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  - June 30, 2014 -  

Supply Chain News: Trip Report - LLamasoft User Conference


Well Attended Event Shows Company's Growing Success; Unilever Segments Its Logistics Costs

  by SCDigest Editorial Staff  

I am just back from the LLamasoft SummerCon user conference on the University of Michigan campus, joining 500 or so other attendees packed into the Michigan League building on N. University Ave. in Ann Arbor.

I was only able to make it for one day, but it was a good one, and this conference - like the company - is continuing to expand rapidly. It was frankly better attended than I would have guessed.

For those that don't know LLamasoft, it started out some years ago doing supply chain network "simulation," then quickly expanded into traditional network optimization, which it strongly (and effectively) pushes as being about "supply chain design." It has also more recently expanded that basic solution to also support inventory optimization, transportation planning and more.

LLamasoft frankly has done some running away from the field in the network planning and optimization space, the result of some backpedaling by some others, smart marketing, and a real focus on building out the solution, putting a level of development into the product that simply had not been seen in this category.

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Barr is among those who believe that the supply chain organizations of many if not most companies are becoming anachronisms and desperately require restructuring.



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Below are some highlights of the keynote and breakout sessions I attended last Thursday:

"Sociobiologist" and radio talk show host Rebecca Costa was the opening keynoter on day 2, and she was entertaining. She noted, for example, that Sloan Kettering hospital in New York City is using advanced analytics for incoming patients. Based on symptoms and readings, the system will say "There is a 54% chance it's X, and 27% chance it is Y," etc. It will then suggest what other information get or tests to perform that will refine and improve the initial diagnosis.

I don't quite have it yet, but surely there is a potential supply chain analog somewhere, if not several.

Costa also said she used a healthcare example when doing some consulting work for Dole foods in recent years.

"The second you pick a head of lettuce, it starts dying," she told execs there. "Your challenge is to get each of them to the consumer before they are dead!"

John Phillips, SVP of Pepsico's consumer supply chain gave a keynote presentation on the intersection of the physical and digital worlds. I have seen it before, and it is very good, updated at SummerCon from when I last saw it in 2013, including some new examples of what innovative companies are doing in the digital realm.

First, I will just note that the scope of what is happening out there in digital marketing and efulfillment is simply incredible, and more than any one person can keep up with. Case in point: I was not aware of the couple of retail start-ups that are rolling out small, highly automated stores with zero people. They are maybe about the size of a single car garage. Consumers choose what food and convenience items they want, and automated picking systems select and deliver the goods after a credit card swipe, if they haven't already moved to smart phone payments.

Not only is it just kind of cool and futuristic, Phillips noted the owners of these stores have complete and real-time visibility to sales and inventory 24 x 7.

We are at an incredible juncture, Phillips said, and stressed that it is critical that marketing, IT and supply chain work closely together to develop strategies, execute programs and initiatives, and respond rapidly as market dynamics change - which they are doing constantly. I couldn't agree more. Digital should be forcing a new level of internal collaboration, given the uncertainties, pace, and level of innovation.

Finally, for fun, I knew that a Michigan florist had been experimenting with drone deliveries perhaps even a bit ahead of Amazon before the FAA shut it down, but I was not aware of a similar and even better example in Wisconsin, where Phillips said a retailer had found perhaps the perfect app: Delivering cases of beer by drone to ice fishermen far out on the lake. The FAA closed that one down too.

Jonathan Boyd of Target gave a fairly straightforward presentation on the different ways the retailer uses LLamasoft tools. But what just struck me was the amazing number of flows such a company might have: finished goods, grocery, refrigerated grocery, pharma, reverse logistics, inbound domestic, inbound international, non-store items (shelving, displays, etc.), and more.

I know retailers and others have been dealing with many flows for years, but can anyone really optimize them with spreadsheets and experience? I don't think so. It requires a tool - and the reward from doing so is big savings.

Target is just now really starting to apply the LLamasoft tool for efulfillment, and Boyd noted that it is a complex problem, especially if you are going to use stores as fulfillment point - it gives you a lot of options to consider. He said a normal network model in the other application areas was one 1 gigabyte of data, while the ecommerce one is going to be like 8 gigabytes worth.

The most interesting presentation of my day there - and one of the most interesting I have seen this year - was from Matt Algar of Unilever, on understanding the "perfect" logistics network.

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First, Algar noted that like most companies, Unilever would get cost reduction targets each year that were sort of arbitrary and often tenuously connected to reality on the road and in the DC. They would do their best of course to hit those targets - but often at the expense of something else outside that year's cost numbers.

So someone at Unilever came up with the witty idea of really understanding and segmenting total North American logistics costs. It started by calculating what its logistics costs would be if it had a "perfect" logistics network - all plants could make all products, everything went out in a full truckload, no expediting costs, etc.

What would those costs be as a percent of what Unilever actually spent in 2013? 56%, it turned out.

It then calculated the cost components that accounted for the difference between the theoretical perfect network and what its costs really were (e.g., network inefficiencies, operating variances, customer unique requirements, etc.), with different categories getting a share until the cost equaled 100% of actual.

With this analysis, Unilever could better understand its true tradeoffs, and where logistics costs could more effectively be reduced. Very interesting - more on this soon.

Jake Barr, former head of Procter & Gamble's supply chain until he retired a short while back, and now running his own consulting firm, gave an inspired presentation on the need to build "agile" supply chain networks.

Now working in a variety of sectors, Barr said really the supply chain problems aren't that different from industry to industry.

"It's about how to integrate, how to lead an organization, and how to deliver breakthroughs," Barr said.

Barr is among those who believe that the supply chain organizations of many if not most companies are becoming anachronisms and desperately require restructuring.

Look how much the environment and requirements have changed over say the last 10 years, yet many companies operate with the same structures they had a decade or even longer ago, Barr noted, observing that this alone was a huge barrier to supply chain agility.

He also is a believer in supply chain segmentation, noting that different groups of customers desire different levels of supply chain integration with their partners - and companies need to be able to segment their supply chain services and teams to be able to match several of these different customers types at once (I believe Barr was channeling some of John Gattorna's thinking here).

It was good stuff.

I had the chance to spend a few minutes with LLamasoft exec Toby Brzoznowski (who played baseball at the University of Michigan, by the way, with several future major leaguers). He walked me through a couple of new solutions being released roughly in conjunction with the conference.

One is a Cloud solution - This will do a couple of things - first, enable solving of larger network design problems faster by leveraging large computer banks, and second (and more interesting), in a sense "democratizing" network design output by unleashing it from the usual handful of planners that run such systems to make it accessible to many.
That, I agree, is a good thing.

LLamasoft also released a new, very cool looking data integration tool it calls Data Guru, which in a sense is a traditional "extract and transform" engine, but is all visual, drag and drop stuff with pre-built connectivity to many data sources.

Since data collection and loading can often be the most time consuming activity in a network design project - and maintenance of such data over time a lot of work - if this new tool makes the jobs faster and easier, it will be a big plus.

It was a good event , and it is encouraging to see so many companies using this kind of tool on a continuous basis.

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