IBM ILOG Optimization & Supply Chain Solutions Blog

Forbes Magazine Article on Why You Need More Optimization in Your Business

2011-07-24T09:41:49-04:00

David F. Carr of Forbes Magazine recently wrote an article based on an interview with Steve Sashihara, the author of the new book called "The Optimization Edge: Reinventing Decision Making to Optimize all of Your Company's Assets".

The article does a great job of explaining how firms need to embed mathematical optimization deep into their organizations to really take advantage of their investment in IT and data.

"One of his [Steve Shashihara] most interesting arguments is that a great deal of the effort spent on information gathering and analysis is wasted — or, at least, used sub-optimally — when it’s used to feed business intelligence systems that produce reports that ultimately wind up with being fed into spreadsheets and PowerPoint slides. Managers then sit around in a conference room listening to presentations and debating what the data means and what decisions should be made about it — when, in many cases, good software could make the decision itself."

The article mentions that IBM and IBM's ILOG CPLEX have the ability to address the need for more automated optimization. This article confirm the value we've seen in Optimization:

A U.S. Bank reduced its outstanding cash balance by $2B by optimizing the replenishment of ATMs
Netherlands Railway reduced cost by $30M USD and captured $57M USD by using optimization to improve efficiency and improve customer service
Indeval, Mexico's Central Security Depository, clears $250B a day with optimization, saving $240M in interest payments
MillerCoors used optimization to help with their $750M in savings from the merger of the two organizations
Mars and Wrigley talked about the value of optimization and supply chain modeling, savings $10M just in the initial modeling, and much more with detailed modeling

And, the list could go on. We are finding that firms who push optimization deep into their organizations see significant returns on their investment.

As a complement to the Forbes article, we have just released a short educational video to explain the value of mathematical optimization to business leaders. Click here for a link to that video.

Lean and Supply Chain Optimization

2011-07-21T08:07:13-04:00

We were recently interviewed by Tom Andel, Editor-in-Chief for Material Handling & Logistics magazine for their edition on how the concepts of 'Lean' apply to the warehouse. We were quoted in the Editor's Note on page 4.

Lean techniques started with Toyota's manufacturing system and have moved into many other types of operations over the last two decades.

Often, though, it is difficult to take the concepts of 'Lean' and apply them to operations that do not look much like Toyota. Often, these efforts will just focus on waste reduction. However, a careful study of the fundamentals of lean reveals the importance of creating optimal (and minimal) buffers to protect against variability. This is where optimization can come in. Optimization can often reveal new strategies for minimizing the buffers you have in your supply chain. For example, the article quotes:

"Of course, another great way to reduce inventory at the warehouse is if the product just skips the warehouse entirely. That requires determining which products should touch every warehouse, which should bypass the warehouses, and which should be cross-docked."

Mathematical Optimization For Business Explained in a 3-Minute Video

2011-07-20T07:08:26-04:00

IBM just released a nice video introducing the concepts of mathematical optimization to business. This is a great video to help you convince others in your organization of the value of optimization. Click here to view the video.

One example of this type of optimization is strategic network design. To get more information on this, click here for a video on this technology.

In addition, within IBM this all fits under our umbrella of Smarter Commerce. Smarter Commerce, in part, is about taking advantage of new data about customers and the market and creating new processes throughout your business to better meet customer demand. Click here for a video introduction or go to this website for an overview of Smarter Commerce.

Minimizing the Impact of New Hours of Service Rules

2011-07-18T08:38:36-04:00

The new "hours of service" rules were discussed In a recent Wall Street Journal article. The article mentioned that the hours a truck can drive in a day is proposed to be dropped from 11 to 10. The final decision is expected to be made in October.

This represents a potential 9% decrease in the number of miles that can be covered in a day by a truck. This obviously has a large impact for the supply chain. Some orders that could be met within a day will now be two days. You may have to shorten routes or change modes. And, this will drive up your transportation costs.

To mitigate the increase in transportation cost, you should re-evaluate the structure of your supply chain to make sure you have the right number and location of your warehouses, to make sure you are making products in the right locations, and to make sure your routes and modes are correct. By re-optimizing your supply chain, you may be able to offset much of the cost of the new rules.

