The typical business or Supply Chain operates in a world where the “new normal” is increased instability, brought about by a multitude of causes. Supply Chains must become more agile, resilient, automated, and efficient and this is also true for the production. environment.
Many companies are challenged by cumbersome processes to reschedule production plans, high inventory and capital tied up in stock, low level of automation, no simulation possibilities and a lack of overview and a lack of one common production plan.
Cases
Absolut company
An increased production complexity made The Absolut Company look for a better and more efficient way to manage the production of the most exported food and beverage product in Sweden. With the purchase of the company from the Swedish government in 2008, Pernod Ricard initiated a transformation of the brand. This had a large impact on the manufacturing process. Check out the case here.
Orthex company
Orthex Group, a leading manufacturer of household products in the Nordic, operates in a sector where the customers have high demands on short lead times and on-time delivery. When unexpected large orders are common and the company growth increases Supply Chain complexity, it puts pressure on the production planning process and the planners involved. By implementing technology Orthex has been able to take a big step towards 100% planning control Check out the case here.
Understanding inventory optimization is key if you want to optimize your Supply Chain with technology. In this blogpost we will look into the details.
Today’s consumers demand more options and greater variety. Trends change quickly. The result is that companies are carrying more slow-moving items with irregular, intermittent demand patterns. Traditional ABC inventory planning, developed in the 1950s, just doesn’t work in this world. Instead, we suggest to use inventory optimization software. It should use self-adaptive demand and inventory models to automatically define the optimal mix of inventory across the multi-echelon Supply Chain. That way you can achieve aggressive service level targets while minimizing inventory and reducing costs, at the same time. As a company you are able to manage slow-moving and intermittent demand items more effectively.
The model is highly reliable because of the proprietary analytical relationships between inventory and customer service levels, even for very slow moving and intermittent demand items. This allows the system to optimize even very large assortments, including products in the “long tail”, balancing inventories across different locations and different levels in the bill of materials (BOM).
Meet high service levels while minimizing inventory
Instead of creating a “one-size-fits-all” inventory mix within item groups defined by rudimentary classification criteria, the inventory optimization approach differentiates service and inventory targets across products, bill-of-materials levels, and distribution network locations to most efficiently meet desired customer service level objectives.
Free up working capital
By applying advanced modeling and artificial intelligence (AI) to optimize inventory at the individual SKU and location level, you are typically able to reduce overall inventory levels by 10-30%. Less money tied up in inventory means you have more cash available for better uses.
Inventory modelling
The inventory modeling technology is capable of eliminating the gross approximations of traditional inventory management, creating very reliable relationships between average inventory and service levels for each SKU and location. This allows the inventory optimization solution to define the optimal inventory mix across products and network to meet service targets at the lowest cost.
Service-driven optimization
Unlike ABC inventory planning, which has an operational perspective, service-driven inventory optimization centers on sales, marketing, and customers. It uses categories called “service classes” that sales and marketing people can easily relate to. Then it optimizes every SKU-Location against a target service level for each service class. The end result is an aggregated service class goal with the lowest possible stock investment.
Multi-echelon inventory optimization (MEIO)
To truly serve the end customer, the entire network–from raw materials suppliers and factories through distribution centers and wholesalers–needs the right items in stock. The technologies which we favor suggests optimal inventory levels at each stage of the supply chain, simultaneously balancing across multiple echelons, locations, and different Bill-of-Material (BOM) levels. It finds the most globally efficient balance between upstream and downstream inventory while optimizing safety stocks. It supports centralized demand planning, lowers costs across the Supply Chain, and streamlines operations.
Probabilistic forecasting
The probabilistic forecast provides the foundation for inventory planning, and helps manage the risk that comes from demand volatility by providing a range of possible values with their probability of occurrence. Advanced machine learning enhances traditional demand forecasts by modeling internal sources of noise and incorporating the effect of external data.
Understanding inventory optimization is key if you want to optimize your Supply Chain with technology.
If you want to know more about Supply Chain from an end-to-end perspective then you can always check out this online-brochure or download our whitepaper via the below link.
1. Getting started with a modern approach to end-to-end planning
Understand the basics of end-to-end planning (whitepaper)
End-to-end Supply Chain planning is about bridging the gap between operations and business plans. It is also about staying in control. Check out and download the whitepaper right here.
You can also read a shorter blog post on what Supply Chain planning is right here.
Do you also have unnecessary items in stock? (Trend report)
Did you know that every fifth item in stock is unnecessary? We made a report based on the 400 largest companies in the Nordics. Learn more about our findings and what you can do to ensure that this is not your company. You can download the report here.
