IDK (“I Don’t Know”)

After listening to a Freakonomics Radio podcast on NPR, the following question and blog comments emerged:

Why do people feel compelled to answer questions that they do not know the answer to?

What I’ve found in business is that we are all prone to hiding our ignorance when asked a question that we cannot answer. So even if someone absolutely has no idea what the answer is, if it’s within his or her realm of expertise, “faking” seems to be an essential part of the response.

My professor friend told me that she has learned the following from teaching MBA students: “One of the most  important things you learn as an MBA student is how to pretend you know the answer to any question even though you have absolutely no idea what you’re talking about. It’s really one of the most destructive factors in business. Everyone masquerades like they know the answer and no one will ever admit they don’t know the answer, which makes it almost impossible to discover the correct answer”.

I ask: Does every question need to be answered?

Everyone expects answers to every question, especially if the question comes from someone higher up in an organization. However, not every unknown question is worth the time and resources to research. If it comes down to the choice of making-up an answer or being saddled with a research project, many people will prefer to make-up an answer. Perhaps in some situations, combined with the ego/self-image issues, every question will be answered, regardless of the person’s knowledge.

I ask: Should IDK be a legitimate response?

Perhaps, if the question has minimal economic impact on the business, and you know something related to the question, then maybe a guesstimate (an estimate made without using adequate or complete information) is fine.

But then, for significant economic impact questions …maybe it’s better to say “IDK the answer to that question, but we are studying it”, and then do the study!

As an example, management asks: Will our delivered cost per SKU increase or decrease if we add more distribution centers to meet expected growth rates and satisfy customer service levels?

The first reaction guesstimate might be “yes they will increase”, although, this might not be true.

The smart analyst will say: “Hmmm, IDK! Give me a few hours (days) to do a quick analysis, and see what the true impact will be.”

A small spreadsheet study looking at the increase in production and distribution levels combined with the increase fixed and variable costs associated with adding a few new distribution centers may be surprising. It may indicate that the increase volume and revenues and lower transportation costs will offset the increased DC costs.

This small study may also be the first in a stage gate approach to perform a forward looking comprehensive supply chain infrastructure study. A detailed strategic infrastructure study can capture the manufacturing and distribution details, including costs and constraints, generating results that will allow management to make a reliable strategic economic decision.

No field is exempt from their know-it-alls, even when the correct answer really is IDK.

I submit, if you are in an uncertain position, try the IDK approach and then offer the following response “I can check into that and find an answer for you”. You may be surprised to learn that your credibility with management will improve.

“Every act of conscious learning requires the willingness to suffer an injury to one’s self-esteem. That is why young children, before they are aware of their own self-importance, learn so easily.”
–Thomas Szasz

Change is hard.

Collapsed Souffle

Collapsed Souffle

So why do it? Why change when you can be the same?  If you have a well-worn recipe to make a great soufflé, you know that the risk of tampering with that recipe can result in the collapse of the soufflé. So why change what is already working?

In the businesses that I help, change comes for several reasons. It may be thrust upon the business from the outside, a change in the competitive landscape for instance, or a new regulation.   It may come from some innovative source within the company, looking for cost savings to increase profitability of productivity, or a new process or product with increased productivity. Change can come from the top down, or from the bottom up. Change can come in a directed way, as part of a larger program, or organically as part of a larger cultural shift.  Change can come that makes your work easier, or harder, and may even eliminate a portion (or all) of the job that you were doing. Change can come to increase the bottom line or the top line. But primarily change comes to continue the adaptation of the company to the business environment.  Change is the response to the Darwinian selector for businesses.  Adapt or decline. Change is necessary.  It is clear to me from my experience that businesses need to change to stay relevant.

This may seem trite or trivial, but accepting that change is not only inevitable, but that it is good, is the shift in attitude that separates the best companies (and best employees) from the others.

So, you say, I see the need to change, it is not the change itself that is so difficult, but rather the way that it is inflicted upon us that makes it hard.  So, why does it have to be so hard?  Good question.

Effective managers know that change is necessary but hard. They are wary of making changes, and rightly so.  Most change projects fail. People generally just don’t like it.  Netflix is a great example.  Recently, Netflix separated their streaming movie service from their DVD rental business. After what I am sure must have been careful planning, they announced the change, and formed Quikster, the DVD rental site, and the response from the customer base was awful. As you likely know, Netflix, faced with the terrible reception from their customer base and stockholders, reversed their decision to separate streaming from DVDs. What was likely planned as a very important change, failed dead. Dead, dead, dead. Change can be risky too.

If change is necessary, but hard and risky… how can you tame this unruly beast?

The secret of change is that it relies on three things: People, Process, and Technology. I name them in the order in which they are important.

People are the most important agents relative to change, since they are the one who decide on the success or failure of the change. People decided that the Netflix change was dead. People decide all the time about whether to adopt change. And people can be capricious and fickle. People are sensitive to the delivery of the change.  They peer into the future to try to understand the affect it will have on them, and if they do not like what they see…  It is the real people in the organization who have to live with the change, who have to make it work, and learn the new, and unlearn the old. It is likely the very same people who have proudly constructed the current situation that will have to let go of their ‘old’ way of doing things to adopt to the new. Barriers to change exist in many directions in the minds of people.  I know this to be true… in making change happen, if you are not sensitive to the people who you are asking to change, and address their fears and concerns, the change will never be accepted.  If you do not give them a clear sense of the future state and where they will be in it, and why it is a better place, they will resist the change and have a very high likely hood of stopping the change, either openly, or more likely passively and quietly, and you may never know why the fabulously planned for change project failed.

Process is the next aspect of a change project that matters.  A better business process is what drives costs down. Avoiding duplication of efforts, and removing extra steps. Looking at alternatives in a ‘what-if’ manner, in order to make better decisions, these are what make businesses smarter, faster, better.  A better business process is like getting a better recipe for the kitchen. Yet, no matter how good a recipe; it still relies on the chef to execute it and the ovens to perform properly. Every business is looking for better business processes, just as every Chef is looking for new recipes.   But putting an expert soufflé recipe, where the soufflé riser higher, in the hands of an inexperienced Chef does not always yield a better soufflé.  People really do matter more than the process.

