December 1st, 2015 5:11 pm Category: Distribution, Global Supply Chain, Green Network, Inventory Management, Network Design, Optimization, Optimization Software, Scheduling, Solver Optimization, Supply Chain Improvement, Supply Chain Optimization, Supply Chain Planning, Transportation, Vehicle Routing, Warehouse Optimization, by: Gene Ramsay
Profit Point has been helping companies apply mathematical techniques to improve their business decisions for 20 years now, and it is interesting to review some of the advances in technology that have occurred over this time that have most enabled us to help our clients, including:
• The ability for companies to capture, store and access increasingly larger amounts of transaction and anecdotal data that quantify the behavior and motivation of customers, manufacturers, suppliers and other entities
• The improvement in analytical capabilities that help make optimized choices, in such areas as the solving mixed integer optimization problems, and
• The improvement of computing technology, allowing us to perform calculations in a fraction of the time required just a few years ago
A recent post on the Data Science Central website highlights the use of advanced techniques based on these advances by on-line marketplace Amazon, which is generally acknowledged as one of the most tech-savvy companies on the planet. 21 techniques are listed that Amazon uses to improve both their day-to-day operations and planning processes, including supply chain network design, delivery scheduling, sales and inventory forecasting, advertising optimization, revenue / price optimization, fraud detection and many others. For a complete list see the link below:
Like our customer Amazon, Profit Point is committed to using these techniques for the benefit of our clients – we have been concentrating on implementing business improvement for our clients, including optimization in various forms, since our very beginning. Are you, like Amazon, using the best methods to seize the opportunities that are available today?
July 21st, 2015 2:58 pm Category: Global Supply Chain, Network Design, Operations Research, Optimization, Optimization Software, Profit Network, Publications, Supply Chain Agility, Supply Chain Optimization, Supply Chain Planning, Warehouse Optimization, by: Ted Schaefer
Profit Point’s recent article in Industry Today, “The Future of Supply Chain Network Design,” describes how to fully leverage the new advances in a traditional supply chain optimization process to include not only your internal supply chain, but the supply chains of your competitors, as well.
Supply chain network design optimization tools have become well integrated into modern business decision-making processes at leading edge companies. The tools are used to rigorously analyze and make the best decisions in response to both short-term events such as weather disruptions, spot sales opportunities, utility outages and to longer-term strategy issues, such as capacity expansion or mergers and acquisitions. These analytical approaches and technologies can be game changers. The newest versions of SCND tools have been expanded: businesses can now analyze not just their own operations, but also the sum of multiple supply chains in the competitive marketplace, creating a new way to integrate competitive risk into the design of your supply chain.
Please contact us if you’d like to learn more about new ways to leverage traditional ideas.
November 14th, 2014 9:45 am Category: Global Supply Chain, Green Network, Green Optimization, Network Design, Operations Research, Optimization, Optimization Software, Profit Network, Risk Management, Supply Chain Improvement, Supply Chain Optimization, Supply Chain Planning, Sustainability, by: Gene Ramsay
In developing a supply chain network design there are many criteria to consider – including such factors as the impact of the facility choices on
• Cost of running the system,
• current and future customer service,
• ability to respond to changes in the market, and
• risk of costly intangible events in the future
to name a few.
Frequently we use models to estimate revenues / costs for a given facility footprint, looking at costs of production, transportation, raw materials and other relevant components. We also sometimes constrain the models to ensure that other criteria are addressed – a constraint requiring that DCs be placed so that 80% of demand be within a day’s drive of a facility, for instance, might be a proxy for “good customer service”.
Some intangibles, such as political risk associated with establishing / maintaining a facility in a particular location, are difficult to measure and include in a trade off with model cost estimates. Another intangible of great interest for many companies, and that has been difficult to make tangible, is water risk. Will water be available in the required quantities in the future, and if so, will the cost allow the company to remain competitive? For many industry groups water is the most basic of raw materials involved in production, and it is important to trade off water risk against other concerns.
As I wrote in a previous blog published in this forum,
There are several risks that all companies face, to varying degrees, as global water consumption increases, including
• Physical supply risk: will fresh water always be available in the required quantities for your operations?
• Corporate image risk: your corporate image will likely take a hit if you are called out as a “polluter” or “water waster”
• Governmental interference risk: governmental bodies are becoming increasingly interested in water consumption, and can impose regulations that can be difficult to deal with
• Profit risk: all of the above risks can translate to a deterioration of your bottom line.