2. Understanding more about the details
Understanding inventory optimization (blog post)
You can achieve aggressive service level targets while minimizing inventory and reducing costs simultaneously. Learn more about how right here.
How an end-to-end Supply Chain planning approach can benefit the business
Having an end-to-end Supply Chain planning approach can turn out to be a competitive advantage in the market. Though, to leverage your Supply Chain for a competitive advantage, it is important to utilize technology to add business value. In this blog post, we will share how it can benefit the business strategy.
Are you going to use a digital twin? (blog post and webinar)
Looking to learn more about a digital twin and how it can help you on your end-to-end Supply Chain planning journey? Check out these resources on the digital twin right here. You can also watch a webinar and read about SKF, who made a digital twin part of their core journey and won the Gartner Chainnovator Award in the Industrial Segment. Optilon supported them all the way – and still do.
Why ABC inventory classification is old school and not optimization (blog post)
ABC inventory classification has been around so long that most planners assume it’s the only way to segment inventory. In fact, it’s not. And it’s not even nearly the best way. Read more in this blog post.
Is the working relationship between operations and marketing an area for optimization? (blog post)
In many companies, the working relationship between operations and marketing is challenging. This is where technology within promotions planning can help. Promotions planning is about bridging the gap between operations and marketing. Read more in this blog post.
3. Check out these great cases:
- Kronans Apotek increased service level with a centralized planning approach. Read more in this customer case.
- Thule increased service levels and reduced inventory. Read more in this customer case.
- EET Europarts feel they are in control with a new approach to Supply Chain planning. Read more in this customer case.
4. Get a brief product demonstration right now
This brief product demonstration explains the core capabilities of the service-driven planning software we provide with our partner ToolsGroup. The video also describes why it’s different and better than traditional planning solutions.
It covers:
- Demand modeling and forecasting
- Promotions planning
- Multiechelon inventory optimization
- Replenishment
5. Finding the right partner
Supply Chain organizations must rapidly assess new digital strategies and Supply Chain planning technology solutions to accelerate digital business. At the same time, they need to evaluate and identify automation opportunities while supporting organizational change. How do they stretch their organization’s current way of thinking and operating while simultaneously delivering on speed and flexibility? Get some fruitful advice in this blog post.
We are here to help you choose the right journey
Our engagement model shows you how we work together with our clients. We want to ensure that you get a humble, engaged, and committed solution delivery that solves your business challenges. Learn more about how we work right here.
Are you heading out on your Sales and Operations Planning journey or have you already embarked on it? This ressource will provide you with lot’s of great content which hopefully can inspire you, to take your Sales and Operations Planning approach to the next level.
1. Getting the journey started
The basics of S&OP
Everyone has probably heard about S&OP, but do you really know what it is? In this blog post we provide you with the basics on S&OP. Read more here.
What value do you get from S&OP?
Like any other business initiative S&OP should be challenged on value impact. In this blogpost we would like to provide you with some insights. Read more here.
Digitalizing the S&OP process untaps further potential
The digitalized version of the S&OP process is recognized to further increase forecast accuracy, as well as reduced inventory investment and stable/increased service level. Read more here.
The myths and realities of Sales and Operations Planning
Chekcout this webinar which is a dynamic discussion of what S&OP is and is not. Listen or watch it here.
2. The details
Bring strategy back into S&OP
It is time to bring strategy back into S&OP. But how? Learn more in this webinar.
Your Supply Chain design checklist can be downloaded from the bottom of this page. Before you head down to that section, perhaps make a recap of the benefit’s of using advanced Supply Chain technologies for Supply Chain design first.
- Make more automated decisions
While most global Supply Chain-reliant companies have already embraced the power of data and advanced analytics across their company, the vast majority have been working with out-of-the-box tools cobbled together with in-house applications or spreadsheet-based solutions. Advanced technology can help the Supply Chain use mathematical solvers and algorithms to find the best decision or decisions for a given business problem within a defined set of constraints.
- Quicker deployment to users in the organization
Advanced technology offers the possibility of creating a personalized experience. With apps, you will be able to create a tailored solution with the appropriate user experience for anyone in the organization to facilitate democratized, AI-powered decision-making.
- Gain proactive insights
Leading companies can apply advanced technologies to fundamentally rethink and transform their Supply Chain, enhance their real-time understanding of activity in complex supply networks, and leverage continuous scenario planning to optimize the balance of cost against risk and agility of their network footprint.
- Continually revisit the Supply Chain design
In other words, by adopting new technologies and the practice of continuous design, companies can reduce risk, improve resilience, and turn their Supply Chain challenges into a competitive advantage. By applying advanced algorithms, companies can continually revisit and adapt to make the best decisions balancing profitability, service, risk, and sustainability.
