What is it about the Autobahn that is so alluring? The idea of driving on a road without a speed limit is thrilling. Or how about breaking the sound barrier in a jet plane?

At the risk of sounding like a supply chain nerd, here at Profit Point, I get a similar sense of exhilaration in enabling our clients to increase the velocity in their supply chains by implementing decision support tools that enable faster and better decisions.

These decision support tools enable faster and better decisions in at least the following 3 ways:

1. Faster visibility to the data – By having a software tool that holds all the data needed to make a particular decision with automated interfaces to source systems, our users don’t have to spend countless hours combing through multiple spreadsheets and other software systems to get the data they need. We bring all the data needed together in one place for the user to be able to make effective decisions.

2. Faster understanding of the data – Supply chain decision support tools have huge amounts of data coming in and going out of them. Making sense of it all can be challenging. Typically what we do is build tools that allow the user to sort through all this data by:

a. Having graphical user interfaces that make it easier to understand what is going on. After all a picture is worth a thousand numbers any day of the week.

b. Show only the exceptions or problems that need to be resolved to help the user focus on what needs to be changed.

3. Faster processing of the data – Oftentimes we will automate tasks that are menial and time consuming or if the task is very complex it may be appropriate to employ an optimization or heuristic solution approach to speed getting to a feasible or better solution. We like to call these “Power Assist” tools that greatly ease the burden on the user while still giving them ultimate control over the decisions that are made.

Do you feel the need for more speed in your supply chain? Give us a call so we can discuss how we can help to get you moving faster.

Mark Rockey

As the competitive environment changes the way companies do business, transportation managers are embracing lean principles mixed with tactical planning software to support cost reductions and quality improvements. Applying lean initiatives to supply chain and logistics operations is one method that allows businesses to reduce cost, but the marriage of tactical planning software with lean principles introduces a new approach and additional opportunity to eliminate waste.

Lean is a team-based form of continuous improvement that focuses on identifying and eliminating waste and increase of speed and flow of an operation, such as distribution of products. Waste can be defined as activities that do not add value for the customer.

A short waste target list for a distribution transportation planner may include the following:

  1. Transportation
  2. Inventory
  3. Motion
  4. Waiting
  5. Underutilizing employees or behavioral waste

For example, managing a large delivery fleet with a relatively fixed, repeating delivery pattern will benefit from an optimal territory planning and routing solution. Since lean adds emphasis on waste, non-value added work, queue times, to traditional process analysis, improving the distribution and routing plan for a company’s fleet can eliminate waste in all of the above categories.

Selecting strategic territory planning software that will optimally divide a customer region into geographical “territories” based on customer delivery requirements can be an important first step in the lean process. Think of each territory is a contiguous area containing the customers that will form a single route, or a regular pattern of routes, over a day, week, month or other time period. Lean solutions can include optimal delivery territories shaped to minimize total travel and to equalize the delivery workload for drivers.

Most software packages utilize geographical mapping software such as MapPoint or Google Maps to generate a solution that will minimizes total travel miles while meeting customer service and delivery requirements. Some of these tools can also be personalized and customized to meet specific business requirements. Planning tools that create both territories and routes in a single integrated package appear to be the most popular.

Before implementing the territory planning software solution, let’s  compare the results to the target list of waste. Transportation waste is minimized. Drivers (“employees”) become more productive since they now have a delivery territory designed to adhere to the driver profile, which may specify shift time and driving break intervals. Routes are optimized, so there is no more wasted motion time. Routes can be built to ensure sufficient inventory is available at all stops. Natural boundaries such as rivers, mountains, canyons and man-made boundaries such as rail tracks, major highways, canals can be model to create optimal delivery territories that are bounded by these constraints, thereby eliminating driver waiting to go around these obstacles.

In summary, managers that use transportation routing and territory planning software are following the lean principles to identify and reduce waste. Implementing the solution can potentially reduce transportation costs by 5% to 20% by decreasing miles traveled and increasing on-time delivery while dramatically increasing driver productivity. Lean principles when married to tactical planning software can be competitive weapons and a great advantage in tough economic times. Start considering lean logistics principles in conjunction with territory planning software applied to distribution transportation problems as opportunities to reduce waste.