Technology is the last aspect of the three that effect change. Better technology enables better processes. A better oven does not make a Chef better.  The Chef gets better when they learn to use the new oven in better ways, when they change the way they make the soufflé, since the oven can do it.  A better oven does not do it by itself.  An oven is just an oven. In the same way, better technology is still just technology.  It by itself changes nothing.  New processes can be built that use it, and people can be encouraged to use it in the new process.  Technology changes are the least difficult to implement, and it is likely due to this fact that they are often fixed upon as the simple answer to what are complex business problems requiring a comprehensive approach to changing the business via it people, process, and technology.

Nice Souffle

Nice Souffle

Change is necessary, but hard and risky. Without change businesses will miss opportunities to adapt to the unforgiving business world, and decline. However, change can be tamed if the attitude towards it is changed to be considered a good thing, and is addressed with a focus on people, process and technology, in that order.  Done right, you can implement the change that will increase the bottom line and avoid a collapse of your soufflé.

Rich 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:

  1. Your company saves money, increases profits.
  2. You get to use all your ERP system’s data.
  3. It’s straightforward and uncomplicated.
  4. You have the tools to discover great ideas and make better decisions.
  5. At the end of the day, you know the total cost of those decisions.
  6. You have a roadmap to make changes.
  7. You avoid the CFO zombie apocalypse

This article written by Alan Kosansky and Ted Schaefer originally appeared in Industry Week.

“Network structure, which determines 75%-80% of total supply chain costs, offers the biggest opportunity to reduce those expenditures.”

A recent study of supply chain activities indicated that as much as 80% of total supply chain costs are determined by the network in place and not by the decisions the supply chain team makes on a daily basis within that network. The cause can be attributed to infrastructure, which significantly determines the types of decisions and degrees of freedom that are available to supply chain decision makers. As a result, many companies have literally stumbled into pitfalls associated with warehouses, distribution centers and sources of supply (manufacturing, supplier locations, etc.) because they lacked thoughtful design.

There is help available for vigilant executives in the form of 10 guidelines to implement necessary cost saving measures. All are applicable whether the company is pursuing a growth strategy or struggling with underutilized assets in a challenging economy. Keeping these guidelines at the forefront of consideration can create opportunities to ease pressures on margin and the bottom line.

1.  Network structure, which determines 75%- 80% of total supply chain costs, offers the biggest opportunity to reduce those expenditures.

That’s because when manufacturing and distribution assets are in place, and major transportation contracts are negotiated, actions to improve operations and efficiencies in the supply chain are limited. The time to discover the biggest supply chain improvement opportunities is during assessment or reassessment of the infrastructure in place; e.g. manufacturing capability, raw material sourcing, major transportation lanes, distribution facilities and delivery to customers.

2. Optimize supply chain infrastructure to realize maximal cost savings.

A company’s existing supply chain infrastructure is a primary cause of daily disruptions and short-term challenges. Those companies that experience the smoothest and most profitable operations are the ones who routinely re-evaluate both operations and infrastructure. Those who reevaluate as a matter of procedure tend to become supply chain and profitability leaders. A recurring evaluation of infrastructure should be considered a necessity.

3. Understand the changes that can be impacted.

Change is inevitable, and the response to it will determine a company’s profitability. First assure that the processes and tools are in place to recognize the changes occurring in the supply chain. Then identify and analyze potential courses of actions and communicate the execution plan.

4. Consider technological analysis to make the supply chain decisions.

Spreadsheet analysis can evaluate a potential change in a business plan or supply/demand balance and perhaps project the impact of a given course of action. However when decisions involve multiple products made across multiple manufacturing sites, shipping and distribution point issues while serving thousands of customers, companies need sophisticated tools to effectively consider all the options to assure maximization of every supply chain infrastructure.

5. Modern infrastructure planning requires a collaborative effort.

Good supply chain operations happen because the people in charge of different aspects (sales, manufacturing, logistics, procurement and finance) are effectively communicating by:

  • Providing the critical data necessary to make the best overall decisions.
  • Understanding how each critical decision \impacts them.
  • Informing each department of every decision and the steps they need to implement.

6. The planning process needs to include many different scenarios to ensure a robust solution.

Even with collaboration across all of the stakeholders, the supply chain infrastructure design process depends on forecasts of the future that will not all prove to be accurate; e.g. customer demand, competitors’ actions, cost of raw materials and transportation. Those who recognize the uncertainty of the data that drives their business planning can use supply chain tools to explore different possible futures and evaluate a course of action. That way they can confidently make decisions that will perform well across a wide range of possible futures and position themselves for a positive return.

7. Consider hybrid solutions to ensure low-cost, high level customer service.

Simplified assumptions are quite common during evaluation and analysis of complex supply chain operations. These may cause managers to overlook opportunities that are combinations or hybrids. For example, instead of sourcing 100% of a raw material from a low-cost country, perhaps optimal customer service at lower costs can be achieved by sourcing 80% to the low-cost provider and 20% to a higher cost and more reliable alternate supplier. Another example is demand variation by day of the week, which may warrant different operations on different days. Hybrid solutions are frequently solutions for optimal mix of customer service and cost, however they are often difficult to identify and evaluate.

8. Models and analysis mean nothing without implementation.

A good supply chain infrastructure planning process begins with solid analysis and evaluation of various scenarios to identify an optimal course of action. However, it is not complete without implementation planning, which must address the cultural and organizational issues that too often prevent companies from achieving the gains that have been projected. If there is resistance within the organization to change, it may be necessary to stage the implementation in increments to gain credibility before tackling the more strategic approach.

9. Optimized supply chains minimize inefficiencies.

A good supply chain infrastructure planning process goes beyond elimination of waste to analysis of benefits and tradeoffs among the different drivers of sustainability in the supply chain. This by definition means that you are creating a greener and more sustainable operation. One example is analysis of tradeoffs between profit and other sustainability measures (for example CO2emissions). Using tools to analyze the total impact of different courses of action can optimize decision making to meet the overall objectives.

10. The answer is in the data.

Assure the accuracy of the data, and then present it to the right people (See #5).

Roadmap for the Future

Supply and logistic executives recognize the importance of developing new and improved ways to understand and use the volumes of data to help them find and utilize the best approach. It is incumbent upon them to ensure that each aspect of the operation is fully aligned to business strategy and goals, which is the purpose of these guidelines. They should be considered a roadmap combining sound business management practices with the newest technologies and tools as a path to success.

