Why Businesses are Elevating Supply Chain Design from a Project to a Core Business Process
by John Ames
(This was originally published on Logistics Viewpoints, here)
When I speak with new customers, many of them tell me how in the past they viewed supply chain design as an optimization project that was completed every three to five years, often by third-party firms. Now these large, multi-national businesses are bringing supply chain design in-house and adopting it as a core business process. Why? What’s the value of making supply chain design a core business process and what can’t you achieve by just doing a series of isolated optimization projects?
Supply chain design is the practice of creating living models to represent the existing structure and policies of the end-to-end supply chain, optimizing to identify a better future state supply chain and continuously running what-if scenarios to test new strategies and react to changing market conditions. Attempting one-off optimization projects to determine the design of an organization’s supply chain is likely to fail for several reasons. Here are just a few:
- Projects lack the benefit of process consistency and standardization and readily-available data
- With no established design team and skill set, different analysts must relearn modeling skills for each project. If using an outside firm, the process is even more protracted due to lack of continuity and understanding of the business
- Initiatives lack adequate resources and funding and management, or may overlap with other isolated projects in other functional areas or geographies
Here are some tips for how to elevate supply chain design from an annual project to a core business process:
- Establish a shared service center/center of excellence (CoE): Supply chain design should be able to see across the entire business to optimize the true end-to-end supply chain and not just a specific business unit or business function. Shared service centers, or supply chain design centers of excellence, can pool talent and technology to provide analysis capabilities to the entire organization. This organizational structure can help the group avoid the pitfalls of local bias or politics and remain focused on data-driven business solutions.
- Go after quick wins: Even though supply chain design can identify major breakthroughs in cost savings or service, some recommendations can be disruptive and time-consuming to implement (open four new DCs, rationalize 200 products, etc.). In order to establish early credibility, many companies will identify quick-win projects that are much easier to implement, but still deliver significant cost benefits.
- Put parallel focus on game-changers: While one part of the team is focused on tactical wins, another should be trying to break down historical legacies to explore what is truly possible through modeling, optimization and analysis of the end-to-end supply chain. When encouraged, supply chain designers can socialize “design thinking” and help remove pre-conceived business constraints and design new greenfield supply chain operations that could lead to game-changing new business practices and competitive advantage.
- Get advice from companies at different stages of CoE development: Many other businesses in your networking circles, supplier community or common technology users may be excellent resources for supply chain design CoE experience and advice. Ask supply chain modeling software vendors about the design community they support and how you can get involved with other users. Many will be happy to act as a sounding board for your ideas and share the lessons they learned along the way.
- Get out in front of the predicted supply chain talent shortage—but be selective: The demand for talent is rapidly increasing and the availability of qualified supply chain professionals is dropping. Be aware that it may become more challenging to recruit for your CoE, but don’t hire just anyone who has the right degree. Successful team members should be effective problem solvers—people who think analytically and are natural researchers and implementers of new processes.
- Extend your modeling to the cloud: A SaaS-based modeling platform can give supply chain designers a collaborative platform to expand the value of supply chain modeling throughout the organization. Web-based access to models and data can be leveraged by multiple stakeholders within the company and can support executive dashboards and short-term planning. Plus, the cloud can also be a centralized location for all models and data so that the information needed is always available, current and accessible to the entire team.
- Fill gaps in modeling data with cloud-based reference data: Your supply chain modeling software provider should offer reference and benchmarking data you may lack, such as transport costs, facility costs and transit time estimates. This will speed the modeling process and improve the accuracy of results.
- Use a data blending and analytics tool for automated model building: Automated access to ERP and other enterprise data through a data analytics tool can significantly reduce the time required to gather, cleanse and blend disparate data and ready it for modeling use. With established connections to enterprise data sources, you can essentially create a “library” of models for repeatable use.
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Ultimately, success in continuous improvement through design requires a balanced consideration of people, process and technology in a supply chain design center of excellence (CoE). Businesses that adopt a CoE have the ability to visualize and optimize the current end-to-end supply chain, design the supply chain needed for the future and test new potential supply chain configurations for continuous improvement and innovation. You can read more on the supply chain design centers of excellence resource page.
John Ames is Senior Vice President of Solutions at LLamasoft. John’s career in supply chain has spanned over 15 years and his expertise spans across numerous technologies including demand planning, inventory optimization, finite capacity scheduling, product lifecycle management, and network design. John has worked with both large and small consultancies to craft partnerships that best serve the end
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