Welcome to Supply Chain Design in The Cloud. I’m Toby Brzoznowski co-founder and Executive Vice President of Llamasoft. Today we’re going to take a look at how cloud based technology is really helping evolve the role and the relevance of supply chain design throughout the supply chain industry.
It all starts really with looking at the market itself, there’s a whole lot of factors out there that are causing volatility and change. A lot of those things company have no control over. Things like changing regulations, fluctuations in currencies or fuel costs, commodity price fluctuations. They know that the changing dynamics of demand, people want products differently than they want the products delivered to them, even a few years ago. There’s constant disruptions out there whether it be disruptions based on weather events, floods, hurricanes, natural disasters, but there’s also disruptions based on things like short strikes, capacity shortages. Those are things that you can’t control.
At the same time there’s things that companies are doing to themselves, internal factors. They’re acquiring constantly, they’re trying to go through acquisition and merger, they’re adding more and more SKUs all the time, that toothpaste that might have had one flavor and now has 25. There’s pace in which they’re introducing new products is constantly evolving at a much more rapid pace than it ever has in the past. Companies are going after new markets, emerging markets like China, Latin America. They’re going after e-commerce strategy trying to figure out how do I capture more business through the internet.
All those changes whether it’s internal or external lead to a whole host of questions that supply chain management folks have to answer. The questions about things like the structure of the supply chain, how many facilities do I need? Who should I source from? Where should those facilities be located? It’s things about inventory, where do you stock inventories? Is it close to the customer? Should I be stocking it upstream? There’s transportation questions about how many assets do I need? How should I route this products out to market? There’s questions about products need to flow into each market. What port should I be using? What facility should I be using to get those products to market?
There’s constant questions about the service and the capacity. If I make a change to the supply chain, how is that going to impact my on time delivery? How is that going to impact my inventory levels? All those changes, all those questions require companies to create living models of their supply chain. Models that are really dynamic that they can constantly go back and ask these what-if questions in a digital world, before they actually make the changes in the real world. The companies that create this supply chain design platform are really set up to have a competitive advantage.
There’s four reasons that we’re looking at out there as to why supply chain design as a platform, as a business process, is really adding value. The first is you can actually just see what’s going on when you have those models, you can actually visualize exactly how the products are flowing through the network. That visualization gives you a sense of really what’s happening and where there might be some inefficiencies. The second is once you have those models built, you now have the ability to go to them with what-if scenarios, you can constantly run what-if scenarios, what-if I add a new supplier? What if I bring on this new customer? What if I introduce this new product? How is that going to affect my supply chain? How is that going to affect my cost? My service?
Speaking of cost and service. Now companies can use these models to actually evaluate the balance between things like cost, service, risk or sustainability. There’s certain parts of the business where companies want to really optimize for cost. There’s other areas of the business where they want to make sure that they have the absolute best service, products available all the time for their customers. Having the ability to model those things and do the trade-offs, that’s a key factor for them and it changes over time. In auto company, five years ago, was optimizing for cost, just trying to reduce cost as much as they could, now the consumers are back they’re optimizing for service, trying to make sure that they have cars available that people can buy.
The last thing to really think about is when you have a digital model, now you have the ability to more rapidly react to disruptions, to things that you can’t control. If I do have a flood in Thailand, I can very quickly go turn-off that facility and take a look at what are my alternatives? How do I suddenly change the way in which I source those products or change the way in which I flow those products out to my customers?
With the right people, process and technology, the design of a company supply chain can actually become one of the biggest competitive advantages. Before we take a look at new technology, specifically cloud based technology, it’s important to take a look at how modeling and analysis has been done historically. Historically supply chain design has been done on a desktop machine, on a laptop. An analyst would have their own machine in which they would build models. There’s always been limitations to those desktop modeling based approaches. First of all, it’s scalability, it’s the ability to run large models. The data itself is just getting more and more available and more and more relevant, there are limitations to what you can run on a desktop machine.
The second thing is, as an analyst, you want to run a lot of scenarios. To run multiple scenarios on a single machine it just takes time. The third thing is that analysts, when they’re working on a machine, are on an island. They have very difficult time collaborating and sharing that information with other people. The fourth thing is, it’s difficult to know, what other analysts are doing throughout the organization, especially as supply chain design as a business process is starting to become something that’s spread throughout the entire organization. Different geographies, different business units.
These four areas are really the keys to where we see the evolution towards SaaS-based supply chain modelling. The laptop, the supply chain designer on a PC isn’t going away any time soon. The browser based approach to creating those models isn’t necessarily out of standard yet, that’s going to bring everybody 100% towards a cloud based solution. But, what the cloud does is enhance that modeling’s experience and it enhances the entire value of the supply chain design process and creates a platform for which people can get more advantage out of their supply chain design teams.
