At the 2011 annual CSCMP conference, Walmart's Greg Forbis spoke to a full session about Walmart's inbound supply chain. SupplyChainDigest reported on the talk. Here a a paragraph from their article that represents the challenge and opportunity:
"He also said that Walmart's vast transportation network, including some
6500 dedicated trucks and an amazing 56,000 trailers, covering almost
every area of the country, could reduce total transportation costs
because its network density and buying power may result in lower costs,
especially in terms of using vendor freight to reduce empty miles
travelled, or produce better consolidations. He noted, for example, that
Walmart has about 12 consolidation DCs that combine less-than-truckload
shipments from vendors into full truckload shipments to its stores. "
During the talk, Mr. Forbis mentioned the use of optimization to help with this problem.
This is a great example of how optimization can help firms. When you have an almost unlimited number choices, optimization technology helps you sort through the possibilities. This is especially true with transportation optimization. We have previously discussed how deceptively difficult routing problems are (click here and here for more information).
With Inbound logistics, the optimization is even more difficult. For example, you may need to find routes that pick up from multiple vendors and make drop-offs at multiple distribution centers. Most routing optimization focuses on outbound routes from a depot to stores. A nice advantage of IBM's Transportation Analyst is that engine is based on the Constraint Programming engine that gives you the ability to model inbound logistics and find great solutions that you otherwise would not find.
We often find that when we compare the results of an optimization run to the current plans, the optimization can find solutions that meet all the business rules and time constraints (which are not always met in the existing routes) and reduces the cost.
Join IBM Optimization and Supply Chain experts on March 30, 2010 for the webcast: Building a Smarter Supply
Chain: Learn how to position your
business for recovery and growth with better supply chain
decision-making using next generation supply chain optimization. Abstract: Is your business
positioned for recovery? Are your supply chain strategies flexible
enough to manage a rapidly changing and volatile economic landscape?
Join IBM ILOG Optimization & Supply Chain experts to learn how
optimization technology supports flexible business strategies that
enable companies to reduce costs today and prepare for growth tomorrow.
Customer expectations have grown for not only what they are buying
and how they are buying it, but how it is fulfilled and when they will
receive it. They want to buy online and pick up in the store, or have it
shipped direct to their home or office -- and they don't want to wait.
This shift has supply chain professionals moving beyond transactional
enterprise systems and operational rules of thumb to a more advanced
value chain. The value chain takes advantage of all this new granular
customer data to enable organizations to respond to demand variability
at the point of consumption -- connecting the supply chain directly to
customer demand, orchestrating seamlessly between trading partners and
suppliers. This is an inherently multi-enterprise, cross-functional
collaborative process that requires bringing together a vast amount of
data from disparate sources to make the right strategic, tactical and
In this webinar, we will discuss the strategic requirement to creating a successful value chain:
Real time analytics to balance supply and demand and optimize inventory levels and postponement strategies.
Visibility to address disruptions and detect patterns of supply chain behavior
B2B connectivity to optimize the inbound and outbound flow of materials
Evolution of the trading partner eco-system to reduce errors and speed fulfillment
Adrienne Selko Online Editor IndustryWeek
Adrienne Selko manages the editorial content of IndustryWeek's
award-winning Web site. Before joining the staff in 2004, Selko was
managing editor of corporate publications at a large regional financial
institution. She was also an editor for the U.S. based publication of a
medical manufacturing company. Prior to that she ran a public relations
and marketing company that published a best-selling healthcare book.
Selko received a bachelor's of business administration from the
University of Michigan.
Richard Douglass Worldwide Industry Director, Manufacturing IBM
Richard Douglass is the Worldwide Industry Director, Manufacturing,
Smarter Commerce within the software group of IBM, where he is
responsible for industry marketing and key industry account support. He
has over twenty-five years of experience in supply chain management
consulting and solutions development in a variety of manufacturing
sectors ranging from chemicals to high tech. Prior to joining,
Douglass had similar responsibilities at Sterling Commerce and
webMethods, integration and application software providers, and prior to
that he was an associate partner at Accenture, a global consulting
He received a bachelor's in computer science from Michigan State
University and an MBA from the Kellogg Graduate School of Management at
Northwestern University. He is certified as a Six Sigma Black Belt. He
is a senior fellow at the University of Maryland.