A husband, two kids and a golden retriever later…  I am back to implementations in Supply Chain planning and scheduling.  To my surprise, the same challenges I encountered 10 years ago remain in force today:  data, defining business processes, data, implementing software, data, training people, data, supporting the change to a new system and data.

Data collection remains one of the cornerstones of success of a supply chain planning or scheduling implementation.  Though scores of data may exist in a company’s business, harnessing it to feed into a planning or scheduling model can be extremely complex and time consuming.  Interestingly, the data collection process often drives an elucidation of manufacturing practices and process flows, and clients learn what they do and don’t know about their business.  This may seem backwards and risky in terms of getting things out of order.  In a perfect world, a thorough understanding of manufacturing and business processes would pave the way towards building an Advanced Planning and/or Scheduling System.  In reality, they often happen in tandem and are evolutionary in nature.

Deciding how data will be housed, derived and propagated early on in an implementation will pay off in the long run.   Establishing a systematic, automated way to update and propagate data is equally important as the decision of what software system to use.  It is worth the investment to take the time to put this automation in place as a greater and greater number of products are added to a system the data will remain manageable and scalable.

From PC to Cloud, emails to tweets, networking happy hours to LinkedIn, it is nice to know some things stay the same.

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

Sales and operations planning (S&OP) is an integrated business management process that enables a company to continually balance and manage the supply chain supply and demand to achieve its strategic and tactical business objectives. More and more business leaders are relying on S&OP to align and improve decision making across the disparate parts of their organization. And, many companies are still adopting and improving the techniques and tools that they use to improve S&OP.

So this year, we conducted an S&OP Survey of key decision makers to learn more about their challenges, concerns and expectation for 2012. Business leaders from a variety of companies and industries were polled. Here’s what we learned:

  • Many companies lack the metrics needed to capture the benefits from S&OP
  • Scenario and sensitivity analysis is the tool of choice for S&OP planners who understand that sales forecasts are imperfect
  • More companies are beginning to collaborate with suppliers and customers to improve S&OP
  • For many companies, point-of-sale (POS) data may be the key to effective sales and operations planning

To read the complete report, including our conclusions, click the link below:

Sales and Operations Planning Survey

Download the S&OP Survey

To learn more about Profit Point’s S&OP services and S&OP software, call (866) 347-1130 or contact us here.

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
Profit Point’s S&OP software and service helps global manufacturers improve forecasting, operations planning, sales and profitability.

Profit Point, the leading supply chain optimization software and services company, today announced the release of its Profit S&OP software to complement it’s S&OP consulting services. Profit Point’s combined S&OP solution provides business decision makers with the process and tools to manage and optimize sales and operations planning across the supply chain.

The Profit S&OP software tool is fully-customizable to meet the needs of supply chains across all industries and is designed to improve tactical planning for the key decision makers across a company, including finance, sales, manufacturing, logisitics and supply chain. The software provides a centralized dashboard to gain insights and control over a company’s supply chain, including features to enhance collaborative forecasting and improve manufacturing, distribution, and inventory decisions.

“Global manufacturers struggle to accurately plan for global demand across their product lines in a timely manner,” noted Alan Kosansky, Profit Point’s President. “Our S&OP solution solves this problem with a combination of effective processes and a shared planning tool that provides one set of numbers for the key stakeholders across the entire supply chain.”

Using Profit Point’s S&OP solution, manufacturers can coordinate with their supply chain planners across the globe to build accurate, detailed manufacturing and distribution plans quickly and integrate with point-of-sale demand tracking systems. And, the software connects with existing ERP systems, such as SAP® and Oracle®, so analysis and decisions are up to date across the entire organization.

“Improved planning can help any large manufacturer reduce inventory excess and capital risk.” said Jim Piermarini, Profit Point’s CEO. “But the key to successful planning includes the right technology and the right process to align employees with the company’s strategic objectives.”

