Cost containment, better utilization of assets, and freeing up working capital are prominent themes at SAPPHIRE/ASUG 09 this week. Practically every vendor has a slant on this so it's hard to for some customers to see where to begin. Strategic supply chain planning is a good place to start considering that 80% of supply chain savings come from strategic decisions. SCM tools like LogicNet Plus for network design and planning or Inventory Analyst for global inventory optimization help firms identify hidden costs in the supply chain and generally result in 5% - 15% reduction in overall supply chain costs. Visit Pod 21 in the Exhibitor Village to learn more.
IBM Decision Optimization
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Recently, Business Week (Apr 20, 2009) recognized IBM as the 6th most innovative company in the world. IBM’s Smarter Planet initiative was a key reason why:
Improving the supply chain is an important part of the Smarter Planet initiative. IBM’s ILOG LogicTools Suite (LogicNet Plus, Inventory Analyst, Product Flow Optimizer, Plant PowerOps, and Transportation Analyst) plays a key role in helping companies achieve a smarter supply chain.
But, it goes even further: We are creating innovative supply chain solutions by combining the supply chain planning products with IBM’s deep expertise and product offerings in data sensing and data integration. This is how the Smarter Planet initiative creates even smarter supply chains.
As an example, the recent national ad campaigns have highlighted how Danone is creating a smarter supply chain:
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More and more, managers recognize that their business needs multiple supply chains.
As an example, Supply Chain Management Review (Nov 2006) reports on a example that highlights a classic trade-off:
In this case, you can air freight one set of products and ship the other set by ocean. The high-margin, high fashion items easily absorb the extra transportation costs while the low-margin, low cost items can easily absorb the extra inventory carrying cost. These products might also flow through different distribution points within the network.
Optimization-based supply chain planning tools can help create the best design and plan for each of these supply chains.
What is interesting, though, is that managers no longer have to figure out how many supply chains they have and then come up with the right design for each one.
The advances in the planning tools now allow the managers to use optimization-based tool to help figure out how many supply chains they should have and what they should look like. This process can lead to interesting new insights into the business.
For example, you benefit from unique supply chains based on product, on different seasons, on different brands, on where the product comes from, on different regions, on different customer segments, on different channels, and so on.
Creating different supply chains can lead to significant increase in overall profit margin, increase in customer service, decrease in cost, and an overall improvement of the supply chain’s ability to meet the firm’s strategic goals.
To monitor and manage this additional complexity, more firms are relying on a tighter integration with operational data. This allows you to make adjustments in real-time. Gone are the days of looking at the design of your supply chains once every couple of years.
All of this taken together means that firms gain a competitive advantage by carefully determining their supply chains and staying on top of them.
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Recently, a member of Bayer’s Supply Chain Optimization team spoke on how to create a greener supply chain. It was stressed that the carbon emissions were only one part of the equation. The analysis had to include other factors such as taxes, exchange rates, oil prices, sourcing, service time, and, of course, costs.
As an example, a project in China is mentioned for the pharmaceutical products: Previously, the supply chain strategy relied on air freight. After many different scenarios were tested, Bayer found a solution with 3 DC’s that reduced lead times, reduced carbon emissions, and kept costs neutral.
Besides projects in Asia and Japan, the Bayer team has used the tool in the US and Europe.
It was stressed that all of these projects are complex and involve careful analysis of the trade-offs.
In fact, it was mentioned that “some questions you want to raise can’t be answered without a tool like LogicNet Plus.”
Please contact us if you would like more details on this case.