Although the new rules are not yet in place, it is a good idea to get ahead of the situation so you are ready if they are enacted. Even if the rules are not enacted, the supply chain optimization scenario may yield other savings.

Preparing for Australia's New Carbon Tax

2011-07-17T21:36:07-04:00

The new supply chain news aggregation site OpRules, reported on on an article about Australia's new carbon tax. According to the article,

"Prime Minister Julia Gillard yesterday announced a $23 dollar per tonne price on carbon emissions to be paid by about 500 of the country’s biggest polluters from July 1, 2012."

Supply chain optimization can help firms help minimize the impact of this tax and reduce carbon. For example, with this tax, it may make sense to change the number of warehouse locations, manufacture or procure products from different locations, develop different routes for the trucks, switch transportation modes, and evaluate different inventory policies.

By re-analyzing the supply chain to include this new tax, firms should be able to find strategies that dramatically decrease the total cost of the carbon tax by developing new strategies in other areas of the supply chain.

Join Us for a Proof of Technology Workshop in Cologne, Germany Aug 29-30

2011-06-28T16:31:35-04:00

We are hosting a 2-day Proof of Technology workshop in Cologne, Germany on August 29 and 30th. The meeting will be held in our local IBM office.

This proof of technology workshop enables participants to understand the potential of supply chain optimization tools.

The workshop emphasizes hands-on experience with the product and will highlight various ways these products can help you run a smarter supply chain.

If you are interested in the session, please contact us or your local IBM representative.

Reducing "Out of Stocks:" Videocast and SCDigest Editorial

2011-06-27T18:05:58-04:00

The Supply Chain Digest's editorial staff recently wrote an editorial on the "Out of Stock" problem faced by Consumer Goods companies. They noted:

"In fact, inventory levels in consumer goods manufacturers stayed flat throughout most of the 2000s, and out-of-stock levels at the shelf have also been resistant to improvement. A well-publicized 2007 study by Dr. Thomas Gruen of the University of Colorado and Dr. Daniel Corsten of the IE Business School Madrid, based on funding from Procter & Gamble, estimated that manufacturers lose something close to $100 billion in sales annually due to out-of-stocks at the shelf.

Solving the out-of-stock challenge can therefore pay big financial dividends - especially for the companies that can reach new levels of in-stock performance first, before competitors do."

The editorial discusses areas where IBM is helping firms solve this problem by better optimizing inventory.

"In fact, according to Remzi Ural, a supply chain lead in IBM's global consumer packaged goods practice, one beverage company IBM recently worked with was able to increase its sales by 12.3 million cases by significantly reducing its out of stocks, in this case throughout its distribution network that served local stores "

This was based on a videocast we did with SCDigest.

Ahold USA and IBM to Talk About Network Analysis with Strategic Souring, Inventory Optimizaiton, and Route Optimization

2011-06-23T17:17:11-04:00

Joseph Shaw from Ahold USA and Alex Scott from IBM will speak at the 2011 Material Handling and Logistics Conference. The conference is Sept 18-21 in Park City Utah.

Ahold is an international retailing group based in the Netherlands. Ahold had revenues of 29.5B Euros in 2010. Ahold USA is a wholly owned subsidiary of Ahold. Ahold USA operates Stop & Shop, Giant, and Giant Martin's stores as well as the on-line grocer Peapods.

The title of the talk is "Beyond the Traditional Network Analysis."

"So you are challenged with managing a large portfolio of products and a complex set of vendors, customers and distribution locations. How do you make sense of this all and streamline your supply chain? This session takes you beyond the pin-on-a-map network analysis and examines factors such as sourcing strategies, inventory optimization, route planning and more. We will also review a grocery case study that involved the analysis of sourcing effectiveness, evaluation of DC investment opportunities, and relocation of legacy facilities to get the most out of their supply chain network. "

Click here for the link to the conference tracks and a full bio of each speaker. This talk is in Track 3, Session 2 at 10:15 AM on Monday.

New Release of IBM ILOG Transportation Analyst Now Available

2011-06-14T21:20:11-04:00

We have a new release of IBM ILOG Transportation Analyst.