The challenge has been: how to quantify such risks so that they can be used to compare network design options.
Recently a post entitled “How Much is Water Worth” on LinkedIn highlighted a website developed by Ecolab that offers users an approach to monetization of water risks. This website allows the user to enter information about their current or potential supply chain footprint – such as locations of facilities and current or planned water consumption – and the website combines this information with internal information about projected GDP growth for the country of interest, the political climate and other factors to calculate a projected risk-adjusted cost of water over the time horizon of interest.
This capability, in conjunction with traditional supply chain modeling methods, gives the planner a tool that can be used to develop a more robust set of information that can be used in decision-making.
For more details visit the website waterriskmonetizer.com
In their recent article in Industry Week, titled “Is Forecasting the Weakest Link in your Supply Chain?”, Profit Point explains how Supply Chain Optimization is breaking new ground. By bringing state-of-the-art optimization techniques to customer order fulfillment and execution leading companies are making significant inventory reductions and no longer relying on old and expensive technique of building high levels of safety stock to ensure high customer satisfaction.
Visit Industry Week to read about these fresh supply chain ideas.
July 17th, 2014 5:04 pm Category: Global Supply Chain, Green Network, Network Design, Optimization Software, Supply Chain Agility, Supply Chain Improvement, Supply Chain Optimization, Sustainability, Transportation, by: Gene Ramsay
Many of our activities at Profit Point are focused on helping clients in identifying and implementing changes that improve the efficiency of existing supply chain networks, ranging from planning to operations and scheduling. In the short term we are usually trying to find ways to use existing capabilities more effectively, but as you look out over longer time horizons supply chains evolve to develop new links, and these must be considered as you plan.
One instance of this evolution was described by my colleague, John Hughes, who recently wrote about the rise of a “New Silk Road”– a rail network stretching through Western China, Kazakhstan, Russia and Belarus to Europe – used for transporting manufactured goods from Asia to meet demand in Europe.
But Asia has a complementary demand that must be met for their manufacturing systems to function, the demand for energy to power their factories and cities. The growing worldwide demand for energy, and for faster routes to market, is opening up another new link in the global trade routes – the Northern Sea Route, a maritime route connecting Pacific ports with Europe via the Arctic.
Lawson Brigham, professor of geography and Arctic policy at the University of Alaska Fairbanks, was recently quoted on the arcticgas.gov website as saying “What’s really driving the Northern Sea Route is global commodity prices and natural resource development, particularly in Russia.”
The northern reaches of the earth are currently hotbeds of energy development, and much of the activity is focused on adding Liquefied Natural Gas (LNG) production capacity. Projects are on-line or in progress stretching from the North Slope in Alaska to the Yamal Peninsula in Siberia to Hammerfest in Norway. The Northern Sea Route offers quicker shipments of many of these supplies to major Asian ports, shaving ten to twenty days off one-way transit times from Russia and Norway to ports in Korea and China, compared to routes through the Suez Canal.
Climate change has made these routes generally ice-free for several months of each year, and thus more cost effective, but ice-strengthened cargo ships, with icebreaker support, are still required to keep the route open in the colder months, thus driving up the costs.
Supply chain planning activities on a global scale will over time need to expand to consider the potential impact of these types of shipping options. Keep an eye out for this and other new links in the global chain as they become available – change is inevitable.
For a more information on this route see articles like these:
April 16th, 2014 10:21 am Category: Global Supply Chain, Network Design, Operations Research, Optimization, Optimization Software, Profit Network, Supply Chain Optimization, Supply Chain Planning, Supply Chain Software, by: Gene Ramsay
Recently I had the opportunity to speak to an operations management class for MBA students in the Goizueta Business School at Emory University. The class is intended to give the students an introduction to a variety of problems that they might encounter during their careers, and to management science techniques that might be applied to them, using Excel as a solution platform. The professor had asked me to address the course topic from the point of view of one who had used these methods in the real world, and I was glad to do so, recounting my work in supply chain network design, hydro power generation scheduling, routing of empty shipping containers, natural gas supply contract management and various other problems.
During Q&A one of the students asked how a company should determine the appropriate source of resources to use for solving these types of problems – should it be in-house expertise or an outside consultant?
As I told him, to me, this depends on a number of factors, and I gave an example, based on our experience: In our practice we perform supply chain network design studies, and we also license the network design software that we use to our clients, if they desire. A number of clients have engaged us to first do an analysis for them, and then they have licensed the software so that they can then perform future projects themselves, using our initial project as a base. Many of these clients have used the software very effectively.
