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SCDigest Expert Insight: Supply Chain by Design

About the Author

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

February 12, 2013

Three SCDigest Predictions You Should Be Modeling

Supply Chain Digest recently Released its 2013 Predictions: Taking these Predictions a Step Further and Modeling their Impact on your Supply Chain

Dr. Watson Says:

If transportation costs are going up later this year, what are you doing now?
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Over the last two weeks Dan Gilmore has compiled SupplyChain Digest’s 2013 predictions (in Part 1 and Part 2).  In some later articles, I will add my thoughts to the ideas expressed around Big Data, Analytics and Optimization.  And, although we touched Omni Channel distribution, the predictions show that there is a lot more to talk about.

For this article, we will focus on three of the predictions you should model now.

First, Mike Regan predicts that transportation costs will increase in 2013, especially in the 2nd half of the year when new hours-of-service rules kick in and driver shortages are felt. 

This is an easy one to model.  You should understand how an increase in transportation costs will impact your network.  Then, if the impact is large, you should decide what you are going to do about.  For example, will you ship larger quantities in each shipment?  This increases inventory, but decreases transportation costs.  Will you add temporary cross-docks to get closer to your customers?   If you are a seasonal business, will you ship product closer to the final market earlier in the year to avoid the problems in the 2nd half of 2013?   You have many options.  It is important to determine which is best for your business and develop a strong plan.

Second, Mark Wulfraat predicts more investment in warehouse automation. 

Columns by Dr. Watson

Supply Chain by Design: Machine Learning and High Quality Potato Chips

Supply Chain by Design: Simple Models to Solve Complex Fast Delivery Problems

Supply Chain by Design: CSCMP Report - Five Take-Aways on Natural Gas Trucks from the AB InBev and Owens Corning Talk

Supply Chain by Design: CSCMP Report - Six Insights from LLamasoft and JLL

Supply Chain by Design: CSCMP Report - Five Supply Chain Design Lessons from Benjamin Moore and How One is Used by Amazon in their 1-hour Delivery Service

Supply Chain by Design: CSCMP Report - Two Supply Chain Design Lessons from Starbucks CEO

Supply Chain by Design: Four Groups that Need to Step Up to Help Make Network Design More of a Profession

Supply Chain by Design: Top Four Best Practices for Multi-Objective Optimization

Supply Chain by Design: Caesars Entertainment's Customer Data is Worth $1B - How Much is Your Supply Chain Data Worth?

Supply Chain by Design: Using Transactional Data to Estimate Truckload Market Conditions in Near-Real-Time

Supply Chain by Design: Routing Optimization is Hard: Lessons from UPS

Supply Chain by Design: Eli Goldratt's Book "The Goal" is on Jeff Bezos (Amazon) Reading List

Supply Chain by Design: Top Five Rules for Cleaning Data for a Strategic Analysis

Supply Chain by Design: Network Design and Accounting Data

Supply Chain by Design: Sears Case Study - Same Day Delivery

Supply Chain by Design: Three Ways UPS and FedEx Handled Christmas 2014

Supply Chain by Design: Deepen Your Optimization Knowledge Over the Holidays with Free E-book

Supply Chain by Design: Calculating Supplier Lead-Time Variability - Not as Easy as It Seems

Supply Chain by Design: The Myth of the Market Rate and Network Design Projects

Supply Chain by Design: Three Ways the Supply Chain Wastes Big Data

Supply Chain by Design: Three Supply Chain Lessons from the book Scaling Up Excellence

Supply Chain by Design: What to Do About the Rise in Costs Because of the Trucker Shortage

Supply Chain by Design: Modeling Your Competitors

Supply Chain By Design: Just Because the Feature Exists, Doesn’t Mean You Should Use It

Supply Chain by Design: Just Because People are Talking about Big Data Doesn’t Mean it is Clean Data

Supply Chain By Design: Can Western Manufacturing Be Saved: What Does it Mean to Your Firm?