This is a major release for this product. It has a new interface, improved run time performance, additional constraints and settings, and enhanced optimization capabilities. The product embeds IBM ILOG CPLEX Optimizer. Specifically, the optimization engine takes advantage of our powerful constraint programming engine which is well suited to these types of problems. All of this allows you to more easily solve larger problems and address other routing problems.

IBM ILOG Transportation Analyst is a strategic tool that allows you to determine the best routes, size your fleet, determine best backhauls, determine how to best use hubs, and make mode selection choices between private fleet, commercial carriers, multit-stop routes, and LTL.

This product is a nice complement to IBM ILOG LogicNet Plus XE. When designing a network, it is often important to understand the implications to routes, fleet sizes, hubs, and modes. The product also complements Sterling TMS by providing a strategic complement for doing what-if analysis.

The Dow Chemical Co. Saves $5M with Global Supply Chain Optimization

2011-06-14T17:00:00-04:00

At the May 2011 Manufacturing Leadership Summit, The Dow Chemical Co. won a Supply Network Mastery award for their global supply chain optimization initiatives.

The award sited a few examples of the type of work they did:

"One Pacific-area team used a Network Optimization Work Process to evaluate tank usage. Optimizing tank usage for multiple products cut costs, improved service levels, and reduced GHG emissions; the latter has become a key performance metric in the Network Optimization Work Process. Each network project looks not only at cost and customer service, but also provides key carbon footprint data to reveal opportunities for GHG reduction.

After the April 2009 acquisition of Rohm and Haas, D&MSC Work Processes helped teams capitalize on synergy opportunities and optimize the company’s Europe warehouse network. The evaluation identified savings through consolidation of shipments to warehouses and reductions in freight and warehousing costs. "

The award mentioned that these projects and others saved the firm $5 million during 2009-2010.

The article mentions that LogicNet Plus was part of the toolkit. For the a link to the full article, click here.

IBM's Inventory Optimization Solution

2011-05-12T10:47:09-04:00

Consumer Products companies (and others) face pressure to reduce costs, have customers demanding better availability, and have an ever-expanding global supply chain. In this environment, managing inventory is difficult. However, by optimizing inventory by determining the best buffers, the location of the push/pull boundaries, and the correct amount of inventory and safety stock at each location for each SKU.

To address these needs, IBM has pulled together a solution to help firms optimize inventory on an on-going basis. This solution pulls together IBM's optimization technology (IBM ILOG Inventory and Product Flow Analyst), our expertise in inventory optimization, our expertise in integration to ERP systems, and other capabilities such as SPSS's predictive analytics. Click here for a paper on this solution.

The benefits of inventory optimization can be significant:

Studies suggest that reducing inventory can increase share price.
Large firms can free up $100M in cash
But, inventory optimization is not just about reducing inventory. For some SKU's, you may need to increase inventory to drive up revenue and reduce expediting costs.

LogicNet Plus XE Public Training Available May 24-26

2011-05-08T21:09:48-04:00

A public training class for LogicNet Plus XE will run from May 24-26 in Chicago. We have limited seating, so please sign up early.

Click here to enroll.

If you have any questions, please let us know.

Where to Locate Your Factories: A Return to Local Markets?

2011-05-08T10:31:56-04:00

Deciding where to locate your manufacturing plants or where to make a product can have significant impact on your overall cost and your ability to serve your customers. However, this is not a trivial decision and depends on many factors.

Over the last several years, the press has reported on the move of manufacturing from the US to China. However, two recent in articles in The Wall Street Journal and Bloomberg Businessweek, show that the issue is much more complex.

Both articles point out that rising wages in China erode the labor cost advantage. And, the rising cost of commodities and especially oil, tip the scales even further. Both articles indicate that there will be a speed up in new manufacturing capacity being built in the U.S.

Certainly, moving production to China was not the answer for many firms. The Wall Street Journal article points out that rising productivity has allowed US manufacturing output to actually double from four decades ago. And, many firms chose to keep manufacturing in the U.S. to protect intellectual property, to be closer to the market, or to minimize inventory investments.

At the same time, over just the last five to ten years, we have seen firms build manufacturing capacity in China for the China market. So, as consumer demand increases in China, more manufacturing capacity is needed to service these markets. This new demand must be accounted for in decisions on where to locate manufacturing capacity.

