Challenges in Multi-National Resource Management: the Mekong

August 6th, 2015 3:42 pm Category: Enterprise Resource Planning, Global Supply Chain, Green Network, Green Optimization, Network Design, Sustainability, by: Gene Ramsay

One of our main activities at Profit Point is to help companies and organizations to plan better, to make informed decisions that lead to improvements such as more efficient use of resources, lower cost, higher profit and reduced risk. Frequently we use computer models to compare the projected results for multiple alternative futures, so that an organization can better understand the impacts and tradeoffs of different decisions. Companies can usually effectively carry out these types of processes and make decisions, since the CEO or Board of the entity is empowered to make these types of decisions, and then direct their implementation.

Infrastructure and resource allocation decisions must be made on a national and international basis as well, and are usually more difficult to achieve than within a company. An example of this today is the on-going controversy in southeastern Asia regarding the use of water from the Mekong River in the countries through which it flows: China, Myanmar, Laos, Thailand, Cambodia and Vietnam.
For a map of the river and region, refer to the link below:

http://e360.yale.edu/content/images/0616-mekong-map.html

The Mekong River rises in the Himalayan Mountains and flows south into the South China Sea. For millennia the marine ecosystems downstream have developed based on an annual spring surge of water from snow melt upstream. The water flow volume during this annual surge period causes the Tonle Sap River, a Mekong tributary in Cambodia, to reverse flow and absorb some of the extra water, resulting in a large temporary lake. That lake is the spawning ground for much of the fish population in the entire Lower Mekong river basin, which is in turn the main protein source for much of the human population in those areas.

Now China has an ambitious dam construction program underway along the upper Mekong, and other countries (along with their development partners) are planning more dams downstream. Laos, for one, has proposed construction of eleven dams, with an eye towards becoming “The Battery of Asia”.

The challenge here is to find and implement a resource allocation tradeoff that meets multiple objectives, satisfying populations and companies that need clean water, countries that need electricity to promote economic development and fish that need their habitat and life cycle.

Multiple parties have developed measures and models that can help forecast the impact of different infrastructure choices and water release policies on the future Mekong basin. Let’s hope that the governments in Southeast Asia are able to agree on a reasonable path forward, and implement good choices for the future use of the river.

For more information here are a few examples of articles on the Mekong:

http://ngm.nationalgeographic.com/2015/05/mekong-dams/nijhuis-text

http://www.internationalrivers.org/resources/the-lower-mekong-dams-factsheet-text-7908

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Supply Chain Snafus that Impact Everyday Life

July 22nd, 2015 6:44 pm Category: Inventory Management, Supply Chain Planning, by: Karen Bird

I was touring with friends and a Food Science intern around the Bay Area last weekend. On Saturday they visited my home town of Napa and we did some wine tasting.  We also stopped by the Culinary Institute of America in St. Helena just in time to be asked to judge the end of year Dessert Intensive of CIA’s latest cohort of students.  It was a tall order but someone had to give the students feedback.

On Sunday, we took in Fisherman’s Wharf and the wrap up for the weekend was a stop at Ghirardelli Square for dessert.  I knew what I wanted on this visit — Ghirardelli’s “Warm Brownie Sundae”.  All day I was telling my friends about it and offering to share some with them.  We finally get to Ghirardelli Square, waited in line for 20 minutes and when it was our turn to order the cashier says they are out of the Ghirardelli brownies.  WHATTT!!??!! And then he adds sheepishly they’ve been out for TWO WEEKS.  I was disappointed on so many levels but as a Supply Chain professional I was horrified.  How can you allow yourself to be stocked out of one of your Signature Items for TWO WEEKS in Ghirardelli Square????  I have reached out to a former co-worker who used to work in their supply chain but no response as of the writing of this blog.  So here is my public plea…

Please Ghirardelli, if you need some Supply Chain assistance call us at Profit Point.  We can do a 2 or 3 day Business Process Assessment and make recommendations to improve your Supply Chain Operations.