Profit S&OP has an integrated optimization engine that seamlessly drives the best scenarios to the forefront of a tactical planning sessions. Throughout the process, decision makers are able to visualize and test multiple future scenarios to achieve a collaborative, cross discipline decision making process. Key features in the software include the ability to automatically generate an optimal tactical plan down to the bill of materials (BOM) level, integration with existing ERP data warehouse, multi-period planning horizon, scenario analyzer to systematically assess multiple future scenarios, complex BOM exploration and the ability to visualize plans, timelines and bill of materials to correct bottlenecks and reduce excesses.

To learn more about Profit Point’s sales and operations planning software and services, call us at (866) 347-1130 or contact us here.

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 Chemical, Coca-Cola, Toys “R” Us, Logitech and Toyota.

At Profit Point, we often repeat the mantra “People, Process, Technology.”  All three are important for the kinds of projects we work on.  You have to have good systems (the technology part) that support good work processes and people that follow the process and use the systems.  If your people are not committed to following the process and using the systems, you are going nowhere fast.

Recently we were discussing with a senior manager at one of our clients what makes for a good Sales and Operations Planning Process (S&OP Process).  Being someone who is more of a process and technology guy I was thinking that he might say something like “You have to have a well thought out work process that is clearly communicated to everyone involved” or “You have to have a system that is easy to work with that supports the work process well.”  WRONG!

The first thing he mentioned was that senior management needed to be openly committed to the process and systems.  He illustrated this for us by recounting what another senior manager at this same client said during an S&OP meeting with a large group.  The group was going back and forth discussing a “potential” order from a customer and this particular senior manager said “If it’s not in the system then it’s a rumor and we don’t plan and schedule for rumors.”

As you can imagine, this cut down on the chatter in the room quite quickly.  This client had spent a lot of time and money developing processes and systems that worked well and those two things are necessary but not sufficient.  You have to have leadership that says “We have a work process to follow and a system to use to support executing that process.  Follow the process and use the system.”

Next you have to have people who do exactly that!  If this is not happening then as I heard from another executive “Either the people will change or the people will change!”

You have to be able to trust the data in the system but really at its root this boils down to trusting the people who entered the data in the system.  As I was reminded, this starts at the top!

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.

Profit Point’s transportation procurement optimization service reduces outsourcing costs by quickly analyzing multiple carrier bids and provides insightful data for decision makers

Profit Point, a leading Supply Chain Optimization company, today announced the introduction of Transportation Procurement, an optimization service that will cut costs for manufacturers and distributors that outsource some or all of their shipping to third-party carriers. The service provides transportation analysts and procurement managers unsurpassed ability to quickly analyze carrier bids and evaluate the best combination of carrier discounts, enabling them to negotiate rates to ship at the lowest total cost.

“Our clients are looking for new ways to reduce costs and gain productivity in every aspect of their business.” said Alan Kosansky, Profit Point’s President. “With the constant fluctuations in the transportation market, this service enables clients to manage their core carrier base and make effective decisions quickly, negotiating with carriers from a position of strength.”

The company’s optimization service and technology provide the analytical horsepower to the transportation or procurement professional to quickly evaluate different mixes of carriers and lane assignments, making trade-offs among both quantitative and qualitative business goals. The service’s richness and flexibility enables clients to dictate constraints to enforce site-specific, regional or global limits on the number and types of carriers that are included in the awarded lanes.

“We have deployed carrier bid optimization software to our clients in the past; however we have found that many of our clients prefer to leverage our deep analytical expertise. By partnering the client’s negotiating team with the analytical insights we provide them, they are able to reach the best possible outcomes in their negotiations with carriers,” said Kosansky. “And when our clients are ready to bring the analysis in house, we readily provide our Profit Procurement for Transportation software.”

Most large manufacturers have hundreds of carriers and thousands of lane options available to ship products from their manufacturing and distribution centers to their customers. The firm’s procurement optimization service addresses all inbound and outbound transportation routes, including rail, truck (bulk, packaged, and LTL), and marine bids, and simplifies the selection process while lowering the overall transportation costs.

