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?
IBM was recently named to Inbound Logistics Top 100 Logistics IT Providers
. ILOG was acquired by IBM in 2009. Since then, IBM has dramatically increased its supply chain capability. some of this capability includes:
- ILOG Supply Chain applications for network design, inventory optimization, and transportation optimization
- ILOG Optimization solutions for unique scheduling and planning applications
- Sterling TMS for SaaS for transportation management
- Sterling Order Management and Supply Chain Visibility for distributed order management and visibility. This, for example, enables retailers to better handle their multiple channels and gain control of their supply chain
- Emptoris for strategic supply and contract management
- DemandTec for trade and promotion management and optimization
- Cognos and SPSS for supply chain descriptive and predictive analytics. For example, Cognos and SPSS have been deployed for value added S&OP.
We've recently written an educational book on network design. This book is aimed at both those who do network design projects for a living and for use in the classroom.
For those who do these studies, you will develop better intuition on how these models are solved and new ideas for modeling your supply chain. It can also be a good guide for people who are new to the discipline within your organization.
For those of you who teach, this book will introduce your students to the topic and provide them with a wide ranges of realistically sized models to work on. You can use with the IBM ILOG LogicNet Plus XE software from the academic initiative to allow your students to learn the topic with the use of commercial software.
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.
video gives you an introduction to the concepts of network design, shows you the software, and highlights the some of the powerful capability like multi-objective optimization. The focus of this video is on
traditional network design-- locating the optimal number, location,
size, and territories of warehouses.
Today, the latest version of IBM ILOG LogicNet Plus XE was released. This new version of LogicNet Plus XE has been translated into 7 languages. It is available in
- Portuguese (Brazil)
- Simplified Chinese
- Traditional Chinese
This release has been posted. If need help accessing it, please contact us.
Here is a description of the session from the registration site:
Managing a global supply chain is a constant balancing act. Making
sure you’re getting the best results means calculating thousands of
trade-offs. You need to consider every cost and constraint associated
with transportation, production, storage, and global trade, while
keeping service levels as high as possible. And when you consider how
unpredictable high-growth markets can be, the levels of complexity
Attend this IndustryWeek webinar featuring experts from IBM
and GE Healthcare to learn best practices for simplifying the complex.
Find out how your company can calculate the best possible supply chain
network design to meet rapidly expanding business needs.
You will learn:
- Why leading companies are integrating ongoing network optimization
into every major supply chain planning activity -- and how you can
benefit from their insights
- How major companies such as GE Healthcare are managing their
global supply chain structures in order to reduce costs, improve
customer service, and prevent disruptions
- How solutions can help your company simplify the complex though all-in-one packaged network design and planning
Global Network Optimization Manager
WW Technical Lead
We will be speaking with ITW at SCOPE Spring
in Chicago on Monday April 23rd 11-12. The title of the talk is "New Trends in Supply Chain Analytics."
Here is the abstract from the SCOPE website:
A driving force behind much of the success at ITW is the 80/20
business process. Learn how this business process was applied to supply
chain network and supply chain optimization at ITW.
Also, learn how new trends such as considering multiple objectives at
the same to gain deeper insights and learn how inventory optimization is
really about preventing lost sales, reducing late shipments, reducing
expediting, and running a better supply chain
Learn how the combination of tools and processes leads to on-going benefits
Toni Stark, Director, Distribution Operations, Illinois Tool Works Inc.
co-presented with Michael Watson, Ph.D., IBM and Adjunct Professor,
ITW is well known for their use of the 80/20 rule to focus on the important. (Click here for their write-up on this idea
). It will be interesting to hear how these concepts apply to supply chain analytics. We look forward to seeing you at SCOPE.
As we've discussed before in this space, retailers are facing growing pressure from the rise of a smarter consumer. To keep up, a retailer has to do business in a smarter way. At IBM, we are calling this Smarter Commerce
One area where retailers have invested is in the ability to deal with customers seamlessly across multiple channels. That is, a customer must have the same experience whether shopping in your store or on your website and should be able to move between the two with ease. IBM's Sterling Order Management
is one way that retailers make this happen. Sterling Order Management allows you to orchestrate cross channel selling and order fulfillment. That is, it allows you to order on-line and pick up in the store.
With this increase in flexibility, it creates the need for additional inventory optimization capability at the store. For example, besides the foot traffic, a store also needs to have the inventory for customers who order on-line and pick up in the stores. Since this can potentially lead to additional sales when the customer is in the store, this may create the need for more inventory (and hopefully more sales).
In addition, some retailers are looking to ship on-line orders from the store. The idea is that you can allocate orders to the appropriate store and then ship it to customers the next day using standard ground service. And, the second benefit is that is could be beneficial to have this extra inventory in the stores. That is, if the store has an uptick in demand, the store will be in a better position to capture the extra sale. Of course, these benefits must be traded-off against the cost of fulfilling in the stores, and the stores must have the space for this.
To make this work is to pick the stores where you will ship on-line orders (you might not want to pick every store) and then put in place a good inventory optimization strategy. These stores will need extra inventory buffers to handle the increase in volume. The distribution centers that support these stores will need a new inventory strategy. And, the retailer will need to review the inventory strategy on a more regular basis. Click here for an article on the importance of a good inventory optimization strategy
As an added benefit, as your inventory strategy is fed into Order Management, you can build smarter rules for how to replenish when you are out of stock at one location. You don't want to take inventory from a secondary location today, only to run of inventory at that location tomorrow.
The commentary discusses how inventory optimization is critical business process that allows a firm to reduce out of stocks, late shipments (and penalties), reduce expediting, and reduce inventory (and free up cash).
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
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.
In addition to IBM's own Smarter Commerce Global Summit, please join us at the following events:
IBM recently launched a national television ad on Smarter Commerce
. It is definitely worth a quick view.
For supply chain professionals, what is interesting is this ever growing importance of the supply chain in meeting your firm's strategy. As the ad points out, once new trends are spotted, you need to make sure your production and distribution capabilities are flexible and robust enough to meet the new demand.
This is where supply chain optimization can help. It helps by making sure you can re-optimize production plans, distribution plans, and that you have strategically placed inventory within your system. Often, this means that you have positioned key raw material components so you have maximum flexibility (click here for a white paper on the role of inventory optimization
IBM just released a new white paper: "Managing Volatility Through Smart Inventory Planning
The white paper discusses major trends in the consumer products industry and the impact on supply chains. The paper shows how inventory optimization can help a firm deal with these trends and this is highlighted by various case studies. Here is a quote from one of the case studies showing the value of inventory optimization:
"When we went fully operational with the tool," recalls the manager, "we got a two-day improvement [in days on-hand of inventory]. From a working capital perspective, that's a $5 million savings."
We'll have more on this important paper shortly. If you would like a copy of it, please let us know.