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Network Optimization and Design - Done Right

How to do a supply chain network study - the right way

Steve Wilson

on 26 April 2010

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Transcript of Network Optimization and Design - Done Right

Why do you do a network study? Reduce Supply Chain cost structure
Improve customer service
Rationalize network due to merger or divestment
Plan for growth
Understand the trade-offs between cost and service What is the best tool? Logic Net
Supply Chain Designer
Supply Chain Strategist
Excel Tool selection is not as important as the knowledge and experience of the user Amount of experience with a specific tool does impact productivity though Determine the Scope of the Study Plants
Inbound Transportation
Outbound Transportation
Inter-facility Transportation Include only what may change or what might be affected by the changes you wish to model You will have to adapt the historical model to represent the current or go-forward configuration Example, you in your data, you have shipments from a plant that closed last month What questions do you want answered Create the model only at the detail you need and no more But make d#*n sure you know what level that is Save yourself time and effort by developing benchmark costs Benchmark costs are what the baseline costs should equal Mistakes I have made, that you can avoid! Know who your "final" customers are and engage them Your customer will pay far more attention to the map output than any table Within the model, math will rule over common sense, so expect it and prepare for it Unfortunately, I've gotten nailed on this more than once. You can't depend on your primarly contacts to know what the ultimate "boss" wants. You must identify who those individuals are and bring them into the major decisions. You will usually need an "optimal" baseline. The historical data will often have significant amounts of "out of zone" shipping. Important stuff not normally covered in the training class Creating the Baseline Model(s) Spend a lot of time identifying and understanding what elements of the network can change Use the "tollgates" in your engagement - all major stakeholders
must agree or at least review on the following:
The network scope - what elements are to be included in the study
The scenarios to be modeled - what elements in the network are subject to change, and what will not change
Benchmark Network Cost
Historic Baseline vs Go-Forward Baseline

Definition: Benchmark Network Cost - This is
the historical cost of operating the network
based on the actual data provided by the customer

Definition: Baseline Network Cost - This are the cost
that the the model generates using the baseline
network volumes and the cost structures built in

Definition: Optimized Baseline - This is are the costs
that the model generates Customer resources you will need:
Historical data
Primary contact who "owns" the study
Time to review output
Knowledge of overall network
Full transcript