Expert Insight: Supply Chain Network Planning Thought Leaders Discussion
  March 28 , 2007  

The Rapidly Evolving Role of Supply Chain Network Planning Solutions

  Supply Chain Digest’s Dan Gilmore recently spoke with i2 consultant Ken Justin on the rapidly evolving use of Network Planning tools.  
Justin Says:
The level of executive sponsorship needs to be high enough to ensure the company has the support needed to execute on the actions and policies resulting from the network analysis.

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This article was originally publshed in The Supply Chain Digest Letter, our hardcopy newsletter focused on a single topic each month (February, 2007 issue). To subscribe to the SCDigest Letter (free for qualified professionals), click here. To view of Network Planning and Optimization Resurce page, click here.

Gilmore: Ken, What do you think is the biggest misconception about network optimization solutions today?

Justin: I’d say it’s the lack of appreciation for both the depth and breath of business problems they can address.  Historically, people considered network planning solutions to be facility location studies on the distribution side.  Our customers are utilizing our Supply Chain Strategist and Transportation Modeler products to assess trade-offs in the manufacturing, procurement, market planning, and transportation areas as well. In most cases trade-offs within and between these areas are being optimized and analyzed simultaneously. 

I also think many people view network planning solutions in terms of long term infrastructure plans.  Our customers have been successful using our tools for tactical and operational decisions.  Corporations have leveraged our multi-period modeling approach to generate monthly or weekly decisions in terms of inventory stock-up of policies, various outsourcing needs, purchasing decisions, and the sizing of labor shifts and overtime needs.

Gilmore: We’re also seeing that trend. I’m also curious about success factors. What separates the companies that drive the most value from these tools from those that achieve less value?

Justin: First is the correct level of executive sponsorship.  Network planning cuts across multiple corporate domains or stakeholders, such as procurement, finance, logistics, etc. The level of executive sponsorship needs to be high enough to ensure the company has the support needed to execute on the actions and policies resulting from the analysis.   

Second is the involvement of the stakeholder’s key personnel.  Network planning studies often involve business process reengineering.  The right people have to be involved to represent the value and repercussions of these changes on their own area of operations.  Often, the costs and constraints represented in network planning models are soft, meaning an analyst cannot just pull them from a corporate database. Each stakeholder must be familiar with the assumptions, soft costs and constraints, as well as the sources of data for the hard costs and constraints.

Finally, I’d say in the most successful projects the core analysis team or individual that owns all the data requirements and modeling assumptions is responsible for executing the optimization runs, and provides the primary analysis and insight.  The analysts need to understand the core business and build a strong relationship with the stakeholders.  Companies achieving the greatest value use a team of senior analysts that mentor junior analysts on the best practices in network modeling as well as the nuances of their company’s particular industry domain.

Gilmore: How have today’s solutions made it easier for companies to use these tools on a more continuous basis?

Justin: When Supply Chain Strategist first came to market 12 years ago it provided an intuitive user interface, flexible modeling paradigm, and scenario management.  Today, network planning solutions are as easy to use as a Microsoft Office application.  This lowered the training barriers, and allows customers to gain an appreciation of the modeling assumptions and the process behind making these decisions and suggesting alternatives.  This has led customers to create in-house teams that continually develop and run models and assess trade-offs as the dynamics of their particular business evolved.

The next stage of innovation was compressing network planning decision making from strategic (annual or greater) to tactical (monthly or weekly).  Tactical models provide a stronger business case for companies building an internal core competency in continuous value generation.  From the product side, in addition to building multi-period data models and constructs, scalability requirements changed.  Tactical models can be 10 or 100 times larger than strategic models.  The major area of investment and ingenuity to move to this next generation of tools was the optimization technology.  Multi-processor solving techniques, advanced cut-generation, 64-bit utilization along with general improvements to computer power allowed our users to optimize broader and more detailed business problems. 

Gilmore: What are some of the more interesting or emerging uses for these tools you see your customers adopting?

Justin: The biggest area we see emerging is Contingency Planning and the concept of supply chain resiliency.  In this day and age accounting for risk is a critical part of any supply chain design.  Given the complexity and global nature of supply chains companies need to able to account the risk of natural disaster, political risk, monetary risk, and the risk of terrorism.  A resilient supply chain eliminates single points of failures in the system.  Companies can not simply afford to build supply which minimizes costs for the best case scenario.  Companies need to be willing to pay for some infrastructure or contingencies to account unexpected or rare events. To development strategies and plans in this environment Network Planning models need to introduce stochastic events or uncertainty into the optimization.  There are a number of different approaches which can be used to introduce statistical uncertainty into Network Planning models.  Some can be modeled directly into the data model surrounding the optimization engine.  Some approaches call for the integration to external engine.  One of these approaches is discrete event simulation (or Monte-Carlo simulation). i2 has recently developed a partnership with the company Llamasoft to provide our users with a discrete event simulation engine and analysis tool.  This partnership combines our best of breed optimization technology with their innovative and sophisticated simulation platform.

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