Deciding where to locate manufacturing capacity becomes even tougher when you factor in the impact of taxes, inventory, and risk.

So, how should you determine where to locate your manufacturing capacity? The answer is not simple, but should consider the following:

An analytical tool to consider all the cost impacts (labor, transportation, raw materials), tax implications, inventory implications, and service levels.
A analysis of the amount of flexibility. Some questions include: Should plants make all products and service their local markets? Should plants be more focused to increase productivity? How much flexibility should we have?
A risk analysis. How much risk are you willing to tolerate? What is the cost if something happens to one of your facilities? What is the cost of building redundancy in the supply chain and is it worth it?
Product analysis to determine what to make where. Even within a fixed network of plants, you have choices in what should be made where. By doing this correctly, you can significantly improve your performance.

This type of analysis is not a one-time event. You have a chance to mold your strategy everytime you make a capital investment in your supply chain. And, the more facilities you have, the more opportunities you have to adjust your supply chain when market conditions change.

IBM ILOG and Sterling Named to The Top 100 Logistics IT Providers by Inbound Logistics

2011-05-07T06:41:44-04:00

IBM's ILOG and Sterling supply chain teams have been named to the Top 100 Logistics IT Providers for 2011 by Inbound Logistics.

This echos the comment from last year from SupplyChainDigest that" Somewhat quietly, IBM is building a formidable portfolio of supply chain software solutions that has the potential to shake up the existing market."

IBM ILOG SCM Virtual User Group - Join us on LinkedIn!

2011-04-25T15:47:10-04:00

Join our monthly IBM ILOG Supply Chain Management Virtual User Group (VUG) sessions. These 1-hour meetings are a quick way to brush up on your IBM ILOG supply chain modeling skills, meet other people using the products, ask questions to the community, and learn about what's new. These sessions will be led by our experts and have plenty of time for discussions and Q&A.

May 4th 2001:
Topic: "Applying Supply Chain Analytics: Benefits of a Central Group"
This talk addresses the value firms can achieve by deploying advanced supply chain analytics and how a group should be structured. We will use case studies and recent events to highlight the value from business analytics such as network and inventory optimization. We will discuss how 3M Corporation is organized to deploy this capability.

Join our LinkedIn Community to receive updates, more detailed information, and Dial-up/Web Meeting access.

Schedule-at-a-Glance:
May 4th - Wednesday
June 1st - Wednesday
August 2nd - Tuesday
September 1st - Thursday
October 7th - Friday
November 2nd - Wednesday
December 2nd - Friday

May 17th Videocast: Solve the "Out-of-Stock" Scenario for CPG Supply Chains

2011-04-22T16:18:35-04:00

Upcoming Videocast:

How Smarter Inventory Analytics Solve the "Out-of-Stock" Scenario for CPG Supply Chains

Date: Tuesday, May 17, 2011

Time: 11:30 ET, 10:30 CT, 9:30 MT and 8:30 PT

Place: Your PC

Fulfilling the Three A's: Adaptability, Agility and Alignment

In the recent years, we have seen a transformation in consumer behavior. The use of social media allows consumers to exchange thoughts; the migration from controlled media and monitored media. Easy information access combined with more educated consumers is making promotion planning more important. Finally, the chase for "value" is not only changing the timing of purchases but also location and brand. All these changes on the demand side are forcing consumer products companies to think about supply side in terms of: Demand Driven Supply Networks.

The supply chains are being transformed into complex supply networks with the introduction of co-packers, co-manufacturers and service providers. Commodity price increases and fluctuations are adding to volatility and margin pressures. Overall, changing consumer behavior, and increases in complexity, globalization and cost reduction pressures all force consumer products supply chains to fulfill the three A's: Adaptability, Agility and Alignment.

The crux of these strategies relies upon the application of Business Analytics to help close the gap between planning and execution. In this case, Closed-Loop Dynamic Inventory Optimization is leveraged to set appropriate inventory targets throughout the global supply chain and ensure that the right products are positioned in front of the right customers at the right time.