Alan Kosansky, Ph.D., is president and Ted Schaefer is director of logistics and supply chain services of Profit Point Inc.. Profit Point, based in North Brookfield, Mass., is a provider of supply chain optimization systems providing such services as infrastructure and supply chain planning, scheduling, distribution and warehouse utilization improvement.

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

  1. Full participation in data gathering and results review by the project team and management.
  2. Clear definition of the key questions to be addressed and the related scenarios required by the Project Sponsor early in the project timeline.
  3. Availability of leadership resources within the company throughout the project to review assumptions and to ensure integrity and quality of the input.
  4. On time delivery of a complete set of all required data by Project Team members.
  5. Acceptance and agreement on the variable, fixed and capital cost assumptions of existing and potential new facilities.
  6. 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.

Including Capital Costs in Network Design Analysis

September 22nd, 2010 11:42 am Category: Network Design, Profit Network, by: Gene Ramsay

When making infrastructure planning decisions regarding adding new facilities, or adding capacity to existing facilities, you will want to take into account a variety of facility costs to ensure you make the right decisions.  These costs include…

  • variable cost, dependent on the volume through the facility
  • operating fixed cost, to cover costs such as taxes, security, leases, etc.
  • depreciation,  based on the life of the equipment, and
  • cost of the capital used to construct / purchase the facility

In an optimization model you can capture all of these costs separately, or perhaps you will want to consider the fixed costs as a “lump sum”.

Here are two ways that you could build the cost of capital into the decision-making process:

  • Add a Capital Recovery Cost to the objective function, to reflect the cost of the capital required to build or expand a facility.  One way to do this is the approach used in the Microsoft Excel PMT function, which asks for four inputs to the calculation of recovery cost for a time period:
    • capital cost of the asset to be added, e.g. a plant, production line, distribution facility, waste water treatment facility, etc.
    • useful life of the asset  – the entry here for the number of time periods should be consistent with the frequency of time in your model
    • salvage value at the end of the asset’s used useful life, if any
    • capital cost charge (interest) rate to be charged in each time period – again, the entry here should be consistent with the frequency of time in your model.  (This number could be annual, monthly, or based on another frequency, depending on how you have defined your model.)

The Capital Recovery Charge can be thought of as a loan repayment for the amount of capital required in purchase and install the facility.  Excel has help files describing the details of the PMT function, so we will go into more detail here.

  • Use Economic Profit as the objective of the model, or as a measure that you use to compare alternative solutions.  Economic Profit is your standard accounting profit, less the opportunity cost of capital invested in the business.  The opportunity cost is the return that the company would have been able earn if it had invested in the next best alternative project.  For instance, if you consider a future alternative where
    • the accounting profit for the time period (say, year) is 100, with the additional asset, but
    • the asset has a capital cost of 1000, and
    • the opportunity cost for capital is 15% per year (the company could have received a 15% return by investing the capital elsewhere) , then
    • the Economic Profit for the year is 100 – .15*1000 = -50.

If you are minimizing cost rather than maximizing profit in your model, then you can calculate Impact on Economic Profit for a given alternative, adjusting the operating costs from the model for the effective tax rate, and subtracting the capital charge.

Including the cost of capital appropriately will allow you to present a more complete analysis.

Profit Network 4.5 enhances visibility for decision makers and extends modeling capabilities to handle the world’s largest supply chains.

North Brookfield, MA (PRWEB) February 4, 2010 — Profit Point, a leading Supply Chain Optimization company, today announced the introduction of Profit Network 4.5, a major upgrade to their award-winning supply chain network design and modeling software. The software update includes a combination of new features and technical enhancements which combine to support richer scenario testing for larger supply chains over a longer time periods.

“With almost 10 years in the field, Profit Network has been put to the test against some of the world’s largest supply chains,” noted Jim Piermarini, Profit Point’s Chief Technology Officer. “But best practices have expanded over time, so decision makers are looking for more integrated and comprehensive modeling solutions.”

Profit Network 4.5, which is used by many Global 2000 companies to model supply chain plans, has been enhanced to integrate better capital planning, greater control over facilities decisions and improve tracking and modeling of sustainability initiatives. The modeling software now includes improved options for integrated capital spending, facilities decisions, natural resource planning and emissions mitigation.

“Ultimately, the number one priority for our customers remains capital planning and return on investments” said Piermarini. “A company’s infrastructure plan will dictate 80% or more of future costs. So, we added several features that help analysts understand the capital impact of decisions to control costs and maximize the long-term logistics benefits.”

The software update also includes several technical enhancements to improve planning for the largest supply chains, over longer periods of time. “We’ve added a new core optimization process into Profit Network 4.5,” stated Piermarini. “Customers will now have 50% more addressable memory capacity, which will yield deeper visibility in to larger networks and the long term tradeoffs that are being modeled.

To learn more about Profit Network and Profit Point’s supply chain software, visit

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 Dow, The Coca-Cola Company, General Electric, Logitech, Sealed Air, Bridgestone and Toyota.

Below is a video interview with Ted Schaefer, Profit Point’s Director of Supply Chain Services, discussing supply chain optimization including cost reduction and supply chain sustainability issues for greener decisions with Xpress Optimization Suite.

To learn more about our supply chain network design services, contact us here.

Companies are increasing their local supply capabilities while reducing the costs and risks of highly centralized, offshore production and procurement strategies.

This month’s issue of Supply & Demand Chain Executive features an informative article entitled The Future of Network Planning. The article, which was co-authored by Profit Point’s President, Dr. Alan Kosansky, and the firm’s Director of Supply Chain Services, Ted Schaefer, looks at the emerging trend towards a more “local” supply chains.

You can read the complete article here.

To learn more about Profit Point’s Global Supply Chain Design services, please contact us.

We’ve heard a lot about supply chain agility over the past decade. While many companies have taken steps to improve their agility, how many actually achieve their agility potential? So, in light of the current economic situation, this brings the following question to mind, “Is your company’s supply chain as agile as you thought it was?”

If today’s economic doldrums aren’t a good litmus test for your organization’s true agility, then what is?

