IBM Decision Optimization
From archive: January 2011 X
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.
If you are going the NRF show in New York City next week, stop by our booth and visit us or drop me a note that you will be there.
Our supply chain team will be there and we can talk about what's new with ILOG Supply Chain in 2011. We also have a deep dive session and are giving a few talks.
We look forward to seeing you there.
MichaelWatson 270002K5FS Tags:  routing optimization network_design ilog green carbon_modeling inventory_optimization 1 Comment 4,086 Views
The Dec 2010 issue of Inbound Logistics reported that McKesson Corporation is using "IBM's Supply Chain Sustainability Management Solution to aggregate supply chain, sales, and geographic data to create "what-if" scenarios that enable distribution network modeling, supply planning, inventory positioning, vehicle routing, and sustainability management."
When optimization and analytics are applied to a firm's supply chain, you can often see significant returns on your investment. When you make this capability part of an overall framework, like McKesson did, you create a repeatable process to continually drive improvements in your supply chain.
MichaelWatson 270002K5FS Tags:  ilog inventory inventory_optimization optimization analytics 4,272 Views
While doing some research for an upcoming white paper, I came across a nice article from Nov 2009 from Dan Gilmore at the SupplyChainDigest, "The Real Value of (Less) Inventory." A key line from the article is:
"...permanently reducing your level of inventories relative to sales and sales growth can have a dramatic impact on a company’s share price."
The article quotes research and cases to back up this claim. This certainly fits with what our customers are telling us-- they are seeing significant inventory savings through inventory optimization.
The word "permanent" is a great choice of words. Inventory optimization technology, by itself, will not lead to a permanent reduction. As we noted in an earlier post, we have developed an inventory planning playbook to help firms make the right inventory decisions with the right cadence and considering important strategic factors.
Earlier, we recorded a session with SupplyChainDigest on strategic sourcing. This session covers how firms can better use their manufacturing network. For example, where should a product be made and at how many of the plants. These decisions can impact manufacturing costs, transportation costs, and the ability of your supply chain to meet its objectives.
This use of LogicNet Plus XE (LNP XE) is part of a larger trend. More firms are using LNP XE on an on-going basis to gain a competitive advantage in the market. This can range from strategic sourcing to budgeting to contingency planning. This is a way to leverage your supply chain data and bring advanced analytics to your supply chain.
Click on this link for a video on strategic sourcing. You will need to submit your email to register and you will be all set.
Today's Wall Street Journal (WSJ) reported on IBM's big push into Analytics: "IBM Chief Executive Sam 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 decisions."
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.
We received a lot of good feedback from the virtual users group meetings in 2010. These 1-hours meetings are a quick way to brush up on your IBM ILOG supply chain modeling skills, meet other people using the products, ask questions to the community, and learn about what's new. These sessions will be led by our experts and have plenty of time for discussions and Q&A.
Like last year, we are open for ideas for sessions. Please send us your ideas. If you are not on the invite list for the events, please let us know and we'll make sure we add you.
Here is the schedule for 2011. The times will be announced closer to the meeting in the invite.
February 1st - Tuesday. Topic: Transportation Optimization Capabilities in relation to Network Design
March 1st - Wednesday. Topic: Advanced Tableau Capabilities
April 1st - Friday
May 4th - Wednesday
June 1st - Wednesday
August 2nd - Tuesday
September 1st - Thursday
October 7th - Friday
November 2nd - Wednesday
December 2nd - Friday
These dates may be subject to change. We look forward to seeing you at the meetings.