To learn more about Profit Point’s transportation procurement optimization services, call us at (866) 347-1130 or visit www.profitpt.com.

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 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, Logitech, Rohm and Haas and Toyota.

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.


Profit Point’s order fulfillment application reduces inventory write-offs and warehousing costs while maintaining service requirements.

Profit Point, a leading supply chain optimization company, today announced the introduction of Profit Fulfillment, a robust and highly-configurable software tool to help business managers determine an optimal backorder fulfillment and product shipping schedule.

“Just-in-time manufacturing has seen significant growth in the past 15 years, but the challenge of balancing inventory, backlog and service levels persists,” noted Jim Piermarini, Profit Point’s Chief Technology Officer. “Our clients were looking for a solution to help analyze these trade-offs and after real-world testing, we have a cost-effective solution that enables business managers to improve their distribution processes immediately.”

Profit Fulfillment can improve any distribution channel, but it is particularly useful when there are backlog orders to multiple customers, and it is important to determine which customers should get their orders filled immediately and on time, and which customers should enter the backlog queue and for how long. Ensuring that order fulfillment and shipment scheduling departments are executing designated functions consistently with a company’s overall business objectives can have a significant impact on profitability and customer satisfaction.

“Our clients include high-demand, short-cycle product manufacturers as well as more traditional long-cycle manufacturers,” said Piermarini. “And with unpredictable economic conditions, it was essential that we design this application to be highly configurable.”

Profit Fulfillment enables distribution managers to optimize order fulfillment processes consistent with a company’s overall strategic business objectives. It allows decision makers to prioritize customers, implement complex allocation rules amongst customers, dynamically change the allocation rules by region or segment of customers and minimize total backlog days across all customers, or over specific customer segments. And, the application provides forward-looking visibility to quickly and easily view the impact of different allocation rules on customer order fulfillment.

To learn more about Profit Point’s supply chain software and services, visit www.profitpt.com.

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, Logitech, Rohm and Haas and Toyota.

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.

SuperShuttle introduces “Auto Routing” for Quicker Pick Up and Delivery to most of the nation’s largest Airports

Profit Point, MapInfo and SuperShuttle team up to provide the ultimate in Passenger Customer Service

PHOENIX – (December 18, 2007) – SuperShuttle just made getting to the airport and home easier with the introduction of “Auto Routing” a unique system for the delivery of real live people to and from most of the nation’s leading airports. Auto Routing is the brain child of Profit Point, Pitney Bowes MapInfo and SuperShuttle coming together to create a state-of-the-art pick up and delivery system for people that allows for the most efficient routing of SuperShuttle customers yet.

Profit Point, Pitney Bowes MapInfo and SuperShuttle created this programming capability which integrated their individual systems in to the centralized dispatch capabilities at SuperShuttle to provide passengers with a quicker and less complex pick up system for SuperShuttle customers nationwide. “Auto Routing” will reduce the pick up times, less time spent on the shared-ride vans for customers and quicker turn around at the airports overall.

“This has been a true team effort,” said Mike Hogan, Chief Technology Officer for SuperShuttle International. “The functionality of ‘Auto Routing’ is different than the typical delivery optimization of packages since we’re essentially delivering people. Packages don’t mind sitting in the delivery truck and going out of their way a bit. People, on the other hand, don’t like to be on the van too long, go to far out of their way, or backtrack to the airport. This new system actually delivers a whole new ‘on-time’ delivery system for our customers.”

Basically, “Auto Routing” can route each drivers entire day’s work in less than a minute whereas it would take a dispatcher anywhere from four to eight hours to accomplish the same.

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Profit Point, Inc.
Profit Point is about the “Science of Better,” specializing in the improvement of a broad range of complex business processes in several industries. Profit Point’s solutions provide immediate benefits using cost-effective technology improvements with Targeted Software and focused consulting services. Please go to www.profitpt.com for more information.