What is Supply Chain Agility?
First off, what is supply chain agility anyway, and what does it mean to be agile? We most closely associate the term agility with some type of athletic endeavor, so let’s frame our understanding of agility from that perspective. Referencing Wikipedia, we can find the following definition: “Agility is the ability to change the body’s position efficiently, and requires the integration of isolated movement skills using a combination of balance, coordination, speed, reflexes, strength, endurance, and stamina.”

So, agility has something to do with responsiveness, presumably to respond to an internal or external stimulus.

What does agility mean in business terms, more specifically what does agility have to do with a supply chain? Again referencing Wikipedia, “In business, agility means the capability of rapidly and cost efficiently adapting to changes.”

For businesses, agility reflects the supply chain’s ability to deliver in a rapid and cost efficient manner, through the integration of physical infrastructure and processes that govern supply chain execution.

Theory is well and good, but the real question decision makers like you are concerned with is “How agile is my supply chain?” Is your business capable of making adjustments during periods of slower economic activity without sacrificing its principles – loyalty to employees, customers and stockholders – and remaining fiscally viable? Are you well-positioned to react to an uncertain, but eventual economic turnaround? And, how do manage the trade-offs associated with these uncertainties?

If you are concerned with these questions, then use what follows as your own litmus test to challenge or verify your perceived agility. If you’re not too concerned, then hopefully you’ll gain some insights on where you can focus your energies to move your organization to a more responsive and agile supply chain network.

What is a Supply Chain?
In order to apply agility to a supply chain, we need to know a little more about what we’re dealing with. For purposes of this article, a simplified description of what is needed to make a supply chain work yields the following elements:

  1. Physical infrastructure
  2. Organization and people
  3. Business systems
  4. Processes, policies and business rules

In essence, a supply chain is comprised of the physical network infrastructure and the people, processes and systems that govern it.

Most advice on supply chain agility focuses on one or many of these aspects providing enlightened visions of how to make the world better, stronger, faster. While much of this advice is well formed and well intentioned, very little addresses what to do when the purse strings are drawn. Let’s take a look at these four factors that make a supply chain tick and see what can be done to improve agility in a capital constrained environment.

Opportunities to Improve Agility
We’ve all heard the saying “there’s no such thing as a free lunch”. While, for the most part this may be true, it is also said that you have to “spend a buck to make a buck.” Agility improvements don’t come for free, but there are areas where you can get substantial returns on your investment and others that just require you to roll up your sleeves. Endeavors related to the 4 factors can vary significantly in cost but that does not imply that one should start seeking improvement in less expensive areas simply because they are less expensive. Rather, focus on areas where you expect the greatest leverage and return, or where you are currently feeling the most pain.

Physical Infrastructure (Network Design)
The physical infrastructure or network design consists of production facilities and equipment, storage and distribution facilities, etc. The agility of a supply chain’s physical infrastructure relates to the age old question, “Do you have the right assets in the right place at the right time?” Well, do you? How well does your ability to supply match your projected demand? Do you need to restructure your physical infrastructure to better align supply with demand? The name of the game here is low cost and short lead times. Unfortunately, when it comes to infrastructure, we’re usually talking big bucks. The flip side is that the money spent restructuring to improve operational and economic efficiencies has the potential to save far more than you spend.

But how do you know what to do? The best way to accomplish this is through a network design (infrastructure) study. Even a back of the envelope effort can yield target areas for improvement, rough estimates of the magnitude of potential cost reductions or savings, and the anticipated ROI for restructuring physical assets. If the time isn’t right for capital improvement, at least you know where your strengths and weaknesses lie, and you can focus on the remaining three factors accordingly.

Organization and People
How important are the people in your Supply Chain Management team to your organization? The answer is often reflected in your organizational philosophy and the mindset of the people within the organization. Does your company promote or inhibit cross-functional communication and decision making? Does your company have consistent objectives from top to bottom that ensure aligned decision making? An agile organization promotes communication through interdisciplinary teams capable of establishing operational and financial objectives good for the organization as a whole. Incentives should be designed to eliminate conflicting objectives and allow functional departments to have a common goal.

Your test for agility here is how quickly information flows to the stakeholders and fuels decisions that can be put into action. The frequency of interactions between product development, marketing, sales and operations must increase to elevate your agility index. If the right people can’t congregate to make the right decisions, how can you expect to respond in an expedient, profitable manner? While organizational alignment is not without pain, it does not have to be financially burdensome. To add another cliché, “no pain, no gain.”

Business Systems
Business systems include information systems, decision support systems, execution systems, etc. Here are some more questions for you to ponder: Do you know what tools your organization has in place to manage your supply chain? The end game here is decision making and execution. Business systems cover a diverse range of technology and functionality but ultimately their collective purpose is to provide capabilities to collect, store, manage, synthesize and propagate information to promote sound decision making and timely execution of core business activities.

Modern organizations have configured database applications or ERP systems at the
core of their business system network, with integrated peripheral systems designed to perform more specific, detailed tasks. In regard to supply chain management, these systems provide tools for operations and finance to plan and manage customer activity, distribution, production, and procurement. Agility is dictated by how flexibly these systems are architected. Software design and integration are key. Do your systems talk to each other? Are data exchanges dynamic and generic or are they fixed and unresponsive?

Are your planning and scheduling systems capable of rapidly responding to shifts in demand, product or process changes, and evolving business priorities? Or are system updates and new integration goals costly and drawn out? If so, you may not be reaching your agility potential.

What can you do? Start with the mindset of “continuous improvement.” Business systems should be treated as living entities that require monitoring and nurturing to stay consistent and relevant to an ever-changing business environment. Choose software carefully and put design and maintenance in the hands of those who embrace the philosophy of the Agile Manifesto.

Unfortunately, business systems can also require big dollar investments with ERP systems costing tens or hundreds of millions of dollars. Start your quest by looking for low hanging fruit. Ask yourself, Which decisions make or lose the most money? What information is needed to make sound operational or financial decisions? Is the information current and readily available? Can the information be synthesized to answer the right questions within the necessary timeframe? While many systems are expensive, spreadsheets are not and you’d be surprised at the power of a spreadsheet application embedded in the right set of business processes.