Supply Chain By Design: Optimized Baseline and the "Perfect" Network Design

Supply Chain By Design: Become more Analytics-Driven to Recruit Talent

Supply Chain By Design: Step Up Your Preventative Maintenance with Predictive Analytics

Supply Chain By Design: Demystifying Stochastic Optimization

Supply Chain By Design: More on Big Data in the Supply Chain

Supply Chain by Design: Should You Extend Your Network Design Capability with a Map Portal?

Supply Chain by Design: A New Trend in Network Design: Flow Path Modeling

Supply Chain By Design: Top 5 Skills You Need in a Supply Chain Modeler

Supply Chain By Design: Comment on Biggest Supply Chain Planning Technology Challenges

Supply Chain by Design: Beyond the Square Root of N Rule

Supply Chain by Design: UPS's Christmas Problem Explained in One Graph

Supply Chain By Design: Your One Network Design New Year's Resolution

Supply Chain By Design: 80/20 Rule for Supply Chain Design

Supply Chain By Design: What Makes a Good Inventory Buffer

Supply Chain by Design: Some Things Do Not Change: Cost and Service Trade-Offs with Air Shipments

Supply Chain By Design: The Impact of Natural Gas Trucks On Your Supply Chain Design and Capabilities

Supply Chain By Design: Controlling Inbound Transportation with Inventory

Supply Chain by Design: Three Types of Supply Chain Buffers

Supply Chain by Design: Systems Thinking and the "Limits" of Optimization

Supply Chain By Design: 3D Printing and Robotics - Disrupting the Dominant Supply Chain Model

Supply Chain by Design: Future Supply Chain- Airships and the Physical Internet

Supply Chain By Design: Avoiding Capital Investments - A Hidden Benefit of Network Design

Supply Chain by Design: Three More Reasons the Impact of the New Hours of Service Rules May Not Be So Drastic

Supply Chain By Design: Three Ways to Handle the Lag Time from Modeling to Implementation

Supply Chain By Design: Three Quick Steps for Analyzing Big Data

Supply Chain by Design: What is Big Data?

Supply Chain By Design: Using Optimization to Compare Facilities or Internal Benchmarking

Supply Chain By Design: Four Steps for Thinking About An Optimization Problem

Supply Chain By Design: Don't Let the Term "Optimization" Become a Buzzword

Supply Chain By Design: Supply Chain Models Can Go Wrong - A Different Perspective

Supply Chain By The Numbers: Top Three Ways Supply Chain Models Can Go Wrong

Supply Chain By Design: Supply- and Demand-Centered Modeling: A Follow Up to 2013 Priorities

Supply Chain By Design: Three SCDigest Predictions You Should Be Modeling

Supply Chain by Design: Cost to Serve Modeling

Supply Chain By Design: Top Five Models You Should Build in 2013

Supply Chain By Design: Should You Source from China or the US? Why Not Both?

Supply Chain By Design: Same Day Delivery and Network Design

Supply Chain By Design: Political Supply Chain and Network Design

Advanced Analytics in Supply Chain - What is it and is it better than Non-Advanced Analytics?

At first glance, this would not seem to have a network modeling implication.  However, if you are investing in warehouse automation, network modeling is even more important.

Several years ago, we were involved in a project that came back with the big recommendation to close a warehouse that had just received $11M in renovation and capital equipment.  This was a painful situation—painful for throwing away a $11M investment, and painful for the managers that made the decision to invest in the facility.  You don’t want to find yourself in that situation.

Network modeling can help you determine which warehouses you will keep for the long term and the order in which you should invest.

Third, Gene Tyndall has a view that firms realize that they do not a have a clear supply chain strategy.

In this case, network modeling can play a role in this discussion.  For example, if the strategy is to provide the lowest cost or fastest delivery, network modeling can help you determine how close your current infrastructure is to the ideal and what needs to change.  Also, network design can help you understand the cost and infrastructure impacts of different strategies.  It may even suggest reasonable trade-offs.

Final Thoughts

Predictions are important because they help guide our planning. But, you should take the predictions a step further and make sure you model them so you can quantify the impacts and develop appropriate plans.

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