A SupplyChainDigest article from earlier this year noted that "IBM is building a formidable portfolio of supply chain software solutions that has the potential to shake up the existing market."
Now that IBM has completed the Sterling Commerce acquisition, IBM has much more to offer to the ILOG Supply Chain customers.
The IBM ILOG supply chain group provides supply chain planning capability (LogicNet Plus XE), inventory planning (Inventory and Product Flow Analyst), strategic transportation planning (Transportation Analyst), and production planning and scheduling (Plant PowerOps).
Sterling provides a strong set of supply chain execution and visibility products. These products include:
Transportation Management System (TMS), offered as a Software as a Service (Saas)
Warehouse Management System (WMS)
Supply Chain Visibility
Yard Management System (YMS)
The supply chain products from Sterling and ILOG complement each other and allow our customers to make better plans and efficiently execute against those plans.
We had the privilege of speaking with MillerCoors at the annual CSCMP conference in San Diego earlier this year. In that talk, they discussed how a significant amount of the $750 million in synergies came from the combining of the Miller and Coors supply chain.
The press release reports on the progress of the supply chain transformation as well as the on-going efforts to improve the supply chain:
In the third quarter, MillerCoors successfully completed initial product
transitions within its national brewery network. The company will
continue to focus on further network optimization through peak/non-peak
season sourcing changes, as well as opportunities for increased
We see many firms relying on advanced analytical solutions, like LogicNet Plus XE, to help drive savings in the supply chain. The savings can come from combining distribution networks, optimizing production decisions across the supply chain, and reacting to the changes in demand patterns throughout the year.
At Smarter Supply Chains – Atlanta Regional Conference, David Simchi-Levi talked about Combating Volatility through Flexibility. I talked about this in greater detail here.
One point that David raised at the outset was the increased level of volatility surrounding the supply chain. His point was that companies need to be careful in thinking about the "best practices" that they apply to managing their supply chains. In such a dynamic environment, the best practices that applied before the recession - or before oil prices spiked, or before they crashed again - are not necessarily applicable today. It's a call to action for all supply chain executives to step back and reassess their processes to see if they are still "best in class," or whether there might be benefit to adjusting to the "New Normal."
Supply Chain authority Andrew Reese is Editor of Supply & Demand Chain Executive. He has been invited by IBM PR to attend this show as a blogger and speaker. Like all other speakers, Andrew will receive all speaker benefits including travel and board.
At a the recent Manufacturing Leadership Summit, Toshiba gave the "Manufacturing Leadership 100 Award Winner Case Study Presentation." The talk was titled: "Using SCM to Create Competitive Advantage."
In the talk, they mentioned that they used IBM ILOG LogicNet Plus XE to model different options. Among the improvements that they saw, the cost per shipment decreased by more than 12%. In addition, obsolescence reduced by more than 40% and missed service calls reduced by more than 16%. This all helped lead to double digit growth in customer use of Toshiba Supply Chain Services.
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.
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.
Bajaj, Head – Solutions and SCM Strategy at AFL’s Logistics Division
said: “AFL chose IBM’s iLOG software for several reasons, chief among
them – robustness, post-purchase support and a clever user interface
that makes data modelling both simple and secure. This unique
combination of AFL’s domain expertise in logistics and iLOG’s superior
design and modelling capabilities, have helped us unlock significant
value in our clients’ supply chain metrics.”
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.
In a recent webcast, IBM discussed the latest enhancements to IBM ILOG CPLEX Optimization Studio 12.2, from streamlined packaging and licensing, to major performance improvements.
CPLEX Optimization Studio now completely supports the rapid development and deployment of both mathematical programming and constraint programming models from a powerful IDE, based on the Optimization Programming Language (OPL), programmatic APIs, or other 3rd party modeling interfaces via supported connectors (Matlab, Microsoft Excel, etc.).
At the conclusion of the webcast, attendees were asked to identify the feature that excites them most from the latest release. Here are their Top 3:
IBM has once again re-asserted its leadership in mathematical optimization, with a remarkable 2.7x performance improvement on the most challenging optimization problems, mixed integer programs taking at least 1000 seconds. The latest release strengthens IBM ILOG CPLEX Optimizer as the most trusted and widely-deployed solver. Streamlined packaging, and removal of license key enforcement makes it even easier to choose CPLEX. What are your top 3 new features? To view the recorded webcast, please follow this link:
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.