Ghirardelli Square San Francisco, CA

Ghirardelli Square San Francisco, CA

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The Future of Supply Chain Network Design

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

20150721_IndustryTodayTheFutureOfSupplyChainNetworkDesignProfit 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.

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Packaging Proliferation in the News – The Need for SKU Optimization

May 22nd, 2015 10:03 am Category: Distribution, Inventory Management, Optimization, SKU Rationalization, Supply Chain Agility, Supply Chain Planning, Warehouse Optimization, by: Ted Schaefer

A few weeks ago, Steve Westphal with Edge Network posted a piece on our blog about the benefits of SKU Optimization.  This past week, Packaging Digest posted the results of a survey of the beverage industry that suggests new packaging may be one of the key drivers for profitability this year.  The survey also illustrates how new packaging can cause the proliferation of SKU’s.   One more reason why industry leaders maintain an ongoing SKU Optimization process within their supply chain.

If you’d like to to know more about SKU Optimization and how it can impact your bottom line, please contact us.

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An Apple a Day …

May 7th, 2015 5:58 pm Category: Distribution, Network Design, Optimization, Supply Chain Optimization, Transportation, Transportation Procurement, by: Ted Schaefer

Feeding TexasWe all know the saying, “An apple a day keeps the doctor away.” However, for many of our neighbors, it’s easier said than done. According to some recent surveys, most of you reading this eat about 40% more fresh produce than the segment of the population that is served by our nation’s food banks. In Texas, according to the recently released Feeding America Map the Meal Gap data, 17.6% percent of the overall state population struggled to avoid hunger in 2013, including nearly two million children.  Surprisingly, in many cases the problem is not the availability of food -, it is a supply chain problem.

Through a CSCMP friend at the Houston Food Bank, I recently started a project with Feeding Texas, a network of the 21 food banks serving the state, to increase the amount of fresh produce we can deliver per dollar spent.  Just like in many private sector companies that have grown in size over time, each Feeding Texas member food bank operates independently.  Across the food banks resources are tough to come by and tend to be used in the day-to-day operations to bring in food and get it out the door to clients.  Thus, they have not yet adopted many of the current best practices in supply chain management.

Even though there is more fresh produce available than they can use at any given time, many of the key issues that Feeding Texas members face, like

  • Lack of transportation capacity to move produce when it is offered
  • The high cost of transportation that consumes limited budget funds and restricts the amount of produce that can be obtained
  • Purchase of Out-of-State produce when produce is available in Texas

are typical of an organization that haven’t implemented modern network design, supply/demand planning and transportation planning processes.

We are currently collecting data to complete a more extensive review of the total Feeding Texas supply chain to identify opportunities to move more fresh produce at a lower cost.  We are also engaging with key industry contacts and donors to help us understand whether we can adopt some of their best practices in the movement of fruits and vegetables.  I have to say that I have been very gratified at the number of times I’ve called a supply chain colleague to ask for their help on this project.  In almost all cases, the response has been an unhesitating, “What can I do to help?”

I’ll keep posting our updates as we hit new milestones in our project.  In the meantime, I would ask you to reach out to the food bank in your neighborhood and ask if your supply chain expertise can be put to good use.

Improving Profitability using SKU Optimization

April 29th, 2015 1:52 pm Category: Global Supply Chain, SKU Rationalization, Supply Chain Improvement, by: Editor

Are new products placing strain on your warehouse space and warehouse operations? Are increases in revenue from new products being offset by higher supply chain costs? Are you seeing increasing costs for the disposal of discontinued products? Are you experiencing significantly higher costs for specialty SKUs for specific channels or specific customers? If you answered yes to any of these questions, then it may be time to consider a process of optimizing your SKU portfolio.

SKU optimization is a critical annual process that companies need to develop and execute on an ongoing basis. SKU optimization is the combination of analysis and the realities of the competitive marketplace used to determine the merits of adding, retaining, or deleting items from a company’s product assortment.