Closed-Loop Dynamic Inventory Optimization is a core process that regularly tunes policies across the supply chain to keep inventory closely aligned with changing conditions. But, the organizational value of such an approach goes beyond the more obvious metrics of improving service levels, order lead times, and inventory positioning. For example:

Higher performing supply chains can incur lower selling costs
Better replenishment enables faster collection of receivables
Utilization of optimal inventory targets results in less cash tied up in inventory
Optimal use of existing distribution assets (warehouses, fleet) reduces need for capital investments.
Better cash flow from lowered supply chain costs and unnecessary assets drive higher credit rating and lower borrowing costs

The application of Business Analytics on top of traditional supply chain planning and execution solutions gives CP Manufacturers the unprecedented ability to continuously improve operational efficiency, reduce costs, and enhance the customer experience.

Featuring

Dr. Michael S. Watson, Ph.D., WW Optimization & Supply Chain Lead at IBM,

Remzi Ural, Global Supply Chain Management Solutions Lead, Consumer Products Industry at IBM

SCDigest Editor Dan Gilmore.

DC Velocity Videocast: IBM Cloud Computing Optimization and Analytics in the Transportation Industry

2011-04-22T16:05:13-04:00

Question: What is IBM Cloud Computing Optimization and Analytics?

IBM Watson Answer: Learn how companies are dealing with transformative events in their logistics network and managing uncertainty in a turbulent market.

Watch it Now

Problem:
Today, Transportation providers are struggling to meet the ever changing demand in the market. According to a recent Gartner study, current transportation market conditions including rapidly shifting customer demands, capacity constraints and congestion threaten to propel logistics costs. Demand for transportation providers will increase and shipper uncertainty will continue to become a reality, driving the need for new intelligence and insight, better transportation asset utilization, greater connectivity and transparency, and improved customer service. These challenges will require transport providers to better manage their operational networks.

Solution:
Learn about the transformative technologies that power IBM's Watson, the new Jeopardy! Champion, that can help transportation providers implement strategies that will enable them to gain insight, optimize results and lead the transformation to smarter business and operating models.

Despite the turmoil of the transportation market there are advanced technologies to help steward firms through rate hikes, oil prices, driver shortage, congestion, and capacity constraints while managing today's network complexities.

The imperative for companies who want to outpace competitors is to reconsider how they apply optimization to take advantage of limited resources. Executives are looking to technology solutions to provide the tools they need for daily execution and long term strategic transportation decisions.

Executives Walter Heil and Dan Vanden Brink will discuss how the application of business analytics in conjunction with "as a Service" (SaaS) Transportation Management Systems helps optimize distribution and logistics decisions capabilities to:

Reduce supply chain costs by optimizing and executing complex order fulfillment processes
Improve operational efficiency by integrating operations with inventory and planning optimization
Improve customer experience by fulfilling more perfect orders in the demand chain

This webcast was recorded on the show floor at ProMat 2011.

Registration is not required for this free event.

Watch it now!

Inbound Transportation Management Webinar - April 26 at 2:00 PM EDT | 11:00 AM PDT | 6:00 PM GMT

2011-04-13T13:51:51-04:00

On April 26th, Sterling Commerce, an IBM Company is sponsoring an Aberdeen Group webinar on Inbound Transportation Management: The Convergence of Planning, Optimization, and Dynamic Execution. Register today!

Webinar Overview:

Inbound Transportation Focus –

Over 60% of companies from our July study have realized the significance of gaining more visibility and control of inbound transportation.

· WalMart’s Inbound supply chain collaboration initiative is one additional factor driving change- (Kelly Abney, WalMart VP Corporate Transportation presented a keynotes on this initiative during Aberdeen’s 2010 and 2011 Supply Chain Summit).

· Gaining visibility and control of inbound transportation management is prerequisite and central to…

the success of the WalMart initiative and is also prerequisite and
extends to companies of all sizes, scale, and industry segments. It is crucial to the success of any multi-party supply chain management transformation.

· Organizations lacking inbound control are blind to shipment details within the transportation pipeline.

Learn how leading companies (those with highest percentages of Inbound Freight under control) are focusing on new Inbound Technologies to address challenges and take action. They are:

· 2.8 to 5.8 –times as likely to leverage enhanced planning optimization –leading companies are converging planning processes with robust automation to support on-the-fly decision-making

· 1.2 to 2.5 –times as likely to automate dynamic optimization and near real-time visibility with optimization of execution within their processes.