There’s four main areas that we want to consider. One, scalability, two, mobility, three, knowledge management and four collaboration. Let’s first take a look at Scalability. Let’s say I’m an analyst and I want to run 20 different scenarios on different assumptions, different demand assumptions. Each of those models on my machine takes 10 minutes. Quick math, if I’m running those on my machine one at a time, that’s 200 minutes that I’m going to have to wait before I can compare the results and start to come up with some conclusions. With a cloud based technology, I could basically hit run and let the cloud spread out those 20 scenarios across 20 cloud based solver machines. Run them all in parallel. I’m going to get my results back in 10 minutes as opposed to 200. Furthermore I might even get them faster because the cloud based machines might be optimized for speed and that 10 minute run on my laptop might only take 2 or 3 minutes in the cloud.
The second thing to think about is Mobility. I’m an analyst, I’m constantly on the move. I’m going through an airport, I get a call, my manager needs to see a couple of new scenarios. Do I either fire-up my laptop, try to get those to run, but I’m only going to be running them as long as my laptop is up and turned on. I want to get on the plane. If I can open up a browser, I could access those models that are stored on the cloud. I could kick-off five new scenarios, hit run, close my browser and go about my business. That’s going to drastically improve the efficiency. I can do that from my mobile phone, I can do that from a tablet, I can really do that from anywhere. Furthermore I can also start to share those things, create new reports, create new graphs and share that with a larger group throughout the organization.
As I’m doing this, what’s really interesting is I’m storing that information in an essential location. A lot of our clients, a lot of the people who do design, don’t have one single person or one single location, they’re global companies. Global companies operate in all different regions, they operate in different business units, different geographies. Analysts are operating pretty much around the clock in these different locations. The challenge in the past has always been companies couldn’t necessarily leverage what have been done in other regions or leverage what have been done historically by those analysts in order to improve the operations.
The Knowledge Management piece of the SaaS-based application is extremely important. Consider the fact that I could, as an analyst, walk in one day and have a new assignment that says “I need to do an inventory analysis for Western Europe” I could walk into a SaaS-based machine environment, type in a quick search and say “Inventory optimization Europe” lo and behold, I might be able to find that three different projects have been worked on in the last two years. What I can find is here’s the actual models that were used, here’s the people who worked on them, here’s their project plans that they uploaded and stored, here’s the timelines that they used, here’s actually the executive presentations that they delivered to the management team as to what the results were.
All that information is going to give me a launching pad to start my analysis with a lot more information that I had in the past. It’s going to streamline and drastically speed up the analysis and it’s hopefully going to keep me away from some of the mistakes that people have done in the past. That knowledge management piece, I look at as almost like the PLM to the CAD, a CAD being a traditional design and modelling, the PLM, the product lifecycle management, being this new SaaS-based supply chain design platform.
The fourth piece is Collaboration, now that all these models are shared and synced online, as analysis is going on, you can start to get more people involved. Traditionally, if I’m an analyst and I want to share some results with my management team, I’m taking a lot of time to basically go into my system, create screenshots, copy them into a Power Point presentation, walk over, present these results to the management team or email specific reports or results that go around or if there’s certain people within the organization that maybe want to just run a couple of scenarios on their own. But unless they have the modelling tool on their machine, they’re really at the mercy of those analysts so they have to get in line with everyone else before they run the models.
By adding this different classes of user base that can all leverage the same models, you start to expand the relevance, you start to expand the use cases and the accessibility of these models. For instance, I can have a viewer account in a SaaS-based environment and I could log in and I could get dashboards and reports on the three projects that my teams are working on. As a planner, I want to run two new scenarios of considering a new supplier that I might be sourcing from for this product, maybe I’m thinking Asia, it might actually be Latin America or Mexico. I want to see, if I were to select each of those different scenarios, what is that result in cost to serve going to be. In giving those people just through a single browser, the ability to leverage models that the core analyst have used to run their own scenarios is a great way to increase the usability and the relevance of these models.
That collaboration piece is one of the key issues I think that a SaaS-based technology can provide. If we were to go back and take a look at the way in which supply chain design is evolving today, the tools themselves, the desktop tools, are getting more and more powerful, the models themselves are getting bigger, they’re getting more complex and the analysis is happening much more frequently because of the volatility and change that’s out there. Standing alone on a desktop you’re limited, you’re limited in the size of a model that you can run, you’re limited in the number of scenarios that you can run, you’re limited in the ways in which you can maintain that knowledge going forward and share it with the rest of your organization.
The SaaS-based technology on top of the modeler, on top of the designer, basically adds all of those elements, the scalability, the mobility, the collaboration and the knowledge management. Those things really make supply chain design much more relevant in a true business process and it becomes a platform for which companies can use supply chain design to create a competitive advantage. If you’d like to learn more about SaaS-based supply chain design or any topic related to supply chain design, visit our website at llamasoft.com. I appreciate you taking the time today with me, stay tuned for upcoming webcasts.