A new case study is available showing how Südzucker, Europe's leading supplier of sugar products with an annual revenue of approximately €7 billion, uses IBM ILOG LogicNet Plus to help meet their goals of a cost-effective and flexible supply chain:
Here is a quick summary of the case:
"When the European Union adopted a new market regulation for the sugar industry in 2006, Südzucker was forced to re-evaluate their entire supply chain network. On the one hand the company’s ability to export sugar to world markets became very limited, on the other hand major sugar deficit areas within the European Union were created. This led to a much greater focus on sales and distribution. Südzucker also knew this ruling would give them the ability to enter new sugar markets like Greece, Italy, Spain and the United Kingdom. Their challenge was to merge their national supply chain networks to create one integrated and powerful European supply chain network. The company had to determine how to modify their supply chain network by adding new facilities to ensure excellent service but also minimize transportation costs."
I attended the CSCMP Chicago Roundtable event at RR Donnelley last week (February 11, 2009) and heard an interesting presentation by my colleague Jay Jayaraman. He discussed a project we are working on where a manufacturer of a commodity has the choice of exchanging product with a competitor. The idea is that a company can source an order from a competitor’s location that is closer to the intended customer than its current manufacturing base. The impetus being a saving on transportation costs. The key is that both companies can benefit from the swap since they both can reduce transportation costs, and each company keeps their relationships with their customers. Of course, this scenario can only work with commodity-type products.
To take full advantage of the situation, our network modeling and production planning tool, LogicNet Plus XE, can be used to determine the best possible swaps as well as understand all the constraints that impact the results. Doing this type of analysis with Excel can lead to omissions and sub-optimization.
It’s fascinating how collaboration, even amongst “enemies”, can lead to benefits for all…
The article shows how the techniques are being applied in a non-discrete manufacturing environment.
We are seeing a similar trend.
However, many firms struggle with translating the lean system developed by Toyota for their environments. This can be especially difficult in long supply chains or in a environment where there is inherent batch or tank processes.
The excellent book by Hopp and Spearmen, Factory Physics, helps translate Toyota's system to other environments by defining lean as:
A manufacturing supply chain is lean if it accomplishes its fundamental objective with minimal buffering costs.
They define three types of buffers a firm can have: inventory, time, or capacity. In short, if you can make your product with a minimum of inventory, short cycle times, and excess capacity, you are getting closer to lean.
We are finding that optimization can be a great way to minimize these buffers and evaluate the trade-offs between them.
With inventory optimization, firms realize that the may not be able to eliminate inventory completely or that they have removed it from the wrong location. In these cases, optimizing inventory is important to achieving a lean operation.
In process manufacturing plants, these firms are relying on high-end optimization to better schedule the plants. They realize that they cannot get around batch and tank production, set-ups, cleaning operations, and other realities in the process industry. Optimization-based scheduling allows them to reduce manufacturing costs, improve inventory, and achieve lean operations.
IBM identifies three broad categories of analytics activity: descriptive (what happened?), predictive (what will happen?), and prescriptive (what should we do?). As you move from descriptive activities to prescriptive, you are bringing more value to your organization.
The ILOG optimization and supply chain applications fit into the area of prescriptive and play a key role in IBM's overall strategy. The article sites an example:
In the supply chain area, advanced analytics are often used to produce and/or deliver a set of services or products as efficiently as possible in order to meet defined customer needs or demands. Advanced analytics techniques such as inventory optimization, advanced planning and scheduling of resources or production plans, and supply chain network design/optimization represent common ways that companies apply advanced analytics to improve their ability to minimize the costs of delivering upon a given set of business and marketing goals associated with perceived customer needs and desires.
Of course, prescriptive analytics does not stand alone. You need to provide input data, build this into an overall work flow, and be able to act on the results. IBM is uniquely positioned to help firms effectively compete with analytics. The last sentence of the article sums up IBM's business analytics strategy: "IBM is aiming to be the a market leader in business analytics."
On Sept 15, SupplyChainDigest and IBM will be hosting a videocast on building smarter consumer products supply chains. Click here to sign up for this event.
The following is the text from the registration site with more information: ------------------------------------------------------------------------
Videocast Series: Building Smarter Consumer Product Company Supply Chains
Part II: Capitalizing on Supply Chain Complexity and Your ERP Investment in the Consumer Products industry
the first part of this series, we covered the importance of mastering
operational dexterity in the Consumer Products (CP) industry to enable
fast and flexible operations that help businesses find advantages in
Next in this IBM series on Building Smarter Consumer Products Supply Chains,
we will explore the ways in which companies are capitalizing on supply
chain complexity and ERP investments. We will discuss top executive and
supply chain challenges in the consumer products industry, including
customer case studies focusing on the following issues:
High speed of M&A activity
Globalization of the food supply
Focused consumer markets requesting niche products, pressuring the complexity of the supply chain
Increased retailer collaboration and price pressures
We explore all this and more in this outstanding broadcast. Featured speakers include:
Remzi Ural, Global Supply Chain Solutions Manager, Consumer Products Industry, IBM
Michael Watson, IBM Optimization & Supply Chain Solutions, Technical Sales Lead