Back in 2008, companies tried to release cash from inventory reductions to respond to the first recession’s wave. But this had some unintended consequences. Roughly 80% of them ended up with more inventory levels. Why? Because they adopted a quick fix, an opportunistic approach which forced them into silo planning and severe departmental disconnection. How could they have avoided this? When you look back, the answer is simple: Integrated Business Planning (IBP) and Optimization. My colleague Marcel has written about IBP and Optimization before, and walked you through some of its real business gains. In this post, I will attempt to explain why demand modeling and planning is an imperative in the IBP cycle and what the symbiosis between sales and marketing looks like within the cycle. Continue reading »
Back in October 2013, Tesla announced that it would start using its own ERP system because traditional ERP systems did not cover the company’s needs. The reason behind their decision, as TechCrunch puts it, was that “traditional enterprise resource planning (ERP) systems did not cut it, [as] the company has a vertically integrated operation that required a custom environment.” The news might be quite dated by now, but it doesn’t cease to be inspiring. In my view, Tesla chose a revolutionary route. They decided to take a DIY approach on the single piece of software that so many companies are struggling with. Their case makes for a compelling example of a company not settling for less than what it needs. Continue reading »
As we discussed it in our previous blog post on Integrated Supply Chain Optimization (ISCO), with ISCO considerations such as demands, materials and capacities are taken into account simultaneously during Master Supply Chain Scheduling (MSCS). Multiple strategic, financial, demand, supply and delivery scenarios are consolidated into one decision process which respects all restrictions, options and priorities. In an effort to explore how the approach works in a real world case, we explored its application at JBS, a world leader in meat processing. The JBS case revealed that ISCO led to a 25% increase in the company’s gross margin. The approach allowed the company’s sales team to identify opportunities from a margin perspective, fully leveraging opportunities that arise from market situations and production capacity.
This is a guest entry by Frans van Helden, Product Lead at ORTEC Supply Chain Design. As a new writer to this blog, I spent some time to think about what my ‘maiden speech’ should be. I would like to share something about my passions. In my personal life, my true sports passion is bicycling, like your prototype Dutchman. I thought to myself: why do I like it? Cycling, compared to walking, goes at high speed. With sufficient training, you can cover long distances as well. A bicycle is easy to maintain, so if something breaks down, you can repair it yourself. And the best part is: you can spend some time outside, giving your mind some time off, enjoying the countryside. Continue reading »
This time I feel like writing about something that I’ve encountered in my work since I joined AIMMS over a year ago. It probably will be a shorter blog post than you’re used to, but hopefully equally inspiring.
In speaking with our business relations, I often find myself wondering how to best explain what optimization is all about. For math people, it’s easy. They will refer to a set of variables (i.e. the subjects you need to decide on) that you assign values to in such a way that the objective function (your goal) is maximized (or minimized) within the boundaries of a set of constraints (restrictions). This is formally true and it’s important to grasp the concept so you can easily go back to the basics.
It’s the time of year to look ahead. I’ve read several interesting articles and blog posts that are trying to pinpoint the developments and trends shaping the supply chain industry this year. They all seem to come from a different angle and while they each make a fair attempt, I haven’t found one that provides a clear view of what 2014 will bring for us. So, I decided to do what I love most: talk with some of our clients and contacts and find out for myself.
As we discussed in our previous blogpost, Integrated Supply Chain Optimization offers undeniable benefits for your organization. The industry is abuzz with talk about this trend as well. ORTEC’S John Poppelaars referred to this approach as the optimization of the value chain in a recent post, and leading supply chain blogger Lora Cecere shared an urgent pitch for horizontal collaboration and planning over the entire value chain on Forbes earlier this month.
Should I make or buy? Should I make to order or make to stock? Where should I keep my inventory, close to my client or in my factory? How much should my safety stock be and when should I reorder? How can I minimize my supply chain costs? Is inventory an asset or a waste?
Companies have always been tormented by these questions. The answer is not hidden in their supply chain network; it is the supply chain network itself. Companies that acknowledge their supply chain as a strategic asset achieve 70% higher performance.* In order to move towards the efficient frontier and achieve higher performance with minimum supply chain costs, a company should understand its uniqueness. Each organization has a unique makeup or configuration. Accompanied by a differentiated brand promise, this configuration can lead to the ongoing evolution of supply chain intelligence. But how can supply chains get smarter nowadays?
What do you do when you seem to have exhausted all options for further inventory reduction, footprint reduction, transport bill reduction, or working capital reduction, and your board demands these things of you once more along with further performance improvements? You’ve gone through all the major Lean programs, adopted 6 Sigma along the way, implemented TQM, deployed the finest forecasting software and tested out multiple vendors only to find yourself at a loss for new options. When you find yourself in this kind of situation, it’s time to move towards an integrated supply chain.
Changing market conditions are driving companies to reimagine their supply chain and push the boundaries of conventional thinking. Gartner’s upcoming Supply Chain Executive Conference will delve into key tactics, tools and strategies supply chain leaders can employ to foster growth and efficiency amid rising competition and economic change.
It’s a theme typical to Gartner and their conferences: very strongly focused on global trends, combined with a top-down view on supply chain concepts, approaches, methods and maturity levels. With 750 analysts worldwide, they are capable of putting structure into almost any aspect of supply chain development. But let’s face it, this wealth of information can also be difficult to process: which insights are applicable to your company, how can you apply them to your own supply chain, what should you prioritize? Obviously, you can’t keep up with all their combined output, but they can help you with that as well…