Changing the Basis of Competition with Supply Chain Design

Changing the Basis of Competition with Supply Chain Design In fact, current Supply Chain Management systems use the decisions m... 2:23 AM

Changing the Basis of Competition with Supply Chain Design

In fact, current Supply Chain Management systems use the decisions made during Supply Chain Design as inputs.

These “up front” decisions include:

• Inventory Levels

• Inventory Locations

• Assembly network structure

• Distribution network structure

• Raw material and packaging supplier selection

• Desired raw material, work-in-process (WIP), and finished goods inventory (FGI) availability

• Desired raw material, WIP, and FGI costs

• In-house vs. contract manufacturers

• Logistics supplier selection

Today, most companies use rules of thumb, intuition, and spreadsheets to make these key Supply Chain Design decisions. These methods are neither scientific nor capable of accounting for real-world complexities and inter-dependencies. Further, they are not agile enough to keep up with the changes and uncertainties inherent in business today. The optimal design may change when the forecast is revised; a part, supplier or contract is changed; a new product is introduced; or logistics issues arise.

Inventory theory is simple: hold inventory at the cheapest point possible, except when you can’t. Figuring out  when that is and what to do then is the trick. Supply Chain Design pinpoints the solution.

The theory and goals for supply chain optimization remain constant: minimize costs to maintain a high service level. The Supply Chain Design software – and the business decision processes it supports – is the breakthrough. Only recently have new types of systems come onto the market that can simultaneously optimize service levels,

inventory levels and policies and supply chain configuration based on total costs. With a fundamentally different type of optimization engine, Supply Chain Design software can optimize a detailed complex supply chain model and not bog down in processing for hours or days.