Dr. Michael Watson, one of the industry’s foremost experts on supply chain network design and advanced analytics, is a columnist and subject matter expert (SME) for Supply Chain Digest.
Dr. Watson, of Northwestern University, was the lead author of the just released book Supply Chain Network Design, co-authored with Sara Lewis, Peter Cacioppi, and Jay Jayaraman, all of IBM. (See Supply Chain Network Design – the Book.)
Prior to his current role at Northwestern, Watson was a key manager in IBM's network optimization group. In addition to his roles at IBM and now at Northwestern, Watson is director of The Optimization and Analytics Group.
By Dr. Michael Watson
March 26, 2013
Supply Chain Models Can Go Wrong- A Different Perspective
Michael Schrage’s book, Serious Play, offers us Insight into Thinking about our Supply Chain Models.
Dr. Watson Says:
…modeling isn’t some magic activity that is done by technical folks in the corner or that you completely outsource to consultants.
In a previous post, I talked about ways a model can go wrong. In this post, I wanted to give you a different perspective.
Models can go wrong if you don’t think about them in the right way. That is, modeling isn’t some magic activity that is done by technical folks in the corner or that you completely outsource to consultants. To get the most of out of modeling, you should think of it as a chance to learn about your business.
Michael Schrage, in his book, Serious Play: How The World’s Best Companies Simulate to Innovate to Win, says it much better than I could. (This book is worth a read for the general business reader.)
The book is about the prototypes an organization builds to help make decisions. And, a network design model is a prototype of the supply chain. So, many of the lessons apply directly to the supply chain team. And, when you read the book, it makes you wonder why a company wouldn’t want a model of their supply chain.
One of his key insights breaks a myth that it is a good team that creates a good prototype. Instead, he argues that it is a good prototype that creates the good team and leads to discussion and insight. He goes further to say that what is interesting about prototypes is not the model themselves, but what the models teach us about the organization.
Using a network design model as an example, he would ask questions like who gets to build the model, who gets to see the model, who gets to make suggestions, when do people get to see the model, do customers get to see the model, or do suppliers? All these are good questions for a team building a supply chain model.
The book is full of different ideas you can apply to your modeling efforts. Here are a few I pulled out:
“Waste as Thrift” (pg 100-101). Once you have a model in place, it is relatively inexpensive to test ideas. If you don’t “waste” scenarios, you are really risking wasting real money when you implement an idea without testing it.
“Bigger Isn’t Better” (pg 131-137). The object of the prototype or model isn’t to be as complex as reality. Instead, the model needs to be understood by those who need to make decisions.
“The act of designing the model…is essential to understanding their use” (pg 168). He argues that there is value in putting the model together. We see this as well and think it is well worth your time to understand some of the underlying math.
It is important to create “conflict” with the model (pg 173). The “conflict” is to set up the model to expose important trade-offs like cost versus service. In network design, multi-objective optimization is great at bringing out those trade-offs.
“A prototype should be an invitation to play” (pg 208). A great way to get value from a model is to play with it try new things and see if you can come with some counter-intuitive solutions that change everyone’s thinking.
Final Thoughts
When doing modeling, you should think about the value you get by going through the modeling exercise, not just the final answer.
(This post is modified version of a book review I did of Serious Play.)
Michael Schrage, in his book, Serious Play: How The World’s Best Companies Simulate to Innovate to Win, says it much better than I could. (This book is worth a read for the general business reader.) 