Processes, Policies and Business Rules
Here is where you can make a big impact without breaking the bank. If your situation is not conducive to infrastructure or business system reengineering, consider improving the way you make use of what you already have in place. The process, policies and business rules that govern a supply chain’s behavior are referred to here as Supply Chain Management (SCM), as opposed to supply chain management software which falls under the business systems umbrella. Here we refer to the processes which make use of said software and the set of business constraints that guide decision making.

SCM processes usually take the form of strategic and tactical planning, scheduling and execution. They address the links in the supply chain from supplier to customer (in some instances supplier’s suppliers and customer’s customers). Agility is enhanced through vertical and horizontal process integration as well as decision propagation to other parts of the organization.

Vertical integration is how well connected your business processes are from strategic planning to execution. Does your organization connect these functions? How well do stakeholders follow the plan? How realistic is the plan? To become vertically agile, the first step is to align the frequency of each planning process with the frequency the issues addressed by that process significantly change. Second, information exchange, or feedback loops, must be bi-directional and immediate.

For example, if demand is highly uncertain, an S&OP (Sales and Operations Planning) process should capture the changes and reflect the consequential changes to distribution, sourcing and production. These needs are then conveyed to transportation and production to make the necessary routing and scheduling adjustments. Conversely, real time dynamic constraints recognized by these lower level functions should be communicated back to planning to alter sourcing plans if necessary.

Vertical integration promotes a responsive system with the agility to handle uncertainty at the customer or supplier end of the supply chain, as well as points in between.

Horizontal integration ensures the integrity of the supply “chain.” Procurement, production, distribution and sales are not independent activities. The processes that govern these activities should not be treated independently either.

Horizontally integrated processes allow visibility into the “ripple effect” that decisions or actions in one “link” of the supply chain have on preceding or subsequent activities. Horizontal agility is the ability to anticipate and manage consequences before they happen. While agile SCM business systems are designed to be reactive, agile SCM processes should be proactive so that business users spend their energies avoiding unwanted situations instead of fire fighting.

Policies and business rules determine everything from customer priorities to re-order points and policies, batch sizing to procurement policies. It is these policies, when applied in the planning processes, that influence your actual customer service levels, inventory levels, production line or asset utilization, and purchase material availability. The execution and adherence to these policies directly relates to your unit costs and profitability.

This can be a good thing or a bad thing. If your processes, policies and rules stay fixed, then they will not reflect changing business conditions. To attain high levels of agility, a policy of continuous review is necessary.

Start with knowing your customers, since without them you wouldn’t be in business. Review high cost activities on a regular basis to ensure the policies driving decision making are relevant and cost effective to your customer service goals.

Business process integration and a continuous review philosophy don’t cost much to implement but they can have a huge impact on your bottom line. What they do require, however, is discipline. If economic conditions do not allow for necessary physical infrastructure or business system alterations, then a methodical, disciplined approach to execute the supply chain’s governing business processes will put you in control of your supply chain’s agility.

At Profit Point, we understand supply chains and we’re mindful of your supply chain needs. Contact us to see how we can help you reach your agility potential.

This article was written by John Muckstadt, Profit Point’s Infrastructure Planning Practice Leader.

To learn more about our supply chain network design services, contact us here or call (866) 347-1130.

Supply chain design and infrastructure planning during economic expansions is a commonly accepted best practice within the community of logistics professionals. An often overlooked, but equally critical set of supply chain issues arise during economic contractions.

So in an effort to understand what concerns decision makers are presently experiencing, Profit Point conducted an informal survey of more than 140 logistics professionals worldwide. The survey results indicate that more than 40% of all respondents have plans to expand, rather than contractor their supply chain networks within the next two years.

It is worth noting that the smallest companies surveyed – those with $100 million or less in annual revenue – are experiencing the largest contractions. Conversely, 57% of the surveyed medium-sized companies (annual revenues ranging from $100-500 million) are expanding, not contracting.

To learn more about how Profit Point can help your supply chain expand or contract to meet your future needs, contact us.

What is a Monte Carlo model and what good is it? We’re not talking a type of car produced by General Motors under the Chevy nameplate. “Monte Carlo” is the name of a type of mathematical computer model. A Monte Carlo is merely a tool for figuring out how risky some particular situation is. It is a method to answer a question like: “what are the odds that such-and-such event will happen”. Now a good statistician can calculate an answer to this kind of question when the circumstances are simple or if the system that you’re dealing with doesn’t have a lot of forces that work together to give the final result. But when you’re faced with a complicated situation that has several processes that interact with each other, and where luck or chance determines the outcome of each, then calculating the odds for how the whole system behaves can be a very difficult task.

Let’s just get some jargon out of the way. To be a little more technical, any process which has a range of possible outcomes and where luck is what ultimately determines the actual result is called “stochastic”, “random” or “probabilistic”. Flipping a coin or rolling dice are simple examples. And a “stochastic system” would be two or more of these probabilistic events that interact.

Imagine that the system you’re interested in is a chemical or pharmaceutical plant where to produce one batch of material requires a mixing and a drying step. Suppose there are 3 mixers and 5 dryers that function completely independent of one another; the department uses a ‘pool concept’ where any batch can use any available mixer and any available dryer. However, since there is not enough room in the area, if a batch completes mixing but there is no dryer available, then the material must sit in the mixer and wait. Thus the mixer can’t be used for any other production. Finally, there are 20 different materials that are produced in this department, and each of them can have a different average mixing and drying time.

Now assume that the graph of the process times for each of the 8 machines looks somewhat like what’s called a ‘bell-shaped curve’. This graph, with it’s highest point (at the average) right in the middle and the left and right sides are mirror images of each other, is known as a Normal Distribution. But because of the nature of the technology and the machines having different ages, the “bells” aren’t really centered; their average values are pulled to the left or right so the bell is actually a little skewed to one side or the other. (Therefore, these process times are really not Normally distributed.)

If you’re trying to analyze this department, the fact that the equipment is treated as a pooled resource means it’s not a straightforward calculation to determine the average length of time required to mix and dry one batch of a certain product. And complicating the effort would be the fact that the answer depends on how many other batches are then in the department and what products they are. If you’re trying to modify the configuration of the department, maybe make changes to the scheduling policies or procedures, or add/change the material handling equipment that moves supplies to and from this department, a Monte Carlo model would be the best approach to performing the analysis.

