The article provides a great overview on why network modeling is important to a firm.
They make the point that network modeling tools can help you evaluate many different strategies to understand the impact of each. IBM's new capability to optimize over multiple user-defined objectives greatly enhances this process. That is, you can gain deeper insight into your supply chain by evaluating the complete trade-off curve between multiple objectives.
Also, the article points to many reasons for re-evaluating your supply chain that reinforce the need for bringing these types of tools in-house. For example, it is important that you have the on-going capability to analyze service failures, major disruptions, product and customers changes, and changing 3PL relationships. You do not want to wait every two to four years to look at these issues, you want to be on top of them on an on-going basis.
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
Commerce and Supply Chain Professionals who attend the Optimization and Supply Chain keynote,Conquering Supply Chain Risk: A New Approach, on Tuesday, May 13th @5:45pmEDT will learn how a new Risk Management Indexing process helps model the complete set of issues or risks that can affect your supply chain performance.
Supply Chain and Commerce Professionals are facing a growing array of risks. Supply chain disruption, fluctuating transportation costs, uncertainty in demand volume and mix, commodity price volatility, increase in labor costs in developing countries and the pressure to reduce inventories are just a few of the challenges that companies are struggling to overcome today and will likely face in the future. In such an environment it is important to have an organization flexible enough to adjust quickly to changing market conditions. David will discuss practical implementation methods for the supply chain in the ‘age of eCommerce’ and illustrate the impact of innovation and optimization through a number of case studies from some of his clients, including Ford Motor Company.
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.
Though constrained by economic pressure and increasing security concerns, banks are leveraging IT investments to drive business growth. In industries characterized by heavy mainframe usage, such as banking and finance, it’s crucial to maintain customer data security, scalability and performance, and reduce hardware and software maintenance costs. Deploying optimization on the mainframe helps tackle these IT goals through simplified architecture that assists in automating and streamlining transactional decision making while lowering costs for both firms and customers. Learn more: ttp://www.ibmsystemsmag.com/mainframe/Business-Strategy/BI-and-Analytics/cplex_optimizer/
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.
After the break, we heard from Ben Fuqua, vice president of the management and supply chain consulting team within TranSystems Corporation.
In his presentation, Ben discussed the impact of the dynamic transportation environment, with case studies reviewing impacts on infrastructure and shippers. One theme that echoed David Simchi-Levi's presentation: Green can be compatible with efficient distribution.
Ben noted that the transportation industry is in transition, and supply chains are having to deal with rising transportation/logistics costs. Costs are being driven by, among other things, higher fuel costs and new fees envisioned for containers coming through ports. Volume is shifting between ports (e.g., increased traffic through East Coast ports), trucking bankruptcies are increasing, rail companies are investing in capacity, use of intermodal is increasing.
Against this backdrop, what are companies changing in how they operate in this environment? How are they balancing supply chain costs with customer-service levels? Ben presented case studies of companies balancing these issues, including a toy manufacturer, a home furnishings wholesaler, a durable goods manufacturer and a beverage manufacturer (see Ben's slides from his presentation on the Symposium Web site – the slides are due to be posted by the end of the Symposium on Friday). Lessons learned: each company's optimal network is going to be different, depending on their business model, but you won't be able to understand whether you have the optimal solution without going through the modeling process. And modeling can help you come up with a flexible solution that is going to help your supply chain adapt to the coming changes as the transportation industry continues to be in transition.
The day began with a presentation by Filippo Focacci, product manager for ILOG's planning and scheduling solution, ILOG Plant PowerOps (PPO). His presentation, "Factory Scheduling in the Food & Beverage and Pharmaceutical Industries" focused challenges, solutions and lean initiatives in these process industries.
Companies in this space face high demand variability, complex manufacturing processes, a focus on performance management and cost control, product mix changes and new product introductions/phase outs, and complex product quality issues. ILOG's PPO is designed to model key manufacturing constraints and to be used as a decision support system. Its strength is its optimization and performance analysis. It's not intended to replace current IT infrastructure but to augment it through integration with existing systems.
Filippo first covered an example from the fresh dairy industry, which moves its products from the cow through pasteurizers and fermentation, into storage and filling lines, into the finished product. The industry faces lengthy – up to day-long – cleaning-in-place cycles for its equipment, and these cycles are key to the industries process and are triggered by certain events (e.g., equipment sits idle for eight hours). Companies in the industry face high-demand variability, short shelf life of intermediate products and finished products, and relatively long lead times of three to four days. From a manufacturing efficiency point of view, companies in this space are looking to maximize resource utilization while minimizing waste and maximizing manufacturing predictability. Quality is a key issue, too, of course.