- Make faster decisions
With an end-to-end extensible data model, AI, and rich algorithms, Supply Chain leaders can use simulations to quickly learn how to best respond to changing conditions. They can adjust scenarios and options in these models to identify which decisions best support agility and resilience. The best decisions require the right balance of profitability, service, risk, and sustainability.
- Drive insights through relevant data
Designing a Supply Chain that is both resilient and efficient while addressing increasingly complex and nuanced markets is challenging. Supply Chain will have to consider multiple dimensions: Proximity to custoer markets, diverse customer service requirements (including after sales service and reverse logistics), sources of rawmaterials, proximity to key suppliers and ecosystem partners, risks, regulations, customs, duties and sustainability factors.
Your Supply Chain design checklist can guide you to get off to a good start with your own approach to Supply Chain design?
The starting point for your Supply Chain design journey will always be your own Supply Chain challenges. Use the
following frameworks to become sharper on why it could be useful for you and your company to utilize advanced technologies within Supply Chain design. What kind of questions would be good to ask to become more specific on the use cases?
Checkout this chekclist which you can download right here:
If you want to build a sustainable business capable of delivering the right goods and services at the right cost, you need to build the right network as the foundation. We suggest you use advanced technologies within Supply Chain design. In this brochure we have gathered some of our resources which can provide you with a deeper understanding of the Supply Chain design field. Also we have gathered some of the benefits of using advanced technologies within Supply Chain design.
1. Getting the journey started, understanding Supply Chain design
Why should you make optimizing the Supply Chain network a strategic priority?
Find all the arguments in this blog post.
What are the benefits of utilizing advanced technologies within Supply Chain design?
From our experience, when Supply Chains are designed to adapt and evolve, companies are prepared to make tradeoffs, optimize policies, develop scenarios, and accelerate the time between making and executing decisions. We typically see a reduction in time to develop and deploy optimized solutions by up to 80%. Leaders are empowered to make the best decisions based on valuable Supply Chain intelligence. At the end of the day, it benefits the bottom line and gives the flexibility to manage constant change and risk. Learn more in this blogpost.
Transform with a resilient Supply Chain design (whitepaper)
Would you like to understand more about Supply Chain design – then we urge you to download our whitepaper on Supply Chain design right here.
Check out all the other arguments in this blog post.
2. Understanding the details
What is a Supply Chain digital twin?
Checkout this blogpost on why a digital twin can help you create a competitive advantage.
What are the ingredients to a successful Supply Chain design environment?
In Optilon we have worked with Supply Chain design for more than 15 years. Learn more about what we think are the ingredients to a succesful Supply Chain design environment right here.
Checklist for your approach
The starting point for your Supply Chain design journey will always be your own Supply Chain challenges. Use the following frameworks to become sharper on why it could be useful for you and your company to utilize advanced technologies within Supply Chain design. You can download them right here.
3. Finding the right partner
We are here to help you choose the right journey
Our engagement model shows you how we work together with our clients. We want to ensure that you get a humble, engaged and committed solution delivery that solves yoiur business challenges. Learn more about how we work right here.
Would you like a product demonstration? Please feel free to reach out to us.
You can always find more resources in the Supply Chain design hub.
Every Supply Chain leader seeks an optimally designed network to reduce costs while improving resiliency, efficiency, customer service levels, and competitive advantage. Furthermore, business and Supply Chain leaders understand that changes in demand, service expectations, market costs, and reverse logistics can affect the effectiveness of Supply Chain networks. Hence, it could be a business advantage to periodically re-evaluate the Supply Chain design or determine whether a restructure is needed. However, this can be pretty costly and time-consuming when done manually. That is why companies are looking to use Supply Chain design technology. Here a successful Supply Chain design environment plays a key role.
This blog post will look at what a successful Supply Chain design environment is all about. Before that. let’s recap what the business benefit’s of implementing Supply Chain design technology is:
Business benefits of Supply Chain design technology
There is clear evidence that companies that implement digital technologies fueled with new data sources to test, learn, and adapt rapidly, can outpace their competitors. It is not just about dealing with the challenges and issues of the day; it is about using a culture of technology and digital tools that enable you to be ready for the challenges that are yet to come.