Those that have been most successful at using the software in-house, and at performing management science projects in-house in general, have several common characteristics-
- They are committed to tactical and strategic planning as tools for meeting their business goals,
- They have enough work in this area, and related areas, to keep an analyst or group of analysts busy full time, due to such factors as
- The scale and scope of their operations
- The speed of innovation in their industry
- The level of complexity of their supply chain and variety of products made, and
- Their desire for a “continuous improvement” approach as opposed to a “one-time reorganization” approach
- They have a commitment to maintaining personnel who
- have the proper skills and training to address these problems, and
- are allowed the time to work on these problems, rather than being constantly pulled off for “firefighting” short term or operational problems.
Most companies can make good use of management science solution methods, but, as you think about how to do this, try to make a realistic determination of your internal priorities, so you can decide between insourcing and outsourcing, or a mixture of the two.
March 6th, 2014 9:32 am Category: Operations Research, Optimization, Optimization Software, Profit Network, Profit Vehicle Planner, Profit Vehicle Router, Supply Chain Improvement, Supply Chain Optimization, Supply Chain Planning, by: Jim Piermarini
In the recent weeks, I have been thinking about testing our applications, like our popular Profit Network, or Profit Vehicle Planner. When we test, we run data sets that are designed to stress the system in different ways, to ensure that all the important paths through the code are working properly. When we test, our applications get better and better. There are many good reasons to test, most importantly, is to know that an improvement in one part of the code does not break a feature in a different part of the code.
I have been thinking about how we could test our code a bit more, and the means by which we could do that. I have been reading about automated testing, and its benefits. They are many, but the upshot is that if the testing is automated, you will likely test more often, and that is a good thing. To automate application testing requires the ability to churn out runs with nobody watching. And to do that, the application needs to be able to be kicked off and run in a way that there are no buttons or dialog boxes that must be manually clicked to continue. There can be no settings that must be manually set, or information reviewed to decide what to do next. In addition, the application must then save the results somewhere, either in the instance of the application, or to a log file, or to a database of some sort. Then finally, to really be testing, the results must be compared to the expected results to determine the pass/fail state of the test. This requires having a set of expected results for every test data set.
In looking at this process above, I see numerous similarities to the process used to run a sensitivity analysis, in that many runs are typically run, (so automation is a natural help) and the results need to be recorded. Sensitivity Analysis is a typical process for user of our Profit Network tool, and out Profit Planner and Profit Scheduler tool. An additional step in sensitivity analysis however, is that you may desire to change the input data in a systematic way (say Demand + 5%, and Demand -5%), and to the extent that it is indeed systematic, this too could be folded into the automation. The results analysis is different too, in that here you would like to look across the final sets of results at the differences, while in testing you just compare one set of test results to its expected results. I can foresee difficulty in automating the data changes, since each type of data may need to be changed in a very specific way. Never-the-less, even if the data changes are manual, they could be prepared ahead of the run, and the runs themselves could be grouped in a batch run to generate the results needed for a sensitivity analysis.
Constructing a harness that lashes up to an application where you can define the number of runs to be made, the setting for that run, the different data sets to be used, and the output location for results to be analyzed, would be useful not only for testing, but for the type of sensitivity analysis we do a lot of here at Profit Point.
I am going to encourage our developers to investigate this type of a system harness to be able to talk to and control our applications to be able to run them automatically, and have their results automatically stored in a data store for either test or sensitivity analysis.
Jim Piermarini | CEO Profit Point Inc.
Profit Point, a leading supply chain optimization firm, adds total delivered cost and margin at the customer location-product level of detail to its supply chain network design software.
Profit Point, the leading supply chain optimization consultancy, today announced the release of an update to Profit Network™, a supply chain network design software that is used by supply chain managers all over the world to gain visibility in to the trade-offs they will face when designing or optimizing a global supply chain. In addition to several other new enhancements, Profit Network now allows users to analyze and report on the total delivered cost and the resulting gross profit margin for all products delivered to each customer location.
“With the ever-increasing availability of granular data across the supply chain, many of our clients have expressed a strong interest in analyzing and reporting on the total delivered cost of a single product or set of customer products,” said Alan Kosanksy, Profit Point’s President. “Previously, it was quite a challenge to understand how costs accumulate over time from raw material procurement through manufacturing, inventory, transportation and customer delivery. Now our customers are able to see the true total cost for each unit of product delivered to each customer. This will be a powerful tool in helping them evaluate their product and customer portfolios.”
