Expert Insight: Network Planning and Optimization
  By Dan Gilmore, Editor, Supply Chain Digest  
  March 28 , 2007  

How to Select the Right Consultant for Supply Chain Network Planning Projects


You will almost certainly use a consultant for Supply Chain Network Optimization projects; here's our guide to picking the right one for your needs

Gilmore Says:
One of the most critical elements of Network Planning project success is to determine the appropriate level of detail for the data that goes into the model. This is a complex and challenging exercise.

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Virtually 100% of companies using Network Planning and Optimization tools for the first time, and even a high percentage of more experienced users, use outside consultants from the software vendor themselves, third party firms, or both, to help them on the project.

In fact, a growing trend among companies that use Network Planning for decision support on a continual basis will established a relationship with a consultancy in which one or more outside consultants will regularly be engaged on an outsourced basis to supplement internal team resources, especially during periods of heavy demand for network analysis

In selecting a consultant to use, there are many guidelines that apply as they would for selecting consultants for any supply chain software project.

There are, however, a few unique elements to Network Planning projects that impact both the need for consultants and how to select one to use on a project.

First, many of these projects begin as one time network re-design projects in which the consultant will use a Network Planning tool as part of their practice. In fact, nearly all Network Planning and Optimization vendors offer programs in which consultants pay a relatively small fee - $30,000 to $50,000 is typical – to use the tool for a specific client engagement. The software vendor hopes, as is increasingly common, that the company will decide to license the tool for on-going use after the initial engagement.

Additionally, one of the most critical elements of Network Planning project success is to determine the appropriate level of detail for the data that goes into the model. This is a complex and challenging exercise, impacted both by what data is actually available about SKUs, demand, costs, etc., but even more importantly by what level of detail for each input is best for the specific problem at hand.

Too little detail when more is required leads to sub-optimal recommendations, because the solver doesn’t have enough data to work with. More common, however, is the waste of time and added frustration companies have trying to chase down details in areas that just won’t add much improvement to the final answer, but will add months of time in developing the model. Example questions about data granularity: should manufacturing costs be modeled at the production line level, SKU family, packaging type, etc.? Or, how specific should the variable and fix cost breakdown be? There are no universal answers to these questions – it depends on what answers are being sought, and the characteristics of a company’s demand and supply profile, cost drivers, and many other factors.

The key, therefore, is to align your need for a consultant with resources skilled in those specific areas.

Below, you will find a list of recommendations and key questions to consider when selecting a consultant for a Network Optimization project. By considering these guidelines, you can maximize your likelihood not only of an ultimately successful project, but also one that is completed in the most appropriate amount of time, and that offers the best chance that the recommendations will be enacted.

As we note in the list, for example, companies need to consider how much support they will need from consultants in convincing executive and functional management that network changes are the right strategy. For example, a project driven by the logistics executive about distribution center location probably has need mostly for strong analytic skills, as the changes will mostly impact just the logistics function. A study that has broad implications for sourcing, manufacturing strategy, and overall supply chain costs may benefit from someone who can help explain the benefits and urgency to senior executives.

Recommendations for Selecting a Network Planning Consultant

  • A mix of one consultant from the vendor and one outside consultant often works well
  • Are you selecting a consultant or a software tool? Many consultants have experience with only one particular package. Is that the one that’s best for you? The specific tool to be used may or may not be important for your project.
  • Make sure the consultant has experience with the specific needs of the project: a firm or consultant with great credentials in determining where to locate distribution centers may be over their head in designing global supply chain strategies involving suppliers and manufacturing. Failure to align experience with the specific project is the most common mistake in selecting a consultant.
  • Similarly, the consultant you are comfortable with now for other work (warehouse design, transportation sourcing, etc.) may not be the right one for your Supply Chain Network Planning project, even though they have a “practice” in this area.
  • Probe the consultant’s thoughts on the “granularity” of the modeling data: this is a key element of project success – does the consultant have a knowledgeable perspective about how the data should be modeled?
  • Will you need support for network modeling on an on-going basis? Some consulting companies/vendors are structured for this type of relationship, while others are not.
  • Do you need an “impact” player? Network design changes can require persuading business and functional owners that the way things are done/viewed needs to change. Do you require a consultant with the persuasive power to help navigate this strategy change – or are you just looking for a good analyst?
  • Ask for resumes with specific project histories for the specific individual consultants that will be working on your project – not just the consulting firm’s client list.

Agree or disgree with our expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondents name or company withheld.

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