With Supply Chain design technology, you can:
- Make more automated decisions
- Quicker deployment to users in the organization
- Gain proactive insights
- Continually revisit the Supply Chain design
- Make faster decisions
- Drive insights through relevant data
If you choose to implement a Supply Chain design technology, you will typically be able to realize the following business benefits:
Successful ingredients to a thriving Supply Chain design environment
In Optilon, we worked with Supply Chain design for more than 15 years. From our experience, the most innovative companies are combining the following “ingredients” to form their approach to Supply Chain design:
- They identify challenges and business opportunities in their existing Supply Chain
- They ensure that the technology, powered by AI and machine learning, fits the maturity of the company
- They create a dynamic data model with internal and external data sources
- They tailor the solution with a personalized experience for anyone in the organization
- They ensure C-suite commitment and engagement as well as a growth mindset
- They build governance processes and structures that support an ongoing refinement of the optimal Supply Chain design
- They continuously invest in building skills and competences
If you are looking for a partner to take your Supply Chain design to new heights, we urge you to contact us. We would love to have an informal discussion about the business benefits you are looking to achieve and how we can help you achieve them.
In the meantime, feel free to download the below checklist. It can help you determine what your future Supply Chain design model should cover and what business benefits it can provide you.
You can reduce the time to develop and deploy new Supply Chain design with up to 80% if you use Supply Chain design technology as an enabler. In this blogpost you can learn more about how.
Persistent challenges from increasing customer demands, disruptive competitors, and economic fluctuations make the optimization of Supply Chain designs harder. Various megatrends mean, that Supply Chain complexity and risk are growing. Decision making speed and quality need to increase to enable faster recovery from disruptions. At the same time, there is a need to handle real-time data and complex business requirements across multiple networks. At the same time it is necessary to balance risks and trade-offs. Learn more about how you can turn your Supply Chain design into a competitive advantage with technology in this blogpost.
The greatest risks lie in the Supply Chain
Supply Chains are increasingly at risk of disruption. It can be argued that the greatest risk to business continuity lies in the wider Supply Chain of key suppliers and customers (supply/demand networks) rather than within the company itself. As Supply Chain networks increase in complexity because of outsourcing, globalization, and trading environment volatility, so too has the risk of disruption. The vulnerability of networks has increased because of longer, leaner supply lines within the networks.
While many risks to the Supply Chain come from the external environment, such as war, pandemics, and earthquakes, there is growing evidence that the Supply Chain structure is itself the source of significant risk. The same events that once might have caused minor local disruptions may now affect entire businesses, industries, or economies. At the same time, we know that 80% of the costs come from the design of the Supply Chain.
The ideals of a fully integrated, efficient, and effective Supply Chain
The challenge of the Supply or Operations manager is to achieve the ideals of fully integrated, efficient, and effective Supply Chains capable of creating and sustaining competitive advantages. They must balance downward cost pressures and the need for efficiency with effective ways to manage the demands of market-driven service requirements. At the same time, they need to ensure a resilient and transparent Supply Chain.
By democratizing the processes and thereby reducing functional and data silos, creating an environment for constant learning, using a Supply Chain digital twin to visualize the current Supply Chain and advanced algorithms to model the future, there is an opportunity for ambitious companies to move from episodic one-off design reviews to a state of continuous design. To many, that means transforming from a manual approach to a digital one.
Time to develop and deploy can be reduced by up to 80%
From our experience, when Supply Chains are designed to adapt and evolve, companies are prepared to make tradeoffs, optimize policies, develop scenarios, and accelerate the time between making and executing decisions. We typically see a reduction in time to develop and deploy optimized solutions by up to 80%. Leaders are empowered to make the best decisions based on valuable Supply Chain intelligence. At the end of the day, it benefits the bottom line and gives the flexibility to manage constant change and risk.
Checkout the below graphic which simplifies the time it takes to develop and deploy a model:
Companies have been using Supply Chain network optimization solutions to solve complex operational challenges and improve their Supply Chains for years. While a select few have successfully leveraged the potential benefits of these analytics tools, many have only scratched the surface. Despite widespread recognition of the importance of Supply Chain network optimization, many companies don’t have a clear strategy. In this blogpost we will look into why Supply Chain optimization also should be a strategic priority for your company.
The definition of Supply Chain optimization
Supply Chain optimization is defined as “the deliberate application of advanced analytical processes and solutions to optimize supply chain performance and manage costs,” not as a general concept or management goal. Advanced analytics helps business managers look beyond what happened in the past, and develop predictive and prescriptive models of what could happen, given a certain set of parameters.
Optimization solutions can be applied to daily challenges, like adjusting inventory levels based on lead time and service level targets. They can be used for more cyclical challenges, like modeling optimum inventory locations or managing new product introductions. And finally, they can be applied to larger strategic decisions such as distribution network changes, where to locate new facilities and acquisitions. Some companies also now use it to decarbonize their Supply Chain.
