The Supply Chain Design Movement and How It’s Driving Measurable Improvements for Large Businesses

tc-bakerWhy Is Supply Chain Design Important?

There’s been a fundamental change in the way global manufacturers and distributers operate. The modern supply chain is an increasingly complex and volatile network making the impacts of change harder to determine and increasing the risks involved with being unprepared. The supply chain is a huge opportunity for competitive advantage—and risk. Supply chain design is now a must-have capability for businesses to keep up with the pace of change and to sustain a competitive advantage by significantly improving in the areas of cost, service and risk. Industry leaders have created centers of excellence and put in place integrated supply chain design platforms and business processes to rapidly and accurately answer tough supply chain what-if questions and generate effective and clear recommendations for decision support.

Supply Chain Design Drives Measurable Cost Savings

Supply chain design has enabled businesses around the world to uncover significant supply chain cost savings.

  • According to a recent customer survey, supply chain modeling has helped over 70 percent of companies that have centers of excellence identify savings of at least 10 million dollars along with significant improvements in both time and cost efficiency (1).
  • On average, responding companies saved: nine percent on inventory costs, seven percent on sourcing, six percent on handling, 11 percent on production costs, 11 percent transportation costs, 10 percent on fixed costs and 12 percent on total supply chain variable costs (1).

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Supply Chain Design Centers of Excellence (COE) Drive Increased Benefits with End-to-End Perspective

In order to use supply chain design as a competitive weapon and see significant savings, supply chain design should see across the entire business to optimize the true end-to-end supply chain. Supply chain design COEs can pool talent and technology to provide analysis capabilities to the entire organization. There are a number of important practices that can help businesses nurture COE growth and effectiveness and keep modeling processes and deliverables consistent. Here are a few examples:

Establish a Consistent Method for Identifying and Prioritizing Design Initiatives
An excellent exercise for any business considering a move toward a supply chain design COE is prioritization of modeling initiatives. Executive sponsor(s) as well as representative department heads and analysts should participate. This process is an extremely effective way of promoting valuable interaction and focused discussion among the team (2).

Go After Quick Wins
In order to establish early credibility for an emerging COE, identify quick-win projects that are much easier to implement and still deliver significant cost benefits (product flow-path, inventory right-sizing, DC-to-customer assignments). Quick multi-million dollar wins can gain executive attention and establish early credibility for the supply chain designers.

Get Out In Front of the Predicted Supply Chain Talent Shortage
Many companies assume once they have supply chain modeling software in place the savings will begin rolling in; however, technology is only part of the equation. Industry experts say an understanding of technology and an ability to work in a global environment are increasingly important in the supply chain, forcing managers to look for people with a rare mix of specialized skills. As the supply chain sector grows, the demand for talent is rapidly increasing. On average COEs with staff that have industry experience were over 25 percent more efficient with time and cost savings measures (2).

Pursue Design Mastery
Once you have a team be sure to invest in their growth and development. In addition to giving them powerful and easy-to-learn design technology, build a roadmap for supply chain design mastery for each analyst. Identify the milestones and requirements—and benefits—for each step in their progression from new hire to program leader.

Align COE Goals with Business Strategy
It’s never easy to get everyone on-board, especially executive stakeholders. Business leaders may not be fully immersed in the day-to-day details of the supply chain, and they need information quickly in easily-digestible formats. It’s paramount to work with and win over business leaders on the necessity of supply chain design as an enabler of overall business strategy.

TC Baker is the Vice President of Solution Design for LLamasoft. His team of Solution Designers supports new sales opportunities by mapping prospective client requirements to LLamasoft capabilities. With over 25 years in the advanced planning and optimization arena, TC has held leadership roles in software development, field implementation and project consulting, product management, and sales. He has extensive experience in the integration of best–of–breed planning systems with ERP systems as well as integrated business planning in the process industries. Prior to joining LLamasoft he served as director of sales at Quintiq and has also held roles at WAM Systems, Aspen Technology and Chesapeake Decision Sciences. He is a regular contributor and thought leader on trends and challenges within the supply chain industry. He holds a BS in Computer & Information Science from the University of Massachusetts-Amherst and an MBA from Rutgers University with a focus on Operations Research.

 

1 (LLamasoft Benefit Benchmarking Survey, 2015-2016)

2 (University of Michigan Ross School of Business, 2015)