Tuesday, October 1, 2013

Transportation Simulation

Last week Oracle hosted its OpenWorld Conference in San Francisco, CA. Too little surprise, big data was a leading buzzword at the event. One use of big data has come in the form of transportation simulation programs. These systems fill the void left by strategic design tools (great for long term planning) and transportation management systems (great for very short term planning). However some supply chain analysts have wondered what benefits an intermediate program such as the simulation can bring if network strategic design tools and transportation management systems are already well established within the industry. In contrast to these two tools, transportation simulations unearth answers to the "should have, could have, and would have" situations a company may and should ponder over. Transportation simulations incorporate large amounts of actual historical data to examine what would have occurred if changes to the shipment logistics were different, providing strategic plans at the monthly level. A practical example for the use of this technology is Walmart's PopTart/Hurricane Katrina correlation mentioned in our reading this week.

Benefits of transportation simulation include:

  1. Testing/reviewing/questioning oversimplified transportation policies ("Why is it that we continue to use 3 freight trucks instead of 4 for shipping district X?")
  2. Examining the effects of alternative shipping windows ("How would customers respond to longer delivery times if it prevent rates from rising?")
  3. Fleshing out details to decision makers that justify changes in costs ("This is how would we respond to the sharp price increase from Shipper X because our history shows that...)
For a company interested in continuous improvement (e.g. Toyota), purchasing and implementing a simulation tool is essentially a no-brainer. However, what will it take for small businesses with less capital to consider implementing transportation simulation? Will a halo effect from supply chain masters like Apple, Walmart, and Dell drive smaller companies to try to copy what worked for them? Or will it take shipping companies like Fedex and UPS offering a simulation product as an add-on service to push companies towards it?

Additionally, what will a widespread implementation of transportation simulation software mean for long term strategic design tool? Will simulation push them out of the market?

1.) http://www.forbes.com/sites/stevebanker/2013/10/01/oracle-openworld-new-value-chain-solutions/
2.) http://logisticsviewpoints.com/2013/06/24/transportation-simulation-who-needs-it/

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