In addition to total delivered cost, now Profit Network also enables more control over source-destination matching, as well as inventory levels by establishing minimum and maximum number of days of inventory demand.
“Profit Network software has been helping Fortune 500 companies around the world build more robust and profitable supply chains for more than 10 years,” said Jim Piermarini, Profit Point’s CEO and CTO. “Over that time, the dramatic increase in data availability across the supply chain has provided us tremendous opportunities to solve unique and critical problems in a variety of supply chain networks.”
In addition to Profit Network, Profit Point’s line of supply chain software also includes Distribution and Vehicle Planning, Sales and Operations Planning (S&OP), Production Planning, Scheduling and Order Fulfillment software.
About Profit Point
Profit Point Inc. was founded in 1995 and is now the leading supply chain software and consulting company. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including Dow Chemical, Coca-Cola, Lifetech, Logitech and Toyota.
This month’s IndustryWeek features an article by Alan Kosansky and Ted Schaefer entitled Margin-based Supply Chain Optimization.
“To effectively implement margin-based supply chain optimization, it is important to have three key components in place: data, optimization technology and alignment with strategic business objectives.
Margin-based supply chain optimization is a new business process based on two key business priorities: 1) the desire to deliver more high profit products to customers, and 2) the ability to stop serving customers and products with low profit yield. This supply chain decision support process quantitatively shows companies which customers to serve and what products to produce in order to maximize profit and margin. For companies with complex supply chain operations, this is often easier said than done. Recent advances in the availability of data and optimization modeling, however, enable a growing number of companies to implement more efficient and effective supply chain systems.
A company’s portfolio of customers and products typically changes more quickly than the assets used to meet the customer demand. These situations include changes in the macro-economic environment that precipitate significant increases or decreases in customer demand, shifts in a company’s product portfolio, development of new markets, or changes in the cost to produce and/or deliver products or services. In each scenario, margin-based supply chain optimization is a key tool to help companies manage supply to achieve maximum profitability.
To effectively implement margin-based supply chain optimization, it is important to have three key components in place. They are: data, optimization technology and most importantly, alignment with strategic business objectives.”
Building applications, especially custom ones, carries with it the burden of answering the question: Does this do what the customer wants?
With complicated systems with many interacting features and business rules, answering this question can be daunting. In fact, evaluating the answer can be daunting too, from the perspective of the customer. Having the sales guy check some boxes in a questionnaire, or watching a demo just doesn’t leave you with the assurance that the application with handle all the business requirements, from either perspective, the vendors or the customer. Everyone I have spoken to who has sold complex software, or who has participated in the purchasing process of software has expressed the same doubt. They are just not sure that the tool will be a good fit. As we all know, that doubt does not always prevent the purchase of the software, as each organization has its own level of risk tolerance, and trust in the vendor’s brand or reputation. Often these other considerations can outweigh the amorphous doubt that some folks might feel. How can one quantify that doubt? Frankly, it’s a quandary.
This thought got us at Profit Point thinking… Wouldn’t it be great if there was another way to evaluate the goodness of fit or an application, or the appropriateness of the parameter settings, to match the business needs of an organization. Would it be great if there was a way to eliminate (or greatly reduce) the doubt, and replace it with facts. Either a business rule is obeyed or it is not. Either a decision is made according to the requirements, or it is not. Let’s eliminate the doubt, we thought, and the world would be a better place. (well a little bit anyway).
There are many processes for testing an application as it is being developed, with writing test scripts, and evaluating the results. All these are based on testing little pieces of code, to ensure that each function or sub routine does what it should do in each case of input data. These processes work fine in our opinion, but only when the sub of function is able to be considered independently form the others. When the system has functions that interact heavily, then this approach doesn’t reduce the doubt that the functions may conflict or compete in a way that the whole system suffers. How then to evaluate the whole system? Could we treat the entire application as one black box, and evaluate the important business cases, and evaluate the results? This is exactly what we have done, with the effect of reducing the doubt to zero about the suitability of the application for a business.
With several of our clients we have worked out what seems to be a great process of testing a complex software solution for suitability to the business requirement. In this case, the detailed level function testing methods were not open to us, since the solution relied on a Linear Programming technique.
This process is really just an amplification of the standard testing process.
