By Ian Hobkirk
Managing Director of Commonwealth Supply Chain Advisors
This post is the third and last post in a series of three blogs on supply chain network optimization. The first discussed ways to properly prepare for a network optimization to drive a faster project timeline and more accurate outputs. The second covered concepts to consider and mistakes to avoid as your company develops and runs your model. This piece is about the ongoing use of your model for continuous optimization.
Ongoing Use
1. Use supply chain network optimization scenarios to shape the business plan: Companies should use the baseline model to identify ways to re-balance how to use the network each year, or sooner, as things change. Use this model to analyze every significant capital and network investment.
2. Make supply chain network optimization part of continuous improvement: Using supply chain network optimization practices to understand the impact of channel transformation, acquisitions, new customers, etc. is an untapped opportunity for many businesses. Most companies understand that their businesses will change, but fail to test the total supply chain cost required to support the changes.
3. Incorporate modeled activity-based costs in operational metrics: An output of the supply chain network optimization is a clean and updated view of the company’s true activity-based costs. The company can use this information to rank different customers for cost-to-serve and products for landed-costs. The optimization tools themselves will point to which are the least profitable products or customers by simply limiting capacity. This is very powerful.
4. Use supply chain network optimization as part of your Sales & Operations Planning: Supply chain network optimization tools can be applied to any constraint-based planning exercise (production, distribution capacity) where the goal is to optimize supply options, including inventory build-ahead, in order to work around constraints. Good tools can simultaneously optimize major resources while showing how to fulfill demand at the least cost.
In summary, supply chain network optimization projects can seem daunting, especially if a company has never undertaken such an exercise before. But, with proper attention to data and techniques, and a holistic application of the findings, companies can lock in the value of the initial project and use the model to drive ongoing value for years to come. Read the whitepaper: Supply Chain Network Optimization – Three Ways To Avoid a Project Mishap.