems helps
optimize distribution and logistics decisions capabilities to:
Reduce supply chain
costs by optimizing and executing complex order fulfillment processes
efficiency by integrating operations with inventory and planning optimization
experience by fulfilling more perfect orders in the demand chain
webcast was recorded on the show floor at ProMat 2011.
On April 26th, Sterling Commerce, an IBM Company is sponsoring an Aberdeen Group webinar on Inbound Transportation Management: The Convergence of Planning, Optimization, and Dynamic Execution. Register today!
Inbound Transportation Focus –
60% of companies from our July study have realized the significance of gaining
more visibility and control of inbound transportation.
·WalMart’s Inbound supply chain collaboration
initiative is one additional factor driving change- (Kelly Abney, WalMart VP Corporate
Transportation presented a keynotes on this initiative during Aberdeen’s 2010 and 2011 Supply Chain
·Gaining visibility and control of inbound
transportation management is prerequisite and central to…
the success of the WalMart
initiative and is also prerequisite and
extends to companies of all
sizes, scale, and industry segments. It is crucial to the success of any
multi-party supply chain management transformation.
·Organizations lacking inbound control are blind to
shipment details within the transportation pipeline.
how leading companies (those with highest percentages of Inbound Freight under
control) are focusing on new Inbound Technologies to address challenges and take
action. They are:
·2.8 to 5.8 –times as likely to leverage enhanced
–leading companies are converging planning processes with robust automation to
support on-the-fly decision-making
·1.2 to 2.5 –times as likely to automate dynamic optimization
and near real-time visibility with optimization of execution within their processes.
and as we look for insights around best practices and review specific examples
of strategic technology advancement around inbound collaboration.
About Our Speakers:
Bob Heaney, Senior Research
Analyst Supply Chain Management, The Aberdeen Group
Bob Heaney is a seasoned professional with over 25 years of distinguished
leadership experience in research, analysis, and advisory roles in Supply Chain
Engineering. Bob’s coverage area within Aberdeen
includes various elements of Supply Chain Execution (Transportation Management,
Warehouse Management, Distributed Order Management and Supply Chain
Wharton, Manager of Product Marketing, Sterling Commerce, an
As a software industry veteran, Peter has worked for a number of software
vendors of supply chain solutions, including managing the carrier relationships
with UPS, FedEx, DHL and USPS while Director of Strategic Alliances for Kewill.
Peter started his career in development, designing distribution and inventory
systems in England
working for Imperial Tobacco. He attended the University of East Anglia,
where he achieved a joint honors degree in Environmental Sciences and Computing.
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.
Optimization in and of itself is nothing new but it is
often overlooked by Line of Business and Information Technology
professionals since many instances of it are embedded inside "classic
supply chain management applications". Optimization allows companies to
make sense of the massive amounts of data across the extended
enterprise. By applying this data in unique and innovative ways, firms
can optimize business outcomes by anticipating, controlling and adapting
to a dynamically changing and chaotic environment, using the insights
from visibility, analytics and trading partner collaboration to direct
and control operations more intelligently.
With the advent of "Optimization 3.0",
firms now have the ability to layer or integrate key advanced analytics
technology on top of existing supply chain planning and execution
systems to support both long-term (strategic) and short-term (tactical)
planning goals as well as detailed scheduling while continuously
improving operational efficiency, reducing costs and ultimately
enhancing the overall customer fulfillment experience. This new
combination of State-of-the-Art advanced analytics and B2B integration
gives businesses the unprecedented ability to quickly model and solve
across the most complex systems and implement solutions in near
real-time, creating truly adaptive supply chains.
This live complimentary event will show you how IBM, through its ILOG® Optimization and SPSS portfolio and Business Analytics & Optimization service line, enables organizations to quickly and confidently answer fundamental business questions, from: Who will be our most profitable customers tomorrow? to What price will maximize profit from sales?
Highlights: • Advanced Analytics – Unifying the Worlds of Statistics and Operations Research • Demo – Illustrating the combination of IBM ILOG CPLEX® and the IBM SPSS Modeler • IBM ILOG Optimization Workshop • IBM SPSS Data Mining Workshop
Learn and share best practices in implementing advanced analytics to your most critical business decisions.