- Define the test case, with the expected results
- Construct the test data
- Build or configure the application
- Run the Test using the Test Data and Evaluate the results – Pass or Fail
This is the standard process for testing small functions, where the expected results are clear and easy to imagine. However, in some systems where there many interacting rules and conflicting priorities, it may not be simple to know what the expected results should be without the help of the tool’s structure to evaluate them. Such is the case with many of our application, with layer upon layer of business rules and competing priorities… The very reason for using an LP based approach makes testing more complex.
In the revised process, we have, for each new business requirement:
- Construct the test case with the test data
- Build or configure the application
- Set the expected results using the results of the first pass build
- Re-factor the code and test until all test are passing
In my next blog I will show you the simple excel based tools we use to facilitate the test evaluation.
In practice, the process works well, new versions of the application go into production without any surprises, and with full confidence of the application management team that all the business requirements are 100% met.
No doubt – no doubt a better process.
By Jim Piermarini
March 4th, 2013 4:19 pm Category: Global Supply Chain, Operations Research, Optimization Software, Scheduling, Supply Chain Agility, Supply Chain Improvement, Supply Chain Software, by: Danielle Cohen Jarvie
In a recent sailing trip to Croatia, we lost our sailboat. Sounds outrageous, but it really wasn’t difficult at all. It was early evening when we anchored in the harbor and took our dinghy to shore for dinner. A few hours later, seeing the wind pick up, we returned to the spot where we thought we had left the boat and it had vanished. It was dark, very dark. Looking for the boat on the dark ocean at night was like looking for a needle in a haystack. After hours of searching, we finally found the boat headed out to sea, we had not let out sufficient line for the anchor. The harbor was surrounded by rocky cliffs, and we had no idea what course the boat had taken, and if it had incurred any damage in its renegade voyage. We shook a mechanic out of bed to evaluate if any damage had been done. After it was all said and done, we were very lucky, the boat was fine.
I can’t help but liken this to a manufacturing supply chain, without a business process to chart the way, without software helping to navigate and support the process and without people in place trained to captain the process, the business, like an unanchored sailboat, drifts into sometimes dangerous territory. Yet, this scenario is not atypical for many companies.
How do you know if the anchor is set on your supply chain? Here are some attributes:
- A clear and documented business process that serves as the guide to how you operate under normal conditions as well as defines flows for unexpected changes and events. As conditions change, the process should be reevaluated and assessed in an ongoing fashion.
- Software that supports the business process and enables users to react quickly to unexpected events making your business adaptable and flexible. Software should be tailored to your business needs, one that is one size fits all does not necessarily work for all products and customers.
- Trained people who are living the business process and using the software giving your business a competitive edge. Additionally, attention to detail and data driving the software is crucial and can have a big impact on the business.
To learn more about Profit Point’s Global Supply Chain services, please contact us.
This quarter’s Supply Chain Quarterly magazine features an article by Dr. Alan Kosansky and Ted Schaefer entitled Is standardized software eroding your competitive edge? The article addresses the pros and cons of standard enterprise software packages and discusses how generic applications may not accommodate the processes that leading company’s utilize to gain competitive advantage.
Upgraded Vehicle Route Planner Software Improves Decisions in Distribution Planning, Fleet Sizing, Driver Productivity and Transportation Cost Reduction
Profit Point announces the introduction of Profit Vehicle Planner™ 3.1, a major upgrade to our distribution analysis and design software. Profit Vehicle Planner is designed for Strategic Logistic and Transportation Managers that have large fleets with multiple daily delivery stops and changing logistics processes. The software update includes a combination of new features and technical enhancements which combine to support richer scenario modeling for larger large fleets with multiple daily delivery stops and changing logistics processes.
Designed to be highly accessible and customizable, Profit Vehicle Planner (PVP™) uses standard Microsoft business tools for calculation and display of information, including Excel, Access and MapPoint. The software automatically creates and designs the optimal sales/distribution territories. It does this by dividing customers into territories and days of service, with each territory representing the volume delivered by one delivery vehicle and one driver over the course of the planning horizon. The objective of the proprietary heuristic algorithm used in Profit Vehicle Planner is to assign customers to territories that will minimize the number of trucks required to serve the customer volumes while delivering within the various common and business-specific constraints, including customer frequency of service, hours available per day, volume available per truck, unique equipment requirements and virtually any other custom constraint required.
“With 12 years in the field, Profit Vehicle Planner has been put to the test against some of the world’s largest supply chain distribution problems,” noted Jim Piermarini, Profit Point’s Chief Technology Officer. “Transportation best practices have expanded over time, so decision makers are looking for more comprehensive strategic logistics and transportation modeling solutions.”
