Challenges Facing Today’s Supply Chain Modeler

Supply Chain Modeler Image

We’ve been at supply chain network design for a long time – 26 years – and in all that time, one thing we’ve never seen is things getting simpler for the supply chain modeler. Even as the tools have improved for taking into account production scheduling, production planning, demand planning, supply planning, distribution planning, and transportation optimization, the effort and experience required to use those tools most effectively have fallen on the shoulders of the modelers, raising the technical knowledge bar and requiring additional operational research skills.

At the same time, there’s an increase in the cost of the tools necessary to meet the needs of today’s supply chain modeler: Network design solutions from large software companies are expensive, difficult to use, and require a high level of expertise. This means that businesses and organizations are forced to choose between solutions that under-deliver and those which might not deliver return on investment due to the investment required.

So what has to happen to make a difference in this landscape? To democratize the supply chain network design process, and make it more available and more accessible to more companies? We have a few ideas to make process and system availability easier and better for the business customers who need to make these critical decisions.

 

A Supply Chain Modeler Must Always Start with the Right Data (And Lots of It)

 

Let’s start with some talk about data: It’s the lifeblood of supply chain network design, it’s constantly in flux, and it flows in from everywhere. For the supply chain modeler, gathering the most relevant data needs to be easy, and it needs to be comprehensive, considering all of a company’s official data sources. (Enterprise resource planning applications, for example.) It takes the right kinds of data to make the right kinds of decisions that will shape the story they’re going to tell as they look across different scenarios of how to set up their supply chain.

Network design needs to be flexible to meet an incredible range of upsets: If a port is closed, what’s the best recourse? If a hurricane hits and the plants go down, what’s the optimal alternative? These are questions that can be answered with the right levels of data connection, and these are decisions that can be made in a network design solution.

 

The Right Provider is a Partner to the Supply Chain Modeler

 

Second, let’s focus on the companies providing the network design tools. Lower-cost solutions are often simple to use – which is good! –  but provide output that’s simplistic. They may make the decisions based on incomplete cost picture or over-simplified approximations to the relevant cost model. In many cases, that’s because the team that’s engineered this solution doesn’t have the right level of experience in handling real-world decisions.

For instance, when you look at how many warehouses should be in the network, there are many ways to model how that warehouse cost impacts your bottom line. For example, consider these variables that contribute to total warehouse expenditures: Is there an in-and-out cost? Is there an inventory handling cost? Is there a variable cost associated with the number of pallets? If the team that’s providing the solution doesn’t know how to handle these questions, then neither will their software. And it doesn’t have to be that way. Backed by the right team, modeling can be as detailed as needed to be able to support the right decision.

 

More Frequent Supply Chain Modeling

 

Today’s supply chains are also increasingly dynamic: Many businesses are encountering more degrees of freedom such as changing where their warehouses can be, or altering their product mix, or reconsidering where to expand. Some customers may still only need to address these questions on an infrequent basis, but it’s increasingly common to see network designs revisited more often. We’re seeing companies run scenarios in-year to make more tactical and operational decisions on a more near-term basis, in large part because the right tools work well to make these sorts of decisions. 

 To meet the demands of revisiting supply chain designs more frequently, technology solutions will need to deliver both customizability and rapid access to the most up-to-date and comprehensive data from all points in the chain. In fact, this kind of modeling can also provide a way to ease into better sales and operations planning support, since you can actually model capacity more appropriately and explore the degrees of freedom you have in your supply chain.

 

Seeking Solutions Beyond the Technology

 

Finally, there’s incredible potential for closer collaboration and communication between supply chain modelers and expert support. The specific solution for your company doesn’t have to be expensive, totally customized software. How do you make a good fit in an inexpensive way? Teamwork: When a supply chain modeler creates visualizations, do they have support to help them with the views that make sense for the analysis they want? 

It needs to be easy for users to reach out for help with their network design issues – not just bugs or problems in the modeling process, but things like how to present their data in a way that really supports the decisions they’re trying to make, or uncovering the most appropriate way to model a sophisticated supply chain concern. There needs to be a way for them to engage with appropriate SCND experts, which then promotes their own growth as modelers, and allows the business to quickly and properly model the supply chain decisions that are important to its successful operations and growth.

Not every company has a dedicated Operations Research team to support a complex solution for network design and infrastructure planning – but that doesn’t mean they don’t have difficult supply chain problems that need to be solved, and it doesn’t mean they should have to settle for technology that’s overpriced, under delivers, or requires an advanced degree to operate. There are ways to offer improvements to the supply chain modeler in terms of ease of access, ease of use, and ease of understanding, while still fulfilling the promise of high-quality, reliable supply chain network design solutions.

About Jim Piermarini

Jim has extensive experience in the chemical industry, including ten years working in a plant and twenty additional years working with businesses to improve their supply chains.

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