It’s simply a systematic and consistent business process for analyzing, evaluating and deciding on how to manage your SKU portfolio in order to better align with your organization’s overall strategies, objectives and goals. An effective SKU optimization program lays the groundwork for important initiatives, such as capacity planning and price optimization. Benefits of this integrated, cross-functional business process include improved profitability, increased product availability (lower out of stocks) and increased labor and asset productivity.

Why is SKU Optimization critically important? Research shows customers only use approximately 340 unique items per year in their households (down from 390 last year) from a pool of more than a million items sold *2014 ARM Research, Gartner*. Many consumer product companies have seen an explosion in SKUs over the past decade but don’t have a process for evaluating the merits of individual SKUs. The vast majority of all SKUs become liabilities to an organization at some point in their individual lifecycles.

Smart, proactive companies establish a consistent and repeatable process to identify when that inflection point is reached and execute plans to capture as much profit as possible before discontinuing the item, subject to marketplace constraints and competitive factors. If you’re interested in learning more about SKU optimization,you may either download or view the following presentation on this topic.

 

Steve Westphal
EDGE Network

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Defining Your Bill of Materials Correctly is a Key to Successful Supply Chain Analysis

April 22nd, 2015 12:30 pm Category: Global Supply Chain, Network Design, Operations Research, Optimization, Profit Network, Supply Chain Improvement, Supply Chain Optimization, Supply Chain Planning, Supply Chain Software, by: Gene Ramsay

At Profit Point network design analysis, answering such questions as
• how many facilities a business needs,
• how large they should be and where they should be located, and
• how they should change over time, etc.
is one of our specialties. We have performed this type of analysis for a range of companies across multiple industry types and geographical regions, and we have developed our own network design-focused software package to help us do this type of study. (And we teach folks how to use the software as well, so they can answer their own network design questions, if they want to pursue that.)

Our modeling “toolbox”, our Profit Network software, is designed to be flexible and data-driven, so that the user can focus more attention on a key part of the supply chain where the questions must be answered, without having to define more detail than is really desired in other areas to the supply chain.
One of the key elements in many of the models we or our clients construct is the bill of materials. This data specifies the materials that are required to produce goods along the supply chain, be they intermediate materials or finished goods. For instance, if you are making a finished good such as a loaf of bread, the bill of materials would specify the quantities of flour, yeast, salt and other ingredients that would go into a batch.

To get trustworthy results from a model, it must require that the bill of materials (BOM) data be defined, and be used, in deriving the solution. (In some models we have encountered the BOM is just a suggestion, or products can be created from thin air if the BOM data in not defined.)

The BOM logic must also be able to capture the reality of a situation. The BOM may need to vary from one machine to another within the same facility. Or it might need to vary over time – as an example, when agricultural or dairy products are ingredients to a manufacturing process, the ingredients might have different characteristics over the seasons of the year, thus requiring different input quantities over time to produce a consistent, standardized output.

We work closely with our clients to ensure that our software is matched to their needs, and that it gives them the flexibility they need as their businesses change.

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Are Your Work Processes and Systems Operating in Championship Form?

November 20th, 2014 10:41 am Category: Case Study, Global Supply Chain, Supply Chain Improvement, Supply Chain Planning, by: Mark Rockey

We just finished the fall soccer season in my home.  I was thinking about watching my children play soccer when they were younger after a conversation with one of our consultants.  He had just come back from visiting a prospective client where he was doing an assessment of their supply chain work processes and systems.  Speaking frankly, this prospective client really did not have well defined work processes and certainly didn’t have systems implemented to enable good work processes.  Mostly they seemed to run from one fire to the next and tried to do their best in tamping out the flames enough to be able to move onto the next crisis.  Our consultant came back feeling dizzy from observing how they operated.

When my kids were younger and playing soccer, their style of play could be characterized as “kick and run”.  They really either didn’t understand the concept of trying to possess the ball or couldn’t execute this strategy.  If you have the ball, you have the opportunity to score.  If your opponent does not have the ball, they can’t score.  It’s a simple as that.  After watching my kids play on Saturday mornings with this “kick and run” style, I would really enjoy going to see a local college team play.  They have won numerous national championships and play at a very high level.  They understand and are able to execute this “possess the ball” style of play.  It was always helpful to see how the game should be played and get my perspective straightened out.