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
In the recent letter from the chairman in IBM's 2010 Annual Report, Sam Palmisano discussed business analytics and optimization as a key part of IBM's future growth strategy:
IBM spotted this emerging need early, building the
world’s leading analytics practice, with 7,800 expert
consultants, the world’s premier nonacademic
mathematics function, leading‑edge software and
offerings integrated by industry.
As a reminder of a detailed explanation and definition of analytics from an IBM team, click here.
Lean principles have many virtues. However, as a system primarily created by Toyota and then widely adapted to other businesses and industries, some firms are having second thoughts about some key Lean principles.
Specifically, if lean principles are applied just to the manufacturing sites, it may decrease the flexibility in the system and push inventory to other parts of the supply chain. For example, in the diagram below, if the manufacturing plant decreases their production variability by locking in firm schedules and minimizing their inventory, it may push inventory to the warehouses.
Executives realize that their supply chains need flexibility and that it is best to minimize system-wide inventory, not just inventory at the plants. Inventory optimization analyzes the entire supply chain to determine where inventory should be buffered. In some cases, it may provide more flexibility and less system-wide inventory by creating an inventory buffer at the plant. Inventory optimization provides a way to analyze these trade-offs and better adapt the lean principles to your unique organization.
This blog has often commented on the price of oil. Oil prices have a big impact on the supply chain. As oil prices change, it impacts the cost of raw materials, productions, and transportation. The change in these costs impacts the trade-offs that a firm needs to make.
For example, as the increase in oil prices drives up transportation costs, it can change where product should be made, the mode of transportation used, and the inventory strategy.
Several years ago during the big run up in oil prices, we wrote an article for The Wall Street Journal that discussed how the supply chain strategies needed to adjust to the new prices. As oil prices fell, we wrote an reminder that it was still important to analyze the impact on the supply chain. In both cases, it is important to understand the trade-offs between transportation costs, sourcing decisions, and inventory and adjust the supply chain accordingly.
As oil hit $100 a barrel this week, it is worth recalling these lessons. More firms have invested in more flexible operations, but the basic lessons remain. It is important to adjust your supply chain to fit the realities of the market.
Smarter inventory analytics is about using your investment in inventory wisely. This means optimizing your inventory-- setting the right inventory levels for each SKU at each location, optimally positioning and buffering inventory in the supply chain, setting the correct service levels, and determining the correct flow paths.
With optimized inventory you can:
Free up cash and create more liquidity
Drive up sales through better availability
Reduce expediting costs
To reap the benefits of inventory optimization, it is not just about the optimization technology. You need to integrate into your ERP system for on-going updates and build the capability into your processes.
If you are interested in more details, contact us for a white paper on how to achieve better performance with your inventory.
Many S&OP processes stop with the sales planning. When you extend your S&OP process to include optimization through a tool like LogicNet Plus XE, you can reap many benefits.
The picture to the left is shows some highlights from an S&OP case from a beer company. On a monthly basis, as part of the S&OP process, the operations of this beer company are modeled and optimized in LogicNet Plus XE. The details below the map provide information on how much beer, by product by month, is shipped to each of warehouses and how much product is produced in each month. The graph shows the inventory build up in the supply chain by warehouses.
Besides providing insight into the operational cost and capacity implications of a given sales plan, the results also show the impact on total revenue, operational gross profit, and total pre-build inventory.
These results can also provide insight into the sales plan. For example, it can determine the cost and feasibility of promotions, it can suggest additional demand shaping activities by looking at under-utilized capacity.
In this case, the firm analyzed different demand plans around the implications of a marketing program to grow demand in a region, the implications of a promotion for a specialty product, and the implications of a price increase.
In 2008, after undergoing a grueling third-party logistics provider
(3PL) selection process, Navistar chose San Mateo, Calif.-based Menlo
Worldwide Logistics, the global supply chain management subsidiary of
Con-way Inc., to support it in improving its global logistics network,
including managing global transportation providers and regional
warehouses, planning lead times, and modeling net landed costs.