Please join Aberdeen and as we look for insights around best practices and review specific examples of strategic technology advancement around inbound collaboration.

About Our Speakers:

Bob Heaney, Senior Research Analyst Supply Chain Management, The Aberdeen Group

Bob Heaney is a seasoned professional with over 25 years of distinguished leadership experience in research, analysis, and advisory roles in Supply Chain Engineering. Bob’s coverage area within Aberdeen includes various elements of Supply Chain Execution (Transportation Management, Warehouse Management, Distributed Order Management and Supply Chain Visibility).

Peter Wharton, Manager of Product Marketing, Sterling Commerce, an IBM Company

As a software industry veteran, Peter has worked for a number of software vendors of supply chain solutions, including managing the carrier relationships with UPS, FedEx, DHL and USPS while Director of Strategic Alliances for Kewill. Peter started his career in development, designing distribution and inventory systems in England working for Imperial Tobacco. He attended the University of East Anglia, where he achieved a joint honors degree in Environmental Sciences and Computing.

Supply Chain Modeling for Mergers and Acquisitions

2011-04-03T15:53:43-04:00

An important part of merger and acquisitions is the value created when the two supply chains come together. For example, MillerCoors reported on the progress toward their $750M savings goal on May 4, 2010:

"Supply chain integration continues to proceed on schedule. The brewery optimization project is nearing completion, as product moves are more than 90 percent complete."

Without a analytics modeling tool, like IBM's LogicNet Plus XE (click here for a video introduction), it can be difficult to properly merge the two supply chain. Each firm has unique products, unique manufacturing locations or vendors, unique warehouses, unique customers, and different business strategies. By modeling and optimizing the supply chain, you can evaluate the various trade-offs, understand where there is true overlap, and understand where separate supply chains are still needed. This modeling process allows you to accommodate the two businesses, deliver savings, and avoid creating a situation where the costs go up for both firms.

MarWrigley spoke at CSCMP about their modeling experience and noted the value in just getting a baseline model built. That is, as part of the merger process, there is value to seeing the combined supply chain in one place.

Whirlpool mentioned the importance of getting off to a fast start. Often a merger is known about long before the two firms can legally talk to each other. Therefore, it is important that you start as soon as it is legally possible. The investment community usually expects to see some quick savings.

In some firms, the supply chain modeling team is often an input to the acquisition process. Some firms model potential acquisition targets to approximate supply chain savings. And, this type of analysis can help determine if part of the business should be spun off.

Don't miss this webcast! Creating the Truly Adaptive Supply Chain

2011-03-22T17:37:49-04:00
Date: Tuesday, March 29, 2011
Time: 11:30 EST, 10:30 CST, 9:30 MST, and 8:30 PST
"Optimization 3.0": IBM’s Guide to Leveraging the New Wave of Business Analytics for Next Generation Optimization-Based Decision Support
Optimization in and of itself is nothing new but it is often overlooked by Line of Business and Information Technology professionals since many instances of it are embedded inside "classic supply chain management applications". Optimization allows companies to make sense of the massive amounts of data across the extended enterprise. By applying this data in unique and innovative ways, firms can optimize business outcomes by anticipating, controlling and adapting to a dynamically changing and chaotic environment, using the insights from visibility, analytics and trading partner collaboration to direct and control operations more intelligently.
With the advent of "Optimization 3.0", firms now have the ability to layer or integrate key advanced analytics technology on top of existing supply chain planning and execution systems to support both long-term (strategic) and short-term (tactical) planning goals as well as detailed scheduling while continuously improving operational efficiency, reducing costs and ultimately enhancing the overall customer fulfillment experience. This new combination of State-of-the-Art advanced analytics and B2B integration gives businesses the unprecedented ability to quickly model and solve across the most complex systems and implement solutions in near real-time, creating truly adaptive supply chains.
Register Today!

Don't miss this special IBM Advanced Analytics Summit in Chicago, IL!

2011-03-22T16:55:12-04:00
IBM Advanced Analytics Summit
Wednesday, April 13, 2011
9:00 a.m. - 5:15 p.m.
Chicago Marriott Downtown Magnificent Mile
Chicago, Illinois 60611

This live complimentary event will show you how IBM, through its ILOG® Optimization and SPSS portfolio and Business Analytics & Optimization service line, enables organizations to quickly and confidently answer fundamental business questions, from: Who will be our most profitable customers tomorrow? to What price will maximize profit from sales?