With the new release, PVP’s expanded features include extensive customization of the software to tailor the territory planning solution to be cost and time effective to meet your unique and specific distribution requirements and the ability to use imported address data to automatically geocode customers for whom lat/long data is missing.
For companies that perceive distribution as mission critical, users have the option to integrate PVP deeply into their supply chain systems to import and export data in to their ERP system. Companies that seek the most cost-effective solution have the ability to import virtually any relevant data from an Excel template that includes the following:
- Customer data such as address, location, frequency of service, volume per stop, time required per stop, other data as needed
- Truck data such as size, days of the week that it is available, order in which it is to be scheduled, hours available each day, special equipment, other data as needed
- Warehouse and district data such as location and characteristics of associated trucks and drivers
- Time related data such as start date of planning horizon and number of weeks in the planning horizon.
- Product specific data such as unit of measure of the product being delivered
- Any other data required to accurately model unique constraints
Once optimized, users have the ability to review and assess the characteristics of the territories that are created using tables and maps to provide an enhanced visual experience. And to ensure the optimal distribution plan, users can manually move customers from one territory to another or from one service day pattern to another (e.g. from Monday-Thursday to Tuesday-Friday), if desired.
November 10th, 2011 6:46 pm Category: Enterprise Resource Planning, Global Supply Chain, Network Design, Operations Research, Optimization, Optimization Software, SAP Integration, Supply Chain Agility, Supply Chain Improvement, Supply Chain Planning, Sustainability, by: Richard Guy
The rise of zombies in pop culture has given credence to the idea that a zombie apocalypse could happen. In a CFO zombie scenario, CFO’s would take over entire companies, roaming the halls eating anything living that got in their way. They would target the brains of supply chain managers and operations people. The proliferation of this idea has led many business people to wonder “How do I avoid a CFO zombie apocalypse?”
Supply chain managers are seeking and developing new and improved ways to exploit the volumes of data available from their ERP systems. They are choosing advanced analytics technologies to understand and design efficient sustainable supply chains. These advanced analytics technologies rely on the use of optimization technology. I am using the mathematical concept of “optimization” as opposed to non-mathematical process of making something better.
Mathematical optimization technology is at the heart of more than a few supply chain software applications. These applications “optimize” some process or decision. Optimization-base programs, for example, those frequently found in strategic supply chain network planning, factory scheduling, sales and operations planning and transportation logistics use well-known mathematical techniques such as linear programming to scientifically determine the “best” result. That “best solution” is usually defined as minimizing or maximizing a single, specific variable, such as cost or profit. However, in many cases the best solution must account for a number of variables or constraints. Advanced analytics technologies can improve a company’s bottom line – and it can improve revenue, too! CFO’s like this.
Advanced analytics technologies provide easy-to-use, optimization-based decision support solutions to solve complex supply chain and production problems. And, these solutions can help companies quickly determine how to most effectively use limited resources and exploit opportunities.
So, from my perspective, there are seven practical reasons to embrace advanced analytics technologies:
- Your company saves money, increases profits.
- You get to use all your ERP system’s data.
- It’s straightforward and uncomplicated.
- You have the tools to discover great ideas and make better decisions.
- At the end of the day, you know the total cost of those decisions.
- You have a roadmap to make changes.
- You avoid the CFO zombie apocalypse
We recently attended a discovery meeting that was focused on how to conduct a strategic optimization planning study of an existing distribution network. The company wanted to know what changes needed to be made to lower the distribution costs. Several members of the management team were present and there were many questions regarding the ideal business process, study approach and modeling tools to be used to insure a successful project.
What was interesting to me was the overwhelming focus on the modeling tool. Questions about who would be on the project, the timeline, the types of scenarios, data gathering and validation were secondary. It may be important to have the right tool to model your infrastructure, but the real focus should be on the experience and modeling capabilities of the users of the tool.
These are the Critical Success Factors
- Full participation in data gathering and results review by the project team and management.
- Clear definition of the key questions to be addressed and the related scenarios required by the Project Sponsor early in the project timeline.
- Availability of leadership resources within the company throughout the project to review assumptions and to ensure integrity and quality of the input.
- On time delivery of a complete set of all required data by Project Team members.
- Acceptance and agreement on the variable, fixed and capital cost assumptions of existing and potential new facilities.
- Availability, communication, and collaboration of the Project Team members, support staff, and consultant for all working sessions, conference calls, and follow-up between meetings.