In a Monte Carlo simulation of this manufacturing operation, the model would have a clock and a ‘to-do’ list of the next events that would occur as batches are processed through the unit. The first events to go onto this list would be requests to start a batch, i.e. the paperwork that directs or initiates production. The order and timing for the appearance of these batches at the department’s front-door could either be random or might be a pre-defined production schedule that is an input to the model.

The model “knows” the rules of how material is processed from a command to produce through the various steps in manufacturing and it keeps track of the status (empty and available, busy mixing/drying, possibly blocked from emptying a finished batch, etc.) of all the equipment. And the program also follows the progress and location of each batch. The model has a simulated clock, which keeps moving ahead and as it does, batches move through the equipment according to the policies and logic that it’s been given. Each batch moves from the initial request stage to being mixed, dried and then out the back-door. At any given point in simulated time, if there is no equipment available for the next step, then the batch waits (and if it has just completed mixing it might prevent another batch from being started).

What sets a Monte Carlo model apart however is that when the program needs to make a decision or perform an action where the outcome is a matter of chance, it has the ability to essentially roll a pair of dice (or flip a coin, or “choose straws”) in order to determine the specific outcome. In fact, since rolling dice means that each number has an equal chance of “coming up”, a Monte Carlo model actually contains equations known as “probability distributions”, which will pick a result where certain outcomes have more or less likelihood of occurrence. It’s through the use of these distributions, that we can accurately reflect those skewed non-Normal process times of the equipment in the manufacturing department.

The really cool thing about these distributions is that if the Monte Carlo uses the same distribution repeatedly, it might get a different result each time simply due to the random nature of the process. Suppose that the graph below represents the range of values for the process time of material XYZ (one of the 20 products) in one of the mixers. Notice how the middle of the ‘bell’ is off-center to the right (it’s skewed to the right).

So if the model makes several repeated calls to the probability distribution equation for this graph, sometimes the result will be the 2.0-2.5 hrs, other times 3.5-4.0 hrs, and on some occasions >4hrs. But in the long run, over many repetitions of this distribution, the proportion of times for each of the time bands will be the values that are in the graph (5%, 10%, 15%, 20%, etc.) and were used to define the equation.

So to come back to the manufacturing simulation, as the model moves batches through production, when it needs to determine how much time will be required for a particular mixer or dryer, it runs the appropriate probability equation and gets back a certain process time. In the computer’s memory, the batch will continue to occupy the machine (and the machine’s status will be busy) until the simulation clock gets to the correct time when the process duration has completed. Then the model will check the next step required for the batch and it will move it to the proper equipment (if there is one available) or out of the department all together.

In this way then, the model would continue to process batches until it either ran out of batches in the production schedule that was an input, or until the simulation clock reached some pre-set stopping point. During the course of one run, the computer would have been monitoring the process and recording in memory whatever statistics were relevant to the goal of the analysis. For example, the model might have kept track of the amount of time that certain equipment was block
ed from emptying XYZ to the next step. Or if the aim of the project was to calculate the average length of time to produce a batch, the model would have been following the overall duration of each batch from start to finish in the simulated department.

The results from just one run of the Monte Carlo model however are not sufficient to be used as a basis for any decisions. The reason for this is the fact that this is a stochastic system where chance determines the outcome. We can’t really rely on just one set of results, because just through the “luck of the draw” the process times that were picked by those probability distribution equations might have been generally on the high or low side. So the model is run repeatedly some pre-set number of repetitions, say 100 or 500, and results of each of these is saved.

Once all of the Monte Carlo simulations have been accumulated, it’s possible to make certain conclusions. For example, it might turn out that the overall process time through the department was 10 hrs or more on 8% of the times. Or the average length of blocked time, when batches are prevented from moving to the next stage because there was no available equipment, was 12 hrs; or that the amount of blocked time was 15hrs or more on 15% of the simulations.

With information like this, a decision maker would be able to weigh the advantages of adding/changing specific items of equipment as well as modifications to the department’s policies, procedures, or even computer systems. In a larger more complicated system, a Monte Carlo model such as the one outlined here, could help to decrease the overall plant throughput time significantly. At some pharmaceutical plants for instance, where raw materials can be extremely high valued, decreasing the overall throughput time by 30% to 40% would represent a large and very real savings in the value of the work in process inventory.

Hopefully, this discussion has helped to clarify just what a Monte Carlo model is, and how it is built. This kind of model accounts for the fundamental variability that is present is almost all decision making. It does not eliminate risk or prevent a worst-case scenario from actually occurring. Nor does it guarantee a best-case outcome either. But it does give the business manager added insight into what can go wrong or right and the best ways to handle the inherent variability of a process.

This article was written by John Hughes, Profit Point’s Production Scheduling Practice Leader.

To learn more about our supply chain optimization services, contact us here.

Climate change – or global warming – and the effort to curb the impact of human activities thought to contribute to it – are continuously becoming a higher priority on the agendas of governments, commercial and non-governmental organizations and individuals around the world. In the United States of America the Environmental Protection Agency, the main federal government environmental watchdog and regulator, recently issued a report finding that projected future levels of greenhouse gases (GHGs) “endanger the public health and welfare of current and future generations”, setting the stage for a more intense GHG regulatory regime in the future in a country that has lagged behind imposing the regulatory restraints now in place in many other parts of the world.

A combination of internal and external factors have motivated many companies to work towards better measurement, and control, of their impact on the environment, whether in the areas generation of greenhouse gasses, emission of waste water and other effluents or consumption of renewable and non-renewable resources. But as always, companies need to ensure that they make changes in their activities in a cost-effective, as well as environmentally-effective, manner. We at Profit Point recognize the need to move towards a green supply chain, and are working with our clients to help them make the best decisions in this regard.

Our Profit Network supply chain planning software has helped various clients make such decisions as:

  • how do we consolidate separate distribution systems after a merger of two organizations, or
  • where to produce and how to ship new products coming into the marketplace?

However, Profit Network is capable of taking into account not only the cost of such plans, but also the environmental impact. We recently worked with a client who had significant environmental constraints at both the entrance to and exit from their factories – they had significant limits on the amount of source water (a key raw material required for their manufacturing) that they could draw from surface and underground sources, and also had constraints at many facilities regarding the amount for waste water they could dispose of. Both of these constraints varied over the course of the year and geographically over the service territory. Using Profit Network they were able to see the cost and production location impact of the environmental constraints, and make choices regarding how to respond to their situation.