Highlights:
• Advanced Analytics – Unifying the Worlds of Statistics and Operations Research
• Demo – Illustrating the combination of IBM ILOG CPLEX® and the IBM SPSS Modeler
• IBM ILOG Optimization Workshop
• IBM SPSS Data Mining Workshop
Learn and share best practices in implementing advanced analytics to your most critical business decisions.

Breakfast and lunch included.

Register Now!

3M and IBM to Talk at SCOPE East

2011-03-16T09:46:31-04:00

If you are going to be at SCOPE East in Orlando in April (17-19), 3M and IBM will be doing a talk. And, the IBM supply chain group will have a booth at the event--- we will be under the Sterling booth.

Here is a description of the talk:

"Applying Supply Chain Analytics: Benefits of a Central Group"

This talk addresses the value firms can achieve by deploying advanced supply chain analytics and how a group should be structured. We will use case studies and recent events (like the run up in oil prices) to highlight the value from analytics such as network and inventory optimization. 3M will discuss how they are organized to deploy this capability.

Hu (Tiger) Liu, PhD, CSCP, Supply Chain Specialist for Manufacturing & Supply Chain Services, 3M and Michael Watson, PhD, ILOG Supply Chain Solutions Leader, IBM

IBM Annual Report: Business Analytics and Optimization A Key Growth Strategy

2011-03-10T23:38:21-05:00

In the recent letter from the chairman in IBM's 2010 Annual Report, Sam Palmisano discussed business analytics and optimization as a key part of IBM's future growth strategy:

IBM spotted this emerging need early, building the world’s leading analytics practice, with 7,800 expert consultants, the world’s premier nonacademic mathematics function, leading‑edge software and offerings integrated by industry.

As a reminder of a detailed explanation and definition of analytics from an IBM team, click here.

Inventory Optimization Allows Firms to Rethink Lean

2011-03-03T11:35:38-05:00

Lean principles have many virtues. However, as a system primarily created by Toyota and then widely adapted to other businesses and industries, some firms are having second thoughts about some key Lean principles.

Specifically, if lean principles are applied just to the manufacturing sites, it may decrease the flexibility in the system and push inventory to other parts of the supply chain. For example, in the diagram below, if the manufacturing plant decreases their production variability by locking in firm schedules and minimizing their inventory, it may push inventory to the warehouses.

Executives realize that their supply chains need flexibility and that it is best to minimize system-wide inventory, not just inventory at the plants. Inventory optimization analyzes the entire supply chain to determine where inventory should be buffered. In some cases, it may provide more flexibility and less system-wide inventory by creating an inventory buffer at the plant. Inventory optimization provides a way to analyze these trade-offs and better adapt the lean principles to your unique organization.

$100 Oil Prices and Supply Chain Optimization

2011-02-25T10:54:17-05:00

This blog has often commented on the price of oil. Oil prices have a big impact on the supply chain. As oil prices change, it impacts the cost of raw materials, productions, and transportation. The change in these costs impacts the trade-offs that a firm needs to make.

For example, as the increase in oil prices drives up transportation costs, it can change where product should be made, the mode of transportation used, and the inventory strategy.

Several years ago during the big run up in oil prices, we wrote an article for The Wall Street Journal that discussed how the supply chain strategies needed to adjust to the new prices.   As oil prices fell, we wrote an reminder that it was still important to analyze the impact on the supply chain. In both cases, it is important to understand the trade-offs between transportation costs, sourcing decisions, and inventory and adjust the supply chain accordingly.

As oil hit $100 a barrel this week, it is worth recalling these lessons. More firms have invested in more flexible operations, but the basic lessons remain. It is important to adjust your supply chain to fit the realities of the market.

Smarter Inventory Analytics

2011-02-24T17:23:59-05:00

Smarter inventory analytics is about using your investment in inventory wisely. This means optimizing your inventory-- setting the right inventory levels for each SKU at each location, optimally positioning and buffering inventory in the supply chain, setting the correct service levels, and determining the correct flow paths.