SuperShuttle International, based in Phoenix, AZ is a division of Veolia Transportation On Demand and a subsidiary of Veolia Environment (Euronext: VIE, NYSE: VE). SuperShuttle serves 27 airports, carrying more than eight million passengers a year. Airports served by SuperShuttle include some of the largest in the country including Los Angeles, New York, Dallas/Ft. Worth, Washington, D.C. and Miami. Please go to www.supershuttle.com for more information.

Veolia Transportation, Inc.
Veolia Transportation is the leading provider of passenger ground transportation services on the North American continent, operating bus, rail, taxi, shuttle and para-transit systems in over 120 locations in the US and Canada. Veolia Transportation entered the North American market in 2001 and has quickly expanded to a national presence, with over 16,000 employees and annual revenues approaching $1 billion.

To learn more about how Profit Point can help improve your transportation and routing, contact us here:

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

Send us an Email

Supply Chain Assessment

February 22nd, 2007 6:46 pm Category: Supply Chain Planning, by: Editor

Profit Point’s Supply Chain Assessment – Summary Document

Profit Point’s approach is unique because it is holistic, looking simultaneously at business processes, social systems, and technology using the SC Maturity Model survey.

There are three steps involved in this benchmarking effort.

  1. Gathering the initial data and plotting the results on the high-level maturity model.
  2. Examining individual Business Process Orientation (BPO) component/outcome scores using BPO maturity model.
  3. Comparing the detailed answers to the benchmarking database.

The first step in conducting this comparison or BPO benchmarking is to gather the data on your specific organization. This is accomplished by selecting 10-20 “key informants” within an organization that can complete the BPO measurement survey.

The second step is to examine individual BPO component/outcome scores using BPO maturity model.

Supply Chain Maturity Model
What is the Supply Chain Maturity Model?
The means to assess the quality and effectiveness of the supply chain management process.

How Is It Used?
The model defines five levels of supply chain management maturity ranging from ad hoc to extended (world class).

The model extends the value and capabilities of the Supply Chain Operations Reference Model (SCOR Model) by looking at integration, strategy, cooperation, collaboration, jobs, organization structure, measurement systems, best practices, customer focus and the level of cross functional process definition and understanding.

What Can I Learn From The Model?
Understanding and insight into the degree of maturity and level of sophistication (integration, collaboration, etc.) of your supply chain management processes relative to other enterprises and industries.

The third step is to compare the detailed answers to the benchmarking database.

The Profit Point SC Assessment Deliverables

  1. SCM Maturity Model position – visual.
  2. Scores by maturity model variable – numerical.
  3. Scores by Supply Chain Operation Reference (SCOR) model view – numerical.
  4. Scores plotted on benchmarking database histogram views.
  5. Detailed “Blue Bar” benchmarking scores by questions organized in the following views:
    • By SCM variable
    • By SCOR variable
    • Information technology support
    • Digital technology (Internet) usage both customer and supplier views.
    • Extended supply chain practices
  6. A list of Potential Benefits, both quantitative and qualitative.
    • The Potential Benefits of moving your organization to using the “best practices” identifies:
      1. Potential Benefits for example:
      2. Cost Savings
      3. Inventory Reduction
      4. Faster Cycles
      5. Improved Customer Service
    • Risks of changing the business processes
      1. Social System impediments
      2. Technological hurdles
      3. Magnitude of the change
    • Allows for clear prioritization of areas to change
  7. A recommendation of the change management process improvement areas.
    • Recommendation will identify the areas that should be worked for maximum benefit while minimizing risks.
    • Based on
    • Best industry practices
    • Practical experience of what works (and what doesn’t)
    • Tradeoff of benefit and magnitude of change
  8. A final report summarizing the above deliverables will also be provided.

Typical Project Timeline

Week 1

  • Project kickoff
  • Refine Web Survey
  • Layout interview schedule

Week 2, 3

  • Web Survey

Week 4, 5

  • Detailed Discovery Interviews
  • Key participant interviews

Week 7

  • Presentation of findings and recommendations

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

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

Send us an Email

Profit Point’s consultants interact daily with companies at the senior and mid-management level. We are seeing many risk management issues as a common theme during these discussions.