Perhaps the “possessing the ball” analog in the operation of a supply chain is “possessing the key information.”  In soccer, you have to get the ball to your attackers at the right time and in the right place in order to score.  Likewise, in the supply chain, you have to get the right information to the right people at the right time to beat the competition.  If you are feeling dizzy from fighting fire after fire (playing “kick and run”) in your supply chain operations and don’t seem to be making any progress on making things better and more stable, it would be our privilege to help assess where you are at and work together to move your organization toward operating in championship form.

A New Tool for Evaluating Water Risk in Supply Chain Planning

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

VIPs of Supply Chain Strategies and Leadership

October 17th, 2014 1:30 pm Category: Global Supply Chain, by: Karen Bird

company-115883_1280

August of 2013 I took a course at Stanford Graduate School of Business focused on Supply Chain Strategies and Leadership.  Here are my takeaways of the Very Important Principles and People (VIPs) of Supply Chain Strategies and Leadership.  We learned about The Triple A Supply Chain (Agility, Adaptability and Alignment), Vertical Integration, Postponement, Big Data, Value Chain Ethics and Sustainable Supply Chains.  Each of these topics deserve a blog of their own.  The bottom line is there is no cookie cutter strategy that fits every business.  It is a combination of people and ideas and a willingness to innovate based on what’s happening in your business at the time. However, understanding these concepts and studying companies that have successfully leveraged them as well as those that failed gives us an idea of what may or may not work for a business or industry.

My class was made up of 40 students from 17 different countries and the industries represented were fashion, technology, chemicals, pharmaceuticals, transportation, logging and wine to name a few.  We were given 20 case studies to read prior to the class starting and questions to answer for each case study.  On the first day of class, we were assigned study groups of five people that reflected the diversity of the class.  I learned as much from this part of the class as I learned from the professors and we had fun in the process.

The professors were all outstanding because they have theoretical as well as practical experience. A few examples were Professors Hau Lee, Bill Barnett and Michael Marks.  Professor Lee was the Director of the program and taught us about The Triple A Supply Chain as well as many of the other Supply Chain Strategies.  See how Professor Lee kept us engaged and why we call him Professor Bullwhip: http://youtu.be/b0dExw3es40.  Professor Barnett focused on Leadership and is a prolific blogger.  Here is one of his blogs on Leading by Design: http://www.barnetttalks.com/2014/07/leading-by-design.html.  Finally Michael Marks, a founding Partner in Riverwood Capital and the former CEO of Flextronics, took us through some Supply Chain Ethics case studies as well as case studies on companies that demonstrate Innovation.

It was one of the greatest educational experiences that I have had.  I am still thinking about it more than a year later.  In my blogs over the next few months I will share:

  • The Top 3 Strategies that the Top Supply Chain Companies are Using
  • A More In-depth Discussion of the Very Important Principles of Supply Chain Strategies

The Perils of Using Excel to Manage the Supply Chain Process

September 9th, 2014 1:19 pm Category: Excel Solver, Supply Chain Improvement, by: John Cutler

Excel has many advocates as a system for the development and implementation of supply chain processes. At first glance, it is extremely attractive – a flexible application that many people know how to use. It is portable and the cost of ownership is negligible (http://logisticsviewpoints.com/2013/11/20/5-reasons-excel-champ-supply-chain-apps/).

However, this ease of use and ubiquitousness comes at a cost. As with any product that offers an initially short learning-curve, Excel becomes extremely complicated to use and maintain in the mid- and long-term development cycles. Problems include:

Performance – Excel runs on a single desktop or laptop. As such, its ultimate performance is limited by the device and it cannot take advantage of distributed (cloud) computing.

Development Sprawl – Development of an application in Excel is usually ad hoc with a single expert developer working part-time on the project. Adequate documentation is rare and version control non-existent.
Code and Data Comingled – Is that a formula or a data cell? There is almost nothing to protect data cells from being overrun by formula cells and vice versa.