He reports that one of their goals was a 25% reduction in supply chain costs. He reports that at "the end of the partnership’s second year, we will have achieved
11-percent cost savings, out of the 25-percent goal we set for the next
When discussing the reasons Navistar selected Menlo, he mentioned their "global coverage, cross-network planning, and optimization capabilities."
This is a very interesting article discussing the challenges of building a new global supply chain from the ground up. It is also interesting that modeling net landed cost and optimization capabilities were mentioned as key factors in the transformation of the supply chain. This mirrors some other findings that leading supply chains are relying on optimization-based technology to help drive improvements.
Finding good routes can reduce transportation costs by 5-15%.
Finding great routes can reduce costs by a further 5-10%.
These savings can add up fast.
However, finding these great routes can be difficult.
On one level, routing seems trivial. If you have 75 shipments to make, you can easily look at a map and come up with routes. If analyze the routes, you can probably make changes to reduce costs. But, how do you know if you've found good solution? How do you know if you've found a great solution?
What is not obvious at first glance is how many total possible routes exist in a routing problem. In a problem with just 75 shipments, if you allow up to 10 stops per truck, the total possible routes exceed 10 to the 100th power (10 followed by 100 zeros)! Even with today's computing power, there is no way to evaluate each of these options.
And, the problem becomes harder when you consider delivery windows, different types of trucks, the ability to do backhauls, making making multiple trips with the same vehicle, and so on.
This is where IBM's optimization expertise comes in. Both the IBM ILOG Transportation Analyst and Sterling TMS use the ILOG CPLEX Optimizer to find great routes. The ILOG CPLEX Optimizer product contains a module for Constraint Programming (CP). CP is well suited for tough scheduling and routing problems, especially routing problems with time windows. It is this optimization technology that allows to you to find great solutions.
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
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.
Today's Wall Street Journal (WSJ) reported on IBM's big push into Analytics: "IBM Chief ExecutiveSam Palmisano is making a big bet on a field called business analytics, which
involves using software to mine huge volumes of data to help executives make
For more information on what business anlaytics is, how it helps makes better decisions, and how our supply chain and optimization solutions fit in, click here.
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.
While doing some research for an upcoming white paper, I came across a nice article from Nov 2009 from Dan Gilmore at the SupplyChainDigest, "The Real Value of (Less) Inventory." A key line from the article is:
reducing your level of inventories relative to sales and sales growth
can have a dramatic impact on a company’s share price."
The article quotes research and cases to back up this claim. This certainly fits with what our customers are telling us-- they are seeing significant inventory savings through inventory optimization.
The word "permanent" is a great choice of words. Inventory optimization technology, by itself, will not lead to a permanent reduction. As we noted in an earlier post, we have developed an inventory planning playbook to help firms make the right inventory decisions with the right cadence and considering important strategic factors.
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.
As previously noted, inventory optimization is a core capability for a firm that wants to perform at the highest possible level. Inventory is a lifeline of a firm. Having inventory in the right place allows you to meet demand and allows your business to operate smoothly. Done right, an inventory optimization processes can reduce inventory by 10-30% while improving service levels. For a large firm, this can translate in over $100M in inventory reduction. This is a one-time increase in cash flow as well as the on-going opportunity cost of this capital.
The technology to do this, provided by a tool like IBM ILOG Inventory and Product Flow Analyst, allows you determine the correct inventory strategies and levels. It does this based on data you are likely already collecting-- demand, demand forecast error, supplier lead times, supplier variability, order frequency, minimum order sizes, flows through the supply chain, and other factors. You have to get this piece right to get the buy-in of the people in the organization. When people see that the technology suggests strategies and inventory levels that allow customer demand to be met while maintaining service, they are more comfortable accepting the outputs.
But, to make the technology (and savings) stick within the organization, you need a strong process as well. We have found that it is important that the technology fit within the organization. This means that the inventory planners see information that is appropriate to them while the business analysts and managers may see a different view. When we implement an inventory optimization solution across the enterprise, we make sure the workflows are correct for each user, we make sure the solution fits within an overall larger closed loop planning cycle (which may span the year), we make sure the process is dynamic to allow you to adjust as the market changes, and we have even developed inventory optimization "playbooks" that help customers through the entire planning cycle.