It’s important that the optimization modeling tool can incorporate the variables and constraints associated with your supply chain, but the real focus should not be on the tool, but rather on the experience of the users of the tool and their ability to deliver the results of a project. If I were to set out on a network optimization planning project to model my entire supply chain, then my primary focus would be on developing an experienced team of individuals that had the skills to minimize the above risks.
At Profit Point we are in the ‘Science of Better’, and we are always looking for new ways to do business, both for our clients, and for ourselves. When we started, we had the challenge of being a virtual company, that is, we have never had a corporate office space. Since 1995, each of us has always worked from home. While there are numerous benefits of this style of company architecture, including having a family that actually knows who you are, and keeping the company’s overhead to a minimum, it also has its drawbacks. Like forcing each person to make the deliberate decision about when to start work, and harder still, when to stop work each day. We knew when we started this company that we wanted to keep our overhead costs low, so a virtual office seemed like the natural choice.
More recently, we have been faced with another challenge, how to reduce the cost of the projects we do. Projects in the supply chain business require a certain amount of industry and company specific knowledge. Until recently, we had been building into our projects ample on-site time where the project team could gel and collaborate and build the trust that is needed for the free flow of ideas. But the world has changed, and we have changed with it. No longer are big travel budgets a normal part of the projects we see. So the challenge was: how to reduce the travel expense line item, without sacrificing the project speed or quality?
In the consulting business, there is sometimes no substitute for ‘face-time’. So travel to the customer site perforce happens. Over the course of the last 15 years, I have seen a marked drop in the amount of time that we need to travel, going from 60-70% a decade ago to less than 20% currently, and this has been brought about primarily by two factors: 1) Companies simply do not want to pay the travel expenses. Since 9/11, most major companies have been slashing their travel budgets, and expect their consultants to follow suit. One particular project comes to mind where I had seen travel expenses that were as much as the consulting bill each month. But in general, we see pressure to reduce the travel expenses that are generated by projects across the board. 2) ‘Remote Touch’ Technology has provided the means to travel less. There are some great remote desktop control tools that allow two or more people to have a telephone or VOIP conversation, and look at the same computer screen, to discuss and collaborate on ideas and tools. These web based telephony and remote control tools have eliminated the need for travel to a greater extent than you might think. Many of our projects today have only two face to face meetings, one to kick it off, and one to present the results or close it out. Some of our clients are handled successfully without any face time. I must say though, that in our experience, low face-time projects only work well within the culture and language: that is, when language and culture barriers exist in the project team, face-time is the best way to bridge these gaps, and mitigate the risk of project overruns and delays.
In business, technology comes into being as a means to enable better business processes. The processes that we use that are enabled by this remote touch technology includes an agile approach to solving business problems or developing software solutions. We use several readily available web based tools every day in our business, and boy have they allowed us to reduce the travel expenses. These include:
This is the best remote touch tool out there in our opinion. Until a robust free app comes along, this will remain the best value for the money. The best part of the app is the recent addition of the integrated VOIP, where you can use a head set (I would recommend the Logitech ClearChat PC Wireless Headset: http://www.logitech.com/en-us/webcam-communications/internet-headsets-phones/devices/4226) to join the integrated telecon line. This has the advantage of freeing up your phone, and being instantly connected to the telecon as soon as you start it. No more long telecon numbers with their passcodes! We use this many times every day, and it is the primary reason why we can travel less.
This is a simple to use and secure web based file storage and sharing application that fosters and supports collaboration with people both in your company and externally. We love this app, and my clients seem to as well. Just drop a file into this app, and share it securely with anyone with an email address. Use it when email attachments just will not do, due to size limitations, or just when the email hassle is too much.
This is a terrific project management tool that is designed for agile projects, and makes it simple to create and manage user stories for tool development. While inviting new members can be a hassle (since their email seems to get caught in many spam filters), once they are in, these folks have made a stellar user interface to manage the tasks in a project of nearly any size. Use it to track bugs too. We have done several projects using this tool. and we will be using it for many more. Great tool.
If you like to look at data, like we like to look at data, then you will want to look at Tableau. You can think of it like a pivot table / chart on steroids. You open it, connect to you data, (whereever or what ever data you’ve got, it can connect to it), and then you start to explore your data like you’ve never been able to before. Like a pivot table, you can drag and drop fields, aggregate data along dimensions, and make sums, etc, but the really cool part of Tableau is the part where it suggests new ways of the looking at the data. Go ahead, make maps, heat charts, time phased graphs, whatever. Then you can assemble the graphs into a dashboard. Dashboards are the best. Want to see a ton of data distilled down into a very compact visually stunning view suitable for management? Get a copy of Tableau, and you can make that view in minutes.