Isolation of Calculated Results – These are stored in just one place in the workbook and are often the result of other cascading calculations. Thus changing an intermediate step can cause widespread changes throughout the workbook.

Scoping – What formulae have access to a given cell? Which ones can change its contents (and how would you know)? An object oriented language such as C# utilizes a core principle of encapsulation, which is all about the exposure (and protection) of data. Although spreadsheets have rudimentary methods of data scoping (protected cells, separate worksheets), they are seldom used.

Transactions – Excel does not have a built-in mechanism for recording changes to data and formula cells. This means that changes do not comply with ACID standards (http://en.wikipedia.org/wiki/ACID). If a large spreadsheet is in the process of updating and Excel crashes, can you reliably restore it to its pre-update state?

Poor Security in Older Versions of Excel — From Wikipedia: “Currently, the 40-bit key protection used in Office 97–2003 can be easily cracked by the password-hacking software. The 128-bit key AES protection employed in Office 2007–2010 can still be considered as a relatively secure one. At the moment, however, cloud computing facilities are capable of unlocking a substantial number of the files saved in the Office 2007–2010 format.”
Corporate password and security policies may not apply to desktop applications such as Excel, meaning that strength, frequency of password change and other standards are not enforced.

Flexibility and Scaling – If the supply chain process changes, how can the code and business logic be changed with assurance? Excel has many “nooks and crannies” in which to hide data and formulae.

Conclusion
For small and even mid-sized solutions, Excel has many strengths and advantages. However, the same elements that make Excel so attractive in these situations proves to be a critical flaw for large scale projects. Companies with sizable logistical planning requirements need to look to more formal and distributed solutions for long-term sustainability.

Supply Chain Optimization for Real Time Order Fulfillment

August 6th, 2014 10:11 pm Category: OAO, Optimization, Optimization Software, Publications, Supply Chain Optimization, by: Alan Kosansky

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.

Aspen SCM (MIMI) Upgrade to version 8.5

August 6th, 2014 9:10 am Category: Aspen SCM, MIMI, Scheduling, Supply Chain Software, by: Jim Piermarini

Profit-Point-Logo-(Lo-res)Profit Point is helping several large chemical manufacturers upgrade their many Aspen SCM scheduling models with a goal to achieving long term support-ability in the new Aspen architecture of ver 8.5. An Aspen SCM (MIMI) Upgrade is no small undertaking, but we have been helping people manage, support, and enhance their scheduling models for over 20 years.

I have seen many Mimi scheduling models over the last 20 years, in many different businesses, and it is still amazing to me how well these scheduling models work. Their superior applicability is primarily due to creativeness of the their original modelers and their efforts to incorporate all the important aspects of the plants which they schedule, and most that I have seen have remained relevant and useful all these years. Their longevity is due is no small part to the flexibility of the scheduling environment which is Aspen SCM (AKA Mimi). This allows for many minor changes to the tool as equipment characteristics change or are upgraded, or as the business needs change, or indeed as the scheduler changes. This new version retains that flexibility which has made Aspen SCM scheduling models still relevant today.

In previous version changes, Aspen SCM has always been backward compatible; meaning that with nominal effort a newer Aspen SCM version would open an older version’s scheduling model. This was true up to ver 8.x released earlier this year. With this version, the older scheduling models, especially those that were developed in house, will not be able to function properly without a more substantial effort. Version 8.x brings a new XML based architecture and with it a new look and feel, more compatible with today’s applications. In addition, it has some useful new features that can make scheduling easier. Link here https://www.aspentech.com/products/aspen-plant-scheduler/ Aspen SCM remains, in my opinion, the best tool for the job of scheduling plants of all types and sizes. This new version is no break from that long history of being the best, indeed it has just been made even better.

With plants around the world, our customers trust Profit Point to upgrade their effective scheduling models to the latest version of Aspen SCM (Mimi) so they can enjoy many more years of effective scheduling at their plants.

We love doing this work. Call us if you are facing the same upgrade challenge, we may be able to help get you going.