Another major concern of companies is their levels of emissions of greenhouse gasses. A major corporation in the United States of America recently announced that it was working to reduce its GHG impact through

  • Retiring less efficient and higher-emitting production facilities;
  • Reducing leakage of GHGs from its production and distribution systems;
  • Increasing energy efficiency in its buildings;
  • Increasing the fuel efficiency of its vehicle fleet.

Profit Network will allow you to evaluate the effectiveness of these types of activities. You can define the environmental impact of your own activities (such as your production and distribution, and fleet delivery to customers), and those of your suppliers (such as when you purchase electricity). For instance, you could use Profit Network to determine the impact on your carbon footprint (and cost) of switching to a source of electricity that had a lower GHG emissions rate (such as company-produced solar, or purchased nuclear), or moving towards a transportation fleet that had lower emissions per unit of distance traveled.

Profit Point is here to help our clients make better decisions – this includes making better decisions regarding the many environmental choices that companies have in today’s increasingly regulated environment.

This article was written by Dr. Gene Ramsay, Profit Point’s Infrastructure Planning Practice Leader. To learn more about designing a sustainable supply, contact us here.

Author’s Notes:
1. Reference for the company mentioned in the text above:

2. Reference for the EPA announcement:

“The structure of your supply chain network
determines 75-80% of your total supply chain costs.”

Profit Point’s supply chain consultants have seen decades of economic boom and bust. Learn about the essential steps that you can take today to cut costs in the near term and prepare for future economic scenarios. Click the link below to access our new white paper:

“The structure of your supply chain network
determines 75-80% of your total supply chain costs.
Therefore, it is the biggest opportunity
to reduce those costs.”

The opportunity to improve your infrastructure and design your supply chain network only comes along once in a while. But, our supply chain consultants are optimizing supply chain networks every day. So, we’ve seen the pitfalls and the opportunities that face decision makers when they make critical infrastructure investments.

What else should you know before your begin designing your network? We’ve compiled a list of the top 10 things that supply chain and manufacturing executives should consider before undertaking any significant infrastructure investments. Complete the the short form below to receive the complete list of things you should know about supply chain planning.

Download a copy of 10 Things to Know About Infrastructure Planning.

Supply Chain QuarterlyThis month’s cover story in the CSCMP’s Supply Chain Quarterly magazine feature’s an excellent article written by Profit Point’s Green Optimization Practice Leader, Ted Schaefer, and the firm’s President, Dr. Alan Kosansky.

The article, Can you be green and profitable?, deals with two competing, yet critical issues that face supply chain managers across the globe. As the authors point out, “profitability and sustainability don’t have to be mutually exclusive. By considering environmental issues when setting financial objectives for a supply chain network analysis, companies can successfully balance the trade-offs between them.”

You can read the complete article here.

If you would like to learn more about our Green Supply Chain Optimization services please contact us.

Materials Handling & LogisticsDr. Alan Kosansky, Profit Point’s President, and Ted Schaefer, the company’s Infrastructure Planning Practice Leader, are featured in this month’s issue of Materials Handling & Logisitcs Magazine.

The article, titled Reconnecting With Your Network, reviews the assumptions that motivated the recent shift towards offshoring and the global market changes that have occurred since.

The rush to reduce costs in manufacturing and procurement fueled a surge in outsourcing and offshoring over the last decade that has almost taken on a life of its own. While “low cost” manufacturing has proven a compelling factor, new evidence supports a more detailed understanding of a products total delivered cost.

Read the complete article here.

To learn more about how Profit Point’s supply chain consultants can help improve your supply chain network and infrastructure, contact us here:

(866) 347-1130 or
(435) 487-9141

Send us an Email

Swire Beverages, the largest Coca-Cola bottling and distribution franchise in Mainland China will employ more Profit Point infrastructure planning software licenses.

North Brookfield, MA (PRWEB) May 7, 2008 — Profit Point today announced that its Profit NetworkTM infrastructure planning software, already in use for 3 years to optimize Swire Beverage’s distribution network throughout China, will be expanded to cover the needs of the operations. Swire Beverages is an anchor bottling franchise of The Coca-Cola Company with bottling operations in 7 provinces in Mainland China, Taiwan, Hong Kong and 10 states in the U.S. The Mainland China market is experiencing significant growth in demand for its products, which has in turn increased pressure on its bottling operations. Sales volume increased 20% in 2007 to exceed 500 million unit cases for Swire Beverages’ Mainland China operations. The population in Swire’s Mainland China territory is over 400 million. Swire will rely upon Profit Point’s proven network optimization software to model infrastructure plans, test projected demand scenarios and maximize its return on infrastructure investments.

“Executing our Customer Service Policy is essential in Mainland China,” said Douglas Holland, Swire’s General Manager of Sales Operations in Mainland China. “Our infrastructure decisions must support the fast changing conditions in the marketplace. Our significant volume shifts by geography and by channel, create a daunting task for our operations to keep pace. And our distribution network design must be based upon clear visibility into our projected growth scenarios and the related impact on our distribution network. With our use of the tool Profit Network, we are able to develop least cost or most profit scenarios from our raw materials suppliers all the way through to our end retail outlets, including support for deciding when we should distribute our products via indirect channels, such as wholesalers and 3rd party distribution partners.”

Profit Network is a robust application that helps decision maker optimize their supply chain for maximum profitability. The proven optimization tool is a stand-alone planning software package that is used to analyze the placement and location of production facilities, distribution centers, and warehouses over a multi-period planning horizon. The system is often used to help firms restructure their supply chains after mergers, periods of rapid growth and in anticipation of geographic or product preference shifts in the market.

“Infrastructure planning for a rapidly-growing operation like Swire is an extremely important process and involves significant mid and long-term investments,” said Jim Piermarini, Profit Point’s CEO. “The infrastructure solutions that we develop using Profit Network will allow Swire to make effective management decisions, reconfigure bottling operations as demand shifts, implement new business processes and realign resources.”