Getting off to a good start
Supply Chain network optimization projects or modelling often start with and depend upon the gathering of relevant and timely data to model the potential impact of changes and allow managers to make better decisions. They sometimes start with developing a model that addresses the targeted business challenge, and then move to data collection, speeding up the data gathering and filtering phase of such projects. With either approach, data quality is essential.
Today’s advanced analytics and optimization tools have become easier to deploy because of expanded data availability, more user-friendly interfaces, faster hardware and cloud-based solutions, which replace high up-front investments with more periodic expenses. Solution capabilities have likewise expanded.
Supply Chain network optimization an important technology trend
Leadership in any area of business is a function of management focus and investment. The Supply Chain is no different. While the bar is continually being raised, current Supply Chain performance at any company (both in terms of customer service and cost) is in large part of a strategic choice. For example, for business reasons management may accept higher supply chain costs in exchange for superior customer service; or they may accept lower service levels in exchange for lower costs. The underlying assumption is “you get what you pay for.” In contrast, Supply Chain leaders reject these standard tradeoffs by pushing for both superior service and lower costs. Such a strategy is reflected by management attention and capital investments, including the adoption of supply chain optimization solutions.
A significant majority of manufacturers agree, in a report made by IndustryWeek, that Supply Chain optimization is an important technology trend. It is critical to the future success of their companies. Despite that recognition, less than half (44%) believe their company has a clear and effective supply chain optimization strategy. For any investment that reduces costs and improves performance, early adoption can provide a market advantage.
Does your company have a clear strategy for Supply Chain network optimization?
This article was written with the inspiration from a research done by our partner FICO and Industryweek.
(2016 IndustryWeek Supply Chain Optimization Research Study, underwritten by FICO)
Every Supply Chain leader seeks an optimally designed network to reduce costs while improving its resiliency, efficiency, customer service levels, and competitive advantage. Furthermore, business and Supply Chain leaders understand that changes in demand, service expectations, market costs, and reverse logistics can affect the effectiveness of Supply Chain networks. Learn more about how Supply Chain design technology can benefit the company.
It could potentially be a business advantage to periodically re-evaluate the Supply Chain design or determine whether a restructure is needed. However, this can be quite costly and time-consuming when done manually. Most companies are still in the early stages of their efforts to connect the entire Supply Chain with a seamless flow of data. Digital technologies can deliver major benefits to efficiency and transparency that are yet to be fully realized.
Companies now have access to new digital solutions for running scenarios, assessing trade-offs, improving transparency, accelerating responses, and even changing the cost structures. Let’s have a look at the benefits of using technology for Supply Chain design, besides an empowerment of your employees.
The benefits of using technology for Supply Chain design
- Make more automated decisions
While most global Supply Chain-reliant companies have already embraced the power of data and advanced analytics across their company, the vast majority have been working with out-of-the-box tools cobbled together with in-house applications or spreadsheet-based solutions. Advanced technology can help the Supply Chain use mathematical solvers and algorithms to find the best decision or decisions for a given business problem within a defined set of constraints.
- Quicker deployment to users in the organization
Advanced technology offers the possibility of creating a personalized experience. With apps, you will be able to create a tailored solution with the appropriate user experience for anyone in the organization to facilitate democratized, AI-powered decision-making.
- Gain proactive insights
Leading companies can apply advanced technologies to fundamentally rethink and transform their Supply Chain, enhance their real-time understanding of activity in complex supply networks, and leverage continuous scenario planning to optimize the balance of cost against risk and agility of their network footprint. - Continually revisit the Supply Chain design
In other words, by adopting new technologies and the practice of continuous design, companies can reduce risk, improve resilience, and turn their Supply Chain challenges into a competitive advantage. By applying advanced algorithms, companies can continually revisit and adapt to make the best decisions balancing profitability, service, risk, and sustainability. - Make faster decisions
With an end-to-end extensible data model, AI, and rich algorithms, Supply Chain leaders can use simulations to quickly learn how to best respond to changing conditions. They can adjust scenarios and options in these models to identify which decisions best support agility and resilience. The best decisions require the right balance of profitability, service, risk, and sustainability. - Drive insights through relevant data
Designing a Supply Chain that is both resilient and efficient while addressing increasingly complex and nuanced markets is challenging. Supply Chains will have to consider multiple dimensions: proximity to customer markets, diverse customer service requirements (including after-sales service and reverse logistics), sources of raw materials, proximity to key suppliers and ecosystem partners, risks, regulations, customs, duties, and sustainability factors.
In the following, we give an example of how data can be utilized in the model to drive insights through relevant data:
