“Supply chain management (SCM) is a rapidly growing area of
study—and network design is one of the fastest growing areas within SCM”
—Bill Nickle, Principal, Nickle Consulting
As success of the supply chain is one of the most crucial
factors of an organization’s success, supply chain network design is one of the
important aspects of it. Strategic network design is about selecting the right
number, location, and size of warehouse and production facilities. At the same
time, firms will need to determine the territories of each facility, which
product should be made where, and how product should flow through the supply
chain.
Typically, network
modeling may not produce a single correct answer. Instead, strategic network design
planning requires constructing a logical mathematical model of the existing supply
chain, using powerful optimization engines to sort through the seemingly
countless possibilities to return the optimal solution, and then analyzing the
results of many different scenarios to support a good operational decision. There
are commercially available software takes care of the calculations.
For an example, LLamasoft has a good tool for supply chain
network optimization. The below video can provide some insight:
Mobile supply chain modeling app - Supply chain Sharper
where one can use own metrics for specific organizations cost structure. It
automatically GeoCodes different sites all over the world and provide results
immediately. LLamasoft has supply chain management suite which could be
integrated with the mobile app and analyze data.
However, it is important
that the decision maker/the modeler understands the functionalities of the
optimization engine is doing in order to construct better models and deliver
better results.
A typical network design
analysis should be able to answer the below type of questions:
1. How
many warehouses can provide optimal capacity?
2. How
large the warehouse should be? What would be there Geographical locations?
3. How
many plants or manufacturing sites should we have, where should they be, how
large should they be?
4. How
many production lines should be optimal?
5. What
products should be made and which warehouse they should be kept in?
6.
Which products should be outsourced?
7. What is the impact of changes in demand, labor
cost, transportation cost and commodity pricing on the network?
8. How to ensure the proper capacity and flexibility
within the network?
9. How can we reduce the overall supply chain
costs?
10. If a certain area is affected by natural
calamity, will our rest of the capacity can cover it and meet market demand?
How business Analytics is becoming critical to supply chain
and helping business to shape up and function optimally:
IBM’s webinar on how analytics can manage change impacting
supply chain:
A complete distribution & manufacturing case study of MARS(
multiple products such as chocolates, vending machines – family owned business)
:
The supply chain network
design problem is just as much about geography as it is about business strategy.
Along with Geographical factors, a good model should consider transportation
cost, Service level, risk, local labor, skills, materials, utilities, taxes,
carbon emissions. The nodes of the network would be Hub Warehouse or Central
Warehouse, Distribution Center, Cross-Dock, Plant-Attached Warehouse, delivery
points, receiving points, and service area/city/state and retail stores. Based
on these factors and nodes the baseline model has to be built and then an
optimize baseline model should be built which is a possible solution.
Profitpoint network design tool result for a small supply chain network:
http://www.profitpt.com/software/network-design/network-design-software/
There are three levels
of challenges in a supply chain network remodeling:
- · The first challenge is to get different teams such as Sales Team, Operations Team for Warehousing and Production, Finance Team, Logistics team in one room and align & aggregate their specific goals.
- · The second challenge you have is collecting and validating data from all these different parts of the organization.
- · The third and final challenge after the modeling is done and the decision has to be taken.
The final step of actually
implementing the results can be a major challenge in and of itself. People might resist to changes. It is
not always easy to make everyone to see the big picture and the value these changes
will bring. Proper involvement from all of the previously mentioned teams
within an organization should be in place.
Other than cost, demand, time optimization, customer experience what might lead an organization to remodel their supply chain?
Sources:
Great article. Role of Analytics is very important in supply chain management. It is true that in future businesses will need to sort out challenges in warehouse, logistics and supply chain. Hence, analytics will play an important role. By making use of supply chain consulting experts like Global4PL, businesses can streamline their distribution network to gain efficiencies, effectively analyze their supply chain strategies, improve customer service and better utilization of assets and capital.
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