Used appropriately, these tools, and others like them, have enabled us to travel less, and work faster and better. (and more!)
If you have other great apps like these that enable better business processes, I would love to hear about them.
Leveraging Profit Point’s supply chain optimization methodologies, Toyota North American Part Center California improves efficiency and quality of their workload planning sequencing process to receive containers from Japan.
North Brookfield, MA (PRWEB) October 6, 2008
Profit Point today announced that Toyota Motor Sales (TMS), U.S.A., Inc.’s North American Part Center California (NAPCC) has improved its receiving sequencing processes using advanced mathematical optimization techniques. NAPCC is one of the parts distribution centers among TMS’ North American Parts Operations network, which was established to improve local parts sourcing and manage a parts distribution network that supplies all North American Toyota distributors, U.S. Toyota, Lexus and Scion dealers as well as export to parts centers in Japan. NAPCC turned to Profit Point to apply mathematical optimization techniques to further improve their supply chain operations.
“We turned to Profit Point to apply mathematical optimization techniques to further improve our supply chain operations,” Johnnie Garlington, NAPCCs warehouse operations manager. The program supported the increase in daily offload by 16% resulting in labor savings, off-site storage costs and detention expenses.
Profit Point, the leading supply chain optimization company, combines proprietary software with proven optimization techniques to help business managers improve their operations. Profit Point supported NAPCC’s objective to redesign their workload planning process to improve the efficiency and quality of their sequencing processes. Profit Point carried this out by designing and building custom supply chain software to optimize their sequencing processes.
“We were asked to investigate a mathematical approach to solving Toyota NAPCC’s container receiving sequencing process,” said Joe Litko, Profit Point’s Business Optimization Practice Leader. “This was an interesting challenge for several reasons. We needed a cost-effective solution using legacy tools, the model needed to run quickly, be flexible, and give robust solutions that consider several performance measures simultaneously.”
NAPCC had been using a traditional spreadsheet to manually achieve an hourly workload plan. Profit Point reviewed the sequencing process and designed a stand-alone application to smooth out the flow of containers to maximize the daily unload capacity.
“Like most businesses, Toyota NAPCC was using good, traditional operations practices,” said Dr. Alan Kosansky, Profit Point’s President. “But, by combining the right mathematical optimization methods with a clear understanding of the business requirements, we were able to achieve a superior supply chain process for Toyota.”
About Profit Point:
Profit Point Inc. was founded in 1995 and is now a global leader in supply chain optimization. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point’s has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including The Coca-Cola Company, General Electric, Rohm and Haas and Toyota.
LQM Petroleum Services is one of the largest international marine fuel oil brokers in the world, with core competencies in marine fuel oil brokerage, futures markets and outsourced bunker procurement solutions. With its deep expertise in marine refueling, LQM recognized that marine operators lacked a comprehensive refueling and inventory management system.
When it came time to build the system, BOptimumTM, LQM partnered with Profit Point to optimize the software algorithm in its bunker refueling recommendation software system. Read our case study to learn more about how LQM partnered with Profit Point to optimize its BOptimum bunker refueling recommendation software system.
Look for our new web-based release of Profit Network in spring 2008. Profit Network is a stand-alone optimization planning software package that is used to design better supply chain networks. Profit Network can be used to analyze the placement and location of production facilities, distribution centers and warehouses over a multi-period planning horizon. Profit Network helps firms restructure their supply chains after mergers, periods of rapid growth or in anticipation of geographic or product preference shifts in the market. Savings of 10% of supply chain costs and 25% of supply chain cycle time are typical.
Profit Vehicle Router (PVR) helps distributors save money by cutting the time needed to develop sales/distribution territories and schedules, as well as reducing delivery miles and the number of sales/delivery vehicles and drivers needed. PVR helps you plan optimal delivery or sales territories, cycle-day territories (what days each site will receive deliveries), and daily routes from a distribution center or office, improving customer service, employee productivity and ultimately increasing profits.
ILOG has selected Profit Point Inc. as a preferred ILOG SP Service Provider due to our strong technology expertise and proven ability to integrate software components into custom solutions.
ILOG products are used by tens of thousands of end users in telecommunications, manufacturing, transportation, defense, and other industries.