If you’ve paid much
attention lately, the topic of “smart supply chains” is currently in vogue. But what is a smart
supply chain, exactly? And are you trying to build one at your
company?The idea of smart or
intelligent supply chains has been around for some time – more on that in just a
bit. However, part (but by no means all) of the recent reanimated discussion
about smart supply chains has come from the efforts of IBM, which has made
“smarter” supply chains one of its key marketing messages.
report IBM released last year summarizing surveys and interviews with hundreds
of senior supply chain executives (promoted in many venues since then, including
SCDigest), IBM said that “To deal effectively with risk and meet your business
objectives, we believe supply chains must become a lot smarter,” and called on
Chief Supply Chain Officers to start building to that new vision right
now. Read the full story online at SCDigest.com.
Since last year, there is a lot that is new with IBM's supply chain software solutions. If you are at the conference, make sure you meet up with us. We have several talks, a large booth, and are happy to set up a session with you.
Come see our talks:
Tuesday, October 4 at 10:00 am “’Smarter’ Commerce: Closing the Gap Between Planning and Execution” in the Supply Chain of the Future I track (Michael Watson, Ph.D IBM; Gene Nusekabel, IBM). Location: Hall B, Supply Chain of the Future Amphitheater I
Tuesday, October 4 at 3:00 pm “’Smart’ X-SCM Tools: Keys to a More Risk-Tolerant Supply Chain” in the Current Issues II track (Richard Douglass, IBM; Stephan Dean, Ryder; John Tomcala, Johnson Controls) Location: Room 109B
And, be sure to stop by our booth to get more details on our software solutions for the supply chain:
Learn what is new with network design and optimization, inventory optimization, and transportation optimization
Learn about our hosted TMS and Supply Chain Visibility solutions
Learn about how all of this fits into IBM's Smarter Commerce initiative. IBM has identified several big new trends that will have a big impact on business and the supply chain.
If you will be at the conference, please let us know.
Next Session: March 26, 2014 at 07:30 Pacific, 10:30 Eastern, 16:30 CET
Speakers: Jeremy Bloom, Product Manager, IBM Decision Optimization Center
Session Topic: What’s New in IBM Decision Optimization Center 3.8
A new release of IBM Decision Optimization Center became available on March 14. In this presentation, you will learn about the new features and performance enhancements, including:
Performance and scalability: Lower latency in the business user interface improves the user experience when working with large data sets.
Rapid and flexible application development: Scripting reduces the time and effort required to customize data models and views.
Effective business interface: User roles and rights support organizational business processes. Enhanced Gantt charts enable business users to move activities within a schedule interactively in real time.
Flexible architecture: A basic REST API facilitates application deployment on the web.
We look forward to your participation.Please contact Kitte Knight email@example.com an invitation to this Webinar.
Next Session: December 11, 2013 at 07:30 Pacific, 10:30 Eastern, 16:30 CET
Speakers: Mary Fenelon, Development Manager, CPLEX Optimization Studio, IBM
Session Topic: What's New in CPLEX Optimization Studio 12.6
A new release of CPLEX Optimization Studio will be generally available on December 6. In this presentation, you will learn about the new features and performance enhancements, including:
Improved solution times on difficult mixed-integer problems
Improved solution times on scheduling problems
A new algorithm to provide a global optimum for problems with non-convex quadratic objectives
A new distributed parallel algorithm that harnesses compute clusters to solve mixed-integer problems
Constraints to better model ordering relationships between operations and to easily specify highly combinatorial relationships
Reorganization of CPLEX Optimizer parameters into a functional hierarchy
New code assist functionalities in the IDE that help in correctly writing constraints and related structures
An LP-format viewer in the IDE to aid in model debugging
IBM Decision Optimization Virtual User Group Meetings provide you with updated and useful information about our products and how you can get the best value for your organization from our optimization technology and solutions.
These meetings are being held electronically with presentations by our product management and development subject matter experts. The sessions will run for approximately one hour, with about 45 minutes of presentation material and 15 minutes for open questions and answers. Our goal is to provide a forum for you to:
make smarter decisions
get your questions answered
elicit your feedback on various topics.
We look forward to your participation.Please contact Kitte Knight firstname.lastname@example.org an invitation to this Webinar.
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.