If your supply chain and supplier base is complex, then understanding risk may be one of the top challenges you and your purchasing managers face.

  • Are you effectively and pro-actively managing supply assurance and risk?
  • Do you know where to focus your supply chain risk reduction planning?

If your supply chain and supplier base are complex, then this may be one of the top challenges you and your purchasing managers face today and in the coming years. Yesterday’s reactive approach to supply chain events and disruptions or just performing risk assessments on new suppliers is no longer adequate in today’s world of lean manufacturing and global sourcing.

If you would like to try a better, systematic approach to risk management, we have a new, proprietary methodology and quantitative risk assessment tool that can help you get your arms around the risk management issue. Companies that have tried our tool found the cost and resource requirements are modest while the savings are huge.

We can help you quickly assess specific commodity categories or your entire supply chain to identify the major sources of risk and potential business disruption so that either they can be eliminated or contingency plans can be developed to keep the impact within acceptable limits. If you would like to learn more about this tool and methodology, please contact us. We look forward to hearing from you.

2007 begins with continually increased opportunities for manufacturing companies of all sizes to reap the benefits of Supply Chain Optimization. Optimization technology is truly attaining the long-held high expectations for use in the business community. Advances in the technology and data availability are making this possible. Supply Chain optimization technology solutions are fully deployable in accessible, inexpensive and easy to use software.

Profit Point is well positioned to take advantage of these market trends. We have continued to re-invigorate and expand our partnerships with leading Supply Chain solution providers. We are the leading solution provider for the principal optimization software companies, including Frontline Systems, the provider of Excel® Solver® and Dash Optimization. We have developed high-value targeted software for business processes where the standard solutions are inadequate. We have established deep long-term relationships with many of our earliest clients, including Coca-Cola, Rohm and Haas and Bridgestone-Firestone. And most importantly, we have continued to invest heavily in our team of employees to ensure we have the most experienced, committed, and knowledgeable group of supply chain and optimization experts.

As more people come to realize the opportunity created when applying optimization technology to their business, both the opportunities and expectations will grow. For the first time ever, business data, the fuel of optimization, is abundantly available and accessible. Secondly, businesses have come to rely on technology for profitability in a more integrated and comprehensive way than ten years ago. Together, these two realities are converging to create an environment where optimization solutions must become a part of core business systems. I expect that the next ten years will be to supply chain optimization solutions what the past ten years has been for supply chain processes: a time of unbounded excitement, enormous opportunity, and profitable growth.

Whether you have been a long time friend, partner, or client of ours, or are meeting us for the first time, I sincerely hope we have the opportunity to share some of this excitement together in the years to come.

At Profit Point, we are constantly helping people in companies change their supply chain. I thought I would share with you our approach that has been refined over the years to ensure that we are changing the supply chain in the right way… so that the value will last.

A proven method of enhancing your supply chain.

First, We Help You Assess Where You Are Now:

  • How mature is your organization compared to others in your industry?
  • What are your capabilities?
  • What are your vulnerabilities?
  • What are your opportunities for improvement?
  • Does your social system support/detract from your success?

Then We Build a Roadmap to Get to the Future

  • The vision for sustained improvement of your supply chain
  • An efficient and effective path for implementing your vision
  • A workforce that is knowledgeable of the vision and committed to sustaining it.

Our Expertise

Our staff reflects our balanced approach. Our expertise includes supply chain operations, business process analysis, technology implementation, and sustaining organizational change.

Supply chains that have benefited from our services include:

  • ExxonMobil
  • Chevron Phillips Chemical Company
  • Stolt-Nielsen
  • Aventis Pasteur
  • Bridgestone Firestone
  • GE Plastics

Our Methodology

We begin with a comprehensive assessment of where things stand in your supply chain. Our assessment includes:

  • Benchmarking business processes against our database of 150+ companies
  • Measurement of your Supply Chain Maturity using the SCOR model
  • Detailed discovery of specific improvement opportunities
  • Analysis of how the social system supports and impedes performance
  • Presentation of results and recommendations for sustained improvement

With our approach, you end up with a roadmap for sustained improvement that is practical, actionable, and that your organization will get behind.