The company in question is using PPO for integrated planning and scheduling to find the right tradeoffs between scheduling goals (efficiency, changeover costs, etc.) and supply chain goals (e.g., balancing min/max days of supply). The tool lets the company also balance finished product and intermediate product planning. Planners can run various scenarios based on different constraints or goals and compare select KPIs across the scenarios. Benefits include the ability to have manufacturing and supply chain using the same tool. The tool let the company move from once-a-week planning to daily planning, improving their agility as a company. They saw 50 percent reduction in product waste and improvements in operational efficiency. The company rolled the tool out in Mexico, then Russia, then Argentina, which had fast-growing markets and were therefore both good case examples for the company and markets where increased efficiency could lead to greater sales and, ultimately, market share.
Filippo also ran through an example in the pharmaceutical industry and one that touched on the implementation of Lean within an enterprise.
Filippo talked about a scheduling requirement trend: While planners are looking for tools that better take into account manufacturing and supply chain reality, engineers want tools that generate more realistic plans. He suggested that using a tool like PPO lets both constituencies work off the same set of data.
Biotech manufacturing is an emerging industry. It combines pharmaceutical challenges such as heavy regulation and high production costs with the very specific challenges derived from biological manufacturing processes such as complex manufacturing operations and high process variability. These challenges lead to a strong focus on plant design and process design as well as on manufacturing operations. Industrial engineers working on plant and process design look for the optimal configuration of equipment, process operations and biotech technologies. Manufacturing planners need to make sure that the manufacturing process runs smoothly and is able to meet business requirements. In both cases, factory scheduling turns out to be a key technology that helps both planners and industrial engineers meet their goals.
To learn more about this topic register for the ILOG webcast, Factory Scheduling in Pharma/Biotech: from plant design to manufacturing, on Friday, October 10th at 10amCT.
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."
It is often difficult to explain how difficult it is to come up with an optimal solution to a vehicle routing problem.
I am convinced that part of the problem is that it is so trivial to come up with feasible solutions to a vehicle routing problem: just send out a truck to make every stop or group stops and send a truck to make multiple stops. And, an experienced dispatcher can often quickly improve upon a given schedule by looking at the routes. And, what we've found in practice, the constraints that would make the problem harder (like deliver time windows) are often simply ignored.
However, being about to find a solution to the problem (and maybe even an infeasible one), is not good enough. We've found that using advanced optimization can lead to routes that shave 5-15% of costs (on routes that are already deemed pretty good) and meet all the constraints.
What makes this interesting, is that the optimization is actually very difficult. Mike Trick's recent blog post highlights some of the difficulty with routing by writing about a Traveling Salesman Problem (TSP) a politician might face in Iowa trying to visit all 99 county seats in the shortest amount of drive time. Mike Trick quotes Bill Cook:
Leaving Des Moines, we have 98 choices for our second stop, then, for
each of these, 97 choices for the third stop, then 96 choices for the
fourth stop, and so on until we hit our last county and drive back to
Des Moines. Multiplying all of these choices gives the number of
possible routes through Iowa. And it is a big number, roughly 9 followed
by 153 zeros. No computer in the world could look through such an
enormous collection of tours one by one.
For vehicle routing (with multiple vehicles, capacities, time windows, and so on), the story gets more complicated. In a 2009 paper by Gilbert Laporte titled "Fifty Years of Vehicle Routing" discusses the progress that has been made in this field. He mentions that the vehicle routing problem "is considerably more difficult to solve than the TSP." Over fifty years of research has led to significant advances in different approaches and algorithms. But, he mentions that the field still has a long way to go to solve larger (and more realistically sized) problems found in industry.
This mirrors our experience with the ILOG optimization for vehicle routing-- these problems can be mathematically challenging. To solve these problems in practice requires an optimization-based approach. We have been working on this since the mid-90's. Some readers may remember the ILOG routing engine called Dispatcher or
the tool Transport PowerOps. This routing engine has found its way into
to the product called Transportation Analyst. And, the underlying
optimization engines are now part of the CPLEX toolkit.
The article does a great job of explaining how firms need to embed mathematical optimization deep into their organizations to really take advantage of their investment in IT and data.
"One of his [Steve Shashihara] most interesting arguments is that a great deal of the effort
spent on information gathering and analysis is wasted — or, at least,
used sub-optimally — when it’s used to feed business intelligence
systems that produce reports that ultimately wind up with being fed into
spreadsheets and PowerPoint slides. Managers then sit around in a
conference room listening to presentations and debating what the data
means and what decisions should be made about it — when, in many cases,
good software could make the decision itself."
The article mentions that IBM and IBM's ILOG CPLEX have the ability to address the need for more automated optimization. This article confirms the value we've seen in Optimization:
A fully translated German language version of Transportation Analyst is available. When you install Transportation Analyst, you can switch between the different languages. Transportation Analyst has powerful multi-stop, backhaul, continuous move, mode selection, fleet sizing, and hub capabilities. The powerful optimization engine allows you to uncover savings you could not find otherwise.