Although the resource investments in value chain network design are significant, the return from an implementation of an optimized infrastructure study can be substantial. “We knew that the choices that we were making today will have a long-term impact on our business success, which is measured, both from a customer service level and cost perspective,” said Holland. “Profit Point brings a compelling combination of optimization software and training experts which allow us to effectively manage the process and gain the greatest benefit from our network design. We initially selected and implemented Profit Network in 2005 focusing mostly on Distribution. Today and in the future we are adding more resources into the Profit Network enabled process to incorporate our entire value chain including manufacturing capacity planning, production line and plant locations.”

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.

About Swire Beverages:

Swire Beverages has the franchise to manufacture market and distribute the products of The Coca-Cola Company in Hong Kong and Taiwan, 10 states in the USA and seven provinces in Mainland China. This represents a total franchise population of over 440 million. Swire Beverages is recognized as one of a select group of strategic business partners of The Coca-Cola Company known as the “Anchor Bottlers”. Swire works closely with The Coca-Cola Company on brand development and marketing.

To learn more about how Profit Point’s supply chain consultants can help optimize your supply chain, contact us here:

(866) 347-1130 or
(435) 487-9141

Send us an Email

The Better Process Podcast, an industry show that discusses lean manufacturing news, today featured Ted Schaefer, Profit Point’s Director of Logistics and Supply Chain Services. The show is hosted by Ken Rayment, a manufacturing engineer and Six Sigma Black Belt.

The interview covered a range of topics addressing the challenges that small and mid-size manufacturing firms are facing today, including rising energy costs and increasing competition overseas. The show also highlighted several manufacturing paradigm shifts such as rising wages in China and India and greening supply chains, which are causing manufacturers to reconsider various aspects of their production and distribution processes.

The discussion included a number of recommendations that manufacturers ought to consider, including approaches toward making quantitative trade-offs and the application of optimization techniques to find the lowest total cost for manufacturing.

Listen to the interview here

To learn more about how Profit Point’s supply chain consultants can help optimize your supply chain, contact us here:

(866) 347-1130 or
(435) 487-9141

Send us an Email

Businesses that adapt well to changing economic conditions begin by continually reviewing and updating the core infrastructure – manufacturing, warehousing and distribution assets – that enables their supply chain. If your company is experiencing strong growth, you may discover that your infrastructure is inadequate to meet your growing customer demands. If your company is impacted by the current economic slowdown, you may find that you have too much infrastructure. If you are like many companies operating globally, you will probably find that in some parts of the globe your infrastructure is inadequate, while in other parts of the globe you have excess infrastructure that is going unused and increasing your costs unnecessarily.



Supply chain infrastructure planning is a business process used by the most profitable companies to ensure their supply chain infrastructure of manufacturing, warehousing and distribution assets is the right size, in the right location, and being used to deliver the right products. This relatively easy to implement and cost effective process relies on five key steps:

1) Clearly define your objectives. The most critical step of the infrastructure planning process is to identify your primary objectives. A partial list of critical decisions you might consider is:

  • How many warehouses do I need and where should they be located?
  • Which warehouses should supply product to which customers?
  • What modes of transportation should be used to balance cost and customer service objectives?
  • Where should I be increasing production capacity, and where should I be decreasing it?
  • Which manufacturing plants should be making product for which customers/warehouses?

Identify your objectives as those decisions that are most important to the bottom line and those that you can do something about.

2) Gather supporting data. In order to make intelligent decisions, you need solid data to support those decisions. This step is usually the most time consuming part of the process. However, new resources such as the Crestar Alliance’s global real estate data enable you to quickly and easily acquire more reliable data. These data sources allow you to identify real locations with real costs and operating constraints so that you know your decision making is based on current costs and availabilities. Often companies use cost estimates and assume they can find the specialized warehouse operations they need wherever they want, only to be disappointed when they try to implement the planning decision made by a central business group.

3) Model and analyze your supply chain network. Today’s technology can help you make better decisions as there are many vendors offering supply chain network optimization tools. Whether you implement software yourself, or rely on experienced supply chain optimization expertise to assist with the analysis, make sure the software you select fully addresses the decisions you need to make and can represent your unique business and logistics network.

There is no silver bullet to optimizing your network. Using supply chain optimization tools to make better decisions for your business requires good old-fashioned analysis. Relying on people to leverage the benefits of technology is the path to success. A good supply chain analyst will be both an expert about your business and an expert with the supporting technology. They will need to review many “what if” scenarios with the business management to finalize the supply chain network design.

4) Implement. You’ve explored your options and determined the best supply infrastructure to support your business operations. Now you need to execute. If your initial analysis was based on broad estimates and over-simplifying assumptions you may have problems finding the infrastructure on the ground that you need to implement your plan. However, if you used real costs and operating capabilities, for real locations you will be able to implement faster, with less cost
and with confidence.

5) Refine. The supply chain network analysis and design process is not a static process. Successful ideas are implemented and cost savings are realized. And then things change: a large new customer is added at a new location, more production capacity is added, demand takes a nosedive, or raw material prices swing dramatically. Thus, like all good planning processes, the supply chain network analysis and design process must be on going. This process should be revisited regularly (annually or quarterly) and/or when major shifts happen within the business.

How do you measure the success of this business process? Firstly, it must generate bottom line savings in your supply chain operations. Secondly, the business process must embed itself firmly in the corporate culture. Treating supply chain infrastructure analysis as a one-time effort limits your business from fully reaping the fruits of your labor.

Those businesses that integrate the supply chain infrastructure planning process into their corporate culture will reap the benefits of efficient and focused logistics operations year after year.

Learn more about Profit Point’s Supply Chain Network Design services.

Contact Us Now


Contact Us

Contact UsInfo

Please call:
+1 (610) 645-5557

Meet our Team

Our Clients

Published articles

  • A Fresh Approach to Improving Total Delivered Cost
  • Filling the Gap: Tying ERP to the Business Strategy
  • 10 Guidelines for Supply Chain Network Infrastructure Planning
  • Making Sound Business Decisions in the Face of Complexity
  • Leveraging Value in the Executive Suite
  • Should you swap commodities with your competitors?
  • Supply Chain: Time to Experiment
  • Optimization Technology Review
  • The Future of Network Planning: On the Verge of a New Cottage Industry?
  • Greening Your Supply Chain… and Your Bottom Line
  • Profit Point’s CEO and CTO Named a "Pro to Know" by Supply & Demand Chain Executive Magazine