With optimized inventory you can:
Free up cash and create more liquidity
Drive up sales through better availability
Reduce expediting costs

To reap the benefits of inventory optimization, it is not just about the optimization technology. You need to integrate into your ERP system for on-going updates and build the capability into your processes.

If you are interested in more details, contact us for a white paper on how to achieve better performance with your inventory.

IBM ILOG Optimization Events: Gain High Speed Analytical Insights & Faster ROI

2011-02-22T16:08:52-05:00

Don't miss ILOG Optimization and Supply Chain at these must attend IBM and INFORMS events: http://www.kingfishmedia.net/emails/IBM/2.24b.html


Supply Chain Optimization is Often the Missing Piece of S&OP

2011-02-20T16:33:51-05:00

Many S&OP processes stop with the sales planning. When you extend your S&OP process to include optimization through a tool like LogicNet Plus XE, you can reap many benefits.

The picture to the left is shows some highlights from an S&OP case from a beer company. On a monthly basis, as part of the S&OP process, the operations of this beer company are modeled and optimized in LogicNet Plus XE. The details below the map provide information on how much beer, by product by month, is shipped to each of warehouses and how much product is produced in each month. The graph shows the inventory build up in the supply chain by warehouses.

Besides providing insight into the operational cost and capacity implications of a given sales plan, the results also show the impact on total revenue, operational gross profit, and total pre-build inventory.

These results can also provide insight into the sales plan. For example, it can determine the cost and feasibility of promotions, it can suggest additional demand shaping activities by looking at under-utilized capacity.

In this case, the firm analyzed different demand plans around the implications of a marketing program to grow demand in a region, the implications of a promotion for a specialty product, and the implications of a price increase.

Navistar's Supply Chain Transformation and Selection of 3PL Partner Menlo

2011-02-19T08:58:20-05:00

In the January 2011 edition of Inbound Logistics, Navistar's Ed Melching, Director of Global Logistics discusses their supply chain transformation and selection of Menlo as their 3PL partner.

In 2008, after undergoing a grueling third-party logistics provider (3PL) selection process, Navistar chose San Mateo, Calif.-based Menlo Worldwide Logistics, the global supply chain management subsidiary of Con-way Inc., to support it in improving its global logistics network, including managing global transportation providers and regional warehouses, planning lead times, and modeling net landed costs.

He reports that one of their goals was a 25% reduction in supply chain costs. He reports that at "the end of the partnership’s second year, we will have achieved 11-percent cost savings, out of the 25-percent goal we set for the next five years."

When discussing the reasons Navistar selected Menlo, he mentioned their "global coverage, cross-network planning, and optimization capabilities."

This is a very interesting article discussing the challenges of building a new global supply chain from the ground up. It is also interesting that modeling net landed cost and optimization capabilities were mentioned as key factors in the transformation of the supply chain. This mirrors some other findings that leading supply chains are relying on optimization-based technology to help drive improvements.

A Great Route Can Be Hard to Find

2011-02-17T10:55:33-05:00

Finding good routes can reduce transportation costs by 5-15%.

Finding great routes can reduce costs by a further 5-10%.

These savings can add up fast.

However, finding these great routes can be difficult.

On one level, routing seems trivial. If you have 75 shipments to make, you can easily look at a map and come up with routes. If analyze the routes, you can probably make changes to reduce costs. But, how do you know if you've found good solution? How do you know if you've found a great solution?

What is not obvious at first glance is how many total possible routes exist in a routing problem. In a problem with just 75 shipments, if you allow up to 10 stops per truck, the total possible routes exceed 10 to the 100th power (10 followed by 100 zeros)! Even with today's computing power, there is no way to evaluate each of these options.

And, the problem becomes harder when you consider delivery windows, different types of trucks, the ability to do backhauls, making making multiple trips with the same vehicle, and so on.

This is where IBM's optimization expertise comes in. Both the IBM ILOG Transportation Analyst and Sterling TMS use the ILOG CPLEX Optimizer to find great routes. The ILOG CPLEX Optimizer product contains a module for Constraint Programming (CP).    CP is well suited for tough scheduling and routing problems, especially routing problems with time windows.   It is this optimization technology that allows to you to find great solutions.