Drivers of Sustainable Supply Chain Excellence

Our Solution Helps You Get All Three Right!


We help you get the three key parts of the supply chain right: people, technology, and processes.

You may be able to get quick returns by installing new software or improving processes. But the ability to sustain these gains requires developing the human system along with the business processes and technology. We work with you to address all three drivers with our balanced and integrated methodology.

We leave your system better prepared to continuously enhance its performance.

Thanks for letting me share our approach with you. I hope this helps you in your efforts to change your supply chain!

Optimizing Your Supply Chain

November 6th, 2006 5:47 pm Category: Supply Chain Improvement, Supply Chain Planning, by: Editor

You’re patting yourself on the back. You’ve sorted through the Marine Shipping chaos. In the face of volatile Marine Transportation rates, you just negotiated great prices to transport your North American produced bulk liquid via tank containers to ten Pacific region countries. The contracts are signed and locked in for the next year, holding costs to a known level. A month later you discover there may be a better way. Rather than transport your bulk liquid separately to each of your ten Pacific region customers, you can send all the product on a parcel tanker to a terminal in Singapore, drum it, and ship the drums from Singapore to each of your customers. And you can do this at considerable savings without a reduction in customer service. You looked at so many options, why didn’t you consider this one?

How do you make sure your business is aiming before it fires? The business process of supply chain network analysis and design will help you ensure that you are using the best modes of transportation, the best routes, and the right mix of intermediate assets (e.g. storage, inventory…), to get your products where they need to be to meet your business goals. And the icing on the cake is that it is a relatively easy and cost effective process.

So how does it work? Here is a proven process to design a supply chain network that best meets your business objectives.

1) Clearly define your objectives. No logistics manager is likely to improve all aspects of their logistic and distribution network all at once. The most critical step of the network analysis and design process is to identify your primary objectives. A partial list of critical decisions you might consider is:
What level of customer service does my market demand? What modes of transportation should be used to balance cost vs customer service objectives? Which warehouses should supply product to which customers? How many warehouses do I need and where should they be located? Where should inventory be stored and how much inventory should I be carrying of each product? Which manufacturing plants should be making product for which customers/warehouses? What routes should I be using to get product from source to destination? Are there opportunities for pooling resources that have been overlooked?
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. The good news is that the data is available and reusable. Most likely it exists in your new ERP or legacy system. Typical data elements include: demand by product and container type, transportation rates, transportation lead times, warehousing costs (both fixed and variable costs), and inventory costs. If your objectives include determining the manufacturing source of products, you will also need data like manufacturing and raw material costs.

3) Model your supply chain network. Today’s technology can help you make better decisions as there are many vendors offering supply chain network optimization tools. Alternatively, you can cost efficiently configure your own. Choose wisely, as all software is not created equal. Make sure the software you select fully addresses the decisions you need to make and can represent your unique business and logistics network. Typical model components include capacity limitations, customer service requirements, lead times by mode, operating capabilities and the cost of different options.

4) Analyze your supply chain network. There is no silver bullet. 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.

5) Implement and 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/quarterly,) and/or when big things 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 analysis as a one-time effort limits your business from fully reaping the fruits of your labor.

“Although we have achieved cost savings between 4% and 11% of our total logistics costs in our network designs, the biggest value that we’ve seen from this type of analysis is a common understanding of the delivery chain among Manufacturing, Marketing, Sales, Logistics, and Planning. This common understanding of cost and customer service trade-offs results from the more complete “picture” of the network that emerges from this analysis and the ability to churn out “what-if” analysis to cover most credible business scenarios. It is this understanding and the ability to quickly understand and exploit changes in the market that is the enduring value of a continuing network analysis process”, says Global Logistics Strategy & Design Manager at a Fortune 500 manufacturer.

Those businesses that integrate the supply chain network analysis and design process into their corporate culture will reap the benefits of efficient and focused logistics operations year after year. With a process like this in place you can be assured that you aim before you fire.

Learn more about Profit Point’s Assessment and Supply Chain Planning services.

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