 

Jim Piermarini

The Northern Sea Route – A New Link in the Global Supply Chain

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:

http://www.arcticgas.gov/northern-sea-route-beckons-lng-shippers?utm_source=Arcticgas.gov+Distribution+List&utm_campaign=bed180a217-Northern+Sea+Route+beckons+LNG+shippers&utm_medium=email&utm_term=0_7eb428ef8a-bed180a217-407625618

http://arcticjournal.com/business/102/chinese-make-first-successful-north-sea-route-voyage

Insourcing or Outsourcing Your Supply Chain Optimization?

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.

Managing for Catastrophes: Building a Resilient Supply Chain

March 31st, 2014 8:46 am Category: Publications, Risk Management, Supply Chain Planning, by: Editor

SCMR

This month, Supply Chain Management Review is featuring a 3-part series by Dr. Alan Kosansky and Michael Taus of Profit Point entitled Managing for Catastrophes: Building a Resilient Supply Chain. In this article we discuss the five key elements to building a resilient supply chain and the steps you can take today to improve your preparedness for the next catastrophic disruption.

Once a futuristic ideal, the post-industrial, globally-interconnected economy has arrived. With it have come countless benefits, including unprecedentedly high international trade, lean supply chains that deliver low cost consumer goods and an improved standard of living in many developing countries. Along with these advances, this interdependent global economy has amplified collective exposure to catastrophic events. At the epicenter of the global economy is a series of interconnected supply chains whose core function is to continue to supply the world’s population with essential goods, whether or not a catastrophe strikes.

In the last several years, a number of man-made and natural events have lead to significant disruption within supply chains. Hurricane Sandy closed shipping lanes in the northeastern U.S., triggering the worst fuel shortages since the 1970s and incurring associated costs exceeding $70 billion. The 2011 earthquake and tsunami that struck the coast of Japan, home to the world’s 3rd largest economy representing almost nine percent of global GDP caused nearly $300 billion in damages. The catastrophic impact included significant impairment of country-wide infrastructure and had a ripple effect on global supply chains that were dependent on Japanese manufacturing and transportation lanes. Due to interconnected supply chains across a global economy, persistent disruption has become the new norm.

You can find all three parts on the SCMR website here: Part 1, Part 2 and Part 3.

Are you ready to build a resilient supply chain?
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A Fresh Approach to Improving Total Delivered Cost

March 20th, 2014 11:46 am Category: Publications, Supply Chain Improvement, by: Editor

20140311total_delivered_cost

This quarter’s Supply Chain Quarterly features an article by Dr. Alan Kosansky and Ted Schaefer entitled A Fresh Approach to Improving Total Delivered Cost.

“Most companies calculate total delivered cost (TDC) based on inaccurate and outdated assumptions. Using optimization technology to more accurately forecast TDC by product and customer will help them to improve both their supply chain planning decisions and their costs.

Profitability is the engine that drives all successful businesses. To manage profitability, a company must understand and have good control of both its revenues and its costs.

For a long time, companies have had a good understanding of the revenue side of the business at a detailed customer and product level. It is only in recent years, however, that they have begun to understand their costs at the same detailed level by customer and product. To gain that insight, many companies use total delivered cost (TDC)—the complete cost of sourcing, producing, and delivering products to customers. TDC, in turn, has become a critical metric in guiding supply chain planning decisions.”

Read the complete article on Supply Chain Quarterly.

Total Delivered Cost

Profit Point: Best Supply Chain Blogs of 2014

March 11th, 2014 9:30 am Category: Awards, by: Editor

A special thanks to the folks at Supply Chain Opz for including us in the Supply Chain Power 50: Best Supply Chain Blogs of 2014. The list includes our esteemed colleagues at SCM World, Supply & Demand Chain Executive, Supply Chain Management Review and more.

We don’t write about supply chains so that we can get awards or be included on lists. We write about the topic because we love helping supply chain innovators discover the next evolution of their business, because we love making things better and because we hate the status quo, especially if it’s wasteful.