An article in DCVelocity provides some great insight into how Whirlpool and Maytag combined their supply chains. Whirlpool purchased Maytag in 2006 and promised the investment community $400M in savings over the first 3 years.
According to the article, $40M of savings per year was going to come from logistics-- freight and warehousing costs. This reminds us how important it is to get these decisions right. And, in Whirlpool's case, the article reported that they were able to overachieve and hit a savings of $66M in the current year.
How they got off to a fast start:
One of the first steps was to determine what inventory was on hand in
both operations so that Whirlpool could determine what to do with it.
The company acquired ILOG's LogicNet Plus suite of network design and
planning software so it would have a tool in place that
could import and crunch data once the deal was finalized (regulations
did not permit the managers to have access to Maytag-specific data until
the acquisition closed).
"When the deal was completed on March 31, 2006, we were in the
starting blocks ready to go. We had our tools in place and people in
place, and we had our own data. We were then prepared to bring in the
The network optimization with LogicNet Plus allowed Whirlpool to determine which distribution centers to close, which new sites should be built, and what the local cross dock network should look like.
We have seen this type of result many times over the years. When a firm grows through an acquisition, having a high-quality network optimization tool allows it develop solid plans for the new network. This creates a foundation for additional improvements and helps a company meet the goals of the acquisition.
A recent article in The Wall Street
Journal discusses the benefits of a foldable shipping container. This would be a big innovation in shipping.
Inbalances in supply and demand means that shipping companies must pay
to get their empty containers back to where customers want them.
importance of moving empty containers is simple:
a huge expense, a huge headache for the industry," says Neil Davidson
of London-based Drewry Shipping Consultants. The net cost of moving
empties is around $7 billion a year, say analysts.
foldable container would reduce the cost of shipping the empties.
However, these foldable containers cost around $4,000, or twice the cost
of the standard containers. And, the technology
has not yet proven robust enough for the realities of "heat, cold and
salt water of the high seas, and the rough handling of
Right now, the industry is not standing still.
IBM's ILOG Optimization solutions are being used to optimize the return
of the empty containers. The goal of the optimization is to get empty
containers to where they
are needed at the lowest cost. Of course, the containers do not have to
return from where they started and there are options for leasing or
buying new containers.
The problem can be difficult when you
start to consider such things as the different container types, the
capacities of ships, the costs of different modes of transportation, and
the long ocean shipping times.
Besides reducing costs, the
shipping companies using this technology
are seeing benefits in customer service by having the needed empty
containers in the right place at the right time and having the ability
to quickly re-plan when conditions change.
commitment to Analytics and Smarter Planet, provides additional benefits to this problem:
First, since there is variability in demand and supply, it is important
to correctly set the safety stock levels for empty containers at key
locations. Second, it is important to track and trace the containers so
you have better visibility but also to know when a container needs to
be replaced or repaired.
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.
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?
This week’s Economist magazine has a special report on the
“the data deluge.”The report points out:
“According to one estimate, mankind
created 150 exabytes (billion gigabytes) of data in 2005.This year, it will create 1,2000
exabytes.Merely keeping up with this
flood, and storing the bits that might be useful, is difficult enough.Analysing it, to spot patterns and extract useful
information, is harder still.Even so,
the data deluge is already starting to transform business…”
The article notes that the retailers are one of the leaders
in amassing this data.For example:
“Wal-Mart, a retail giant, handles
more than 1m customer transactions every hour, feeding databases estimated at
more than 2.5 petabytes.”(A petabyte is
Of course, this article fits nicely within IBM’s Smarter
Planter.Smarter Planet’s big ideas are
that the world’s systems will be instrumented, interconnected, and intelligent.
In IBM, the group behind this blog works on solutions to
help firms make more intelligent decisions with this data.Often, due to the number of possible choices,
optimization-based technology is the only way to get value from the information
For example, for retailers we’ve worked with, they have
taken advantage of the data in a variety of ways:
items should be stocked at a store, how the store should be laid out, and where
the SKU’s should be on the shelf—this helps retailers increase store revenue
the warehouses and stores should best be replenished, how the workforce should
be scheduled, how products should flow through the supply chain, locating the
warehouses, and routing trucks--- this helps retailers take costs of their
In each of these cases, simply analyzing the data was not
going to be good enough to extract value from it to give the retailer a