That being said, it sure is nice to get recognized by our peers. And for that, we say thanks!

If you would like to stay updated on our research and writings, you can follow us here:

 

Read the complete Supply Chain Power 50.

Automated Application Testing and Sensitivity Analysis

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

ApplicationHarness

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.

ApplicationHarness

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 ApplicationHarness1may 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.

 

Will 3D printing radically transform the global supply chain, as we know it?

February 28th, 2014 5:16 pm Category: Global Supply Chain, Supply Chain Planning, Sustainability, Transportation, by: Danielle Cohen Jarvie

3D Printing and the Global Supply Chain

Additive manufacturing or 3D printing is a process of making three-dimensional solid objects from a digital model.  It is achieved by laying down successive layers of material, as opposed to the traditional machining techniques of removing material by drilling and cutting.  3D printing is usually performed by a materials printer using digital technology.

Taking a digital image of a toy and printing out a near-perfect replica of it seems sci-fi and surreal, but rapid technological advances in 3D printing being developed make this and even more possible.  Printing metal parts with increased strength makes machines even more viable and cost-effective in manufacturing.  Additionally, an entire part can be 3D printed in a single machine, eliminating multiple touch points in traditional manufacturing and reducing failures.  The newest futuristic trend in 3D printing is to go huge:  using robotics to deposit building materials in an orchestrated and precise way to build large structures made up tons of interconnecting parts.

3D printing is a reality.  A recent Forbes magazine article, “What Can 3D Printing Do? Here are 6 Creative Examples” lists several ways in which 3D printing have been used:

  • In 2012, doctors from University of Michigan developed a tracheal splint made from a polymer and created directly from a CT scan of a baby’s trachea/bronchus using image-based computer model with laser-based 2D printing to product the splint.
  • Both General Motors and Ford Motor Company have used 3D printing to make prototypes of vehicle parts used in testing and design.
  • Nasa has used 3D printing recently to make a rocket engine injector and use it for major hot fire testing.
  • Defense Distributed, a high tech gunsmith group, created the world’s first 3D printed gun called the “Liberator”.
  • Prosthetics including a 3D printed bionic ear created by Princeton University scientists have been developed.

3D Printing of Consumer ProductsAlthough 3D printing has been around since the 1980’s, a differentiating trend has emerged this year that could make 2014 pivotal:  3D printing machines are now being used to manufacture a large variety of consumer products not just heavy machinery and structural components such as aircraft parts.  The printers are expensive and the 3D pictures required to print are difficult for most – a mainstream breakthrough in 3D printing could be seen in the near future as printers become cheaper and easier to use.

What could the Supply Chain of tomorrow look like if and when 3D printing takes off?  It has the potential to transform certain parts of manufacturing and supply chains over the long term. Traditional supply chains are often characterized by mass production of products driven by forecasts and pushed to customers through a warehouse distribution network, with long lead times, high transportation costs and large carbon footprints.  A 3D supply chain would be distinguished by having customized production, be “pulled” by customer demand, locally printed and distributed, have short lead times, low transportation costs as well as low carbon footprint.  It will create a demand for smaller factories that would take offshore manufacturing and bring it close to the consumer.  Goods will be cheaper to reproduce domestically versus manufactured offshore and shipped from low-wage countries.  Because new technologies currently being developed result in a significant proportion of manufacturing becoming automated large and costly work forces would be reduced.  In addition to distribution cost reduction, storage would also be a reduced as products could be made quickly in response to demand as opposed to meeting service levels via inventory and safety stocks.

Although it is a huge leap to go from printing a single object on a 3D printer to replacing an entire manufacturing enterprise and thus allowing any business or individual to become its own homegrown factory, Gartner Group calls it the “beginning of the Digital Industrial Revolution which threatens to reshape how we create physical goods”.  If that “threat” becomes reality, then it promises to reshape how we consider and optimize our current Supply Chain.

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Published articles

  • A Fresh Approach to Improving Total Delivered Cost
  • Filling the Gap: Tying ERP to the Business Strategy
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