But, vehicle routing is a notoriously hard problem.  And, adding in factors such as backhauls, continuous moves, and other sophisticated considerations make the problem even tougher.

IBM’s ILOG Supply Chain group has invested heavily in the Transportation Analyst product powered by our own Transport PowerOps routing engine.  This has allowed our users to explore transportation strategies they couldn’t consider otherwise.

For example, besides routing a set of shipments, our clients have been able to better incorporate backhauls into their plans or determine the frequency of delivery to their stores.

Here is what Adrian Gonzalez of ARC Logistics Viewpoints reported on one of our customers:

Last week, I was briefed by Sterling Commerce on their software-as-a-service TMS.  The main focus of the briefing was their new optimization capabilities, powered by ILOG’s Transport PowerOps (TPO) solution.  According to Sterling, TPO offers improved capabilities over their previous optimization solution, including faster processing speed, multi-modal capabilities (including parcel), and improved route planning functionality.

Strong optimization capabilities can have a big impact on routing problems.

As a result, we are seeing more firms incorporating taxes into their supply chain models.  Over time, firms have built more sophisticated supply chain models to incorporate the impacts of manufacturing, the impact of carbon, and now tax optimization.

As part of IBM, with its vast R&D resources, we are happy that LogicNet Plus XE can continue to lead the industry with more advanced modeling capability.   This allows the supply chain group in your firm to play a larger role the company’s strategic decisions.

You can view an upcoming Webcast on tax efficient supply chains hosted by Supply Chain Digest.  The Webcast is on Tuesday, July 14th at 11:30 EST.

IBM executives are excited about future possibilities for blending insights from the supply chain solutions with other systems using IBM’s middleware and business process management functionality

Our clients are already starting to see value from our integration into IBM as these possibilities become reality.  For example, clients are seeing value from the following:

• IBM’s vast expertise for moving, cleaning, and aggregating transactional data with the supply chain applications
• IBM’s off-the-shelf and widely used SAP Adapters to tap directly into their SAP data.  And, IBM has similar adapters for other ERP systems
• IBM’s tools for setting up the supply chain tools to “allow you to manage either the exceptional cases or the routine cases so that you can systematize the business decisions and business thought without having to deal with the latency of humans making decisions.”

It is exciting to see our supply chain clients get much more value from our tools and services by mixing them with the tools and services from IBM.   This is all a great fit with IBM’s new initiative to create smarter supply chains.

Management as a science uses mathematical models and data from operations to help executives make better decisions.   Our supply chain planning applications are a great example of models helping firms make better decisions.

The authors point out that despite some recent failings of some high-profile financial models, the trend towards management as a science will march on.  They note that the tools need to become more dynamic, that they need to integrate more real-world feedback, and that “business executives need to get better at using them.”

ILOG’s supply chain planning applications are well positioned within IBM to help firms take the lead in this trend.  Supply chain executives benefit from:

• The ease of use to fully use and understand the results of the models
• IBM commitment to providing more real-time data and feedback
• IBM’s commitment to advanced analytics.
• The power of the combined IBM and ILOG which brings together over 800 Operations Research experts and practitioners with the gold standard of the IBM ILOG CPLEX solver.

This plant won the award for its innovative manufacturing process, its low energy consumption, but also for its “reduction in transportation and supply chain costs.”

This case highlights the importance of good supply chain modeling.  The right location and function of your facilities can make a significant difference to your overall strategy and to the bottom line.

Celebration Foods explains how they went about the site selection:

The first step was a supply chain optimization study. Officials selected a program from LogicTools, a Chicago-based supply chain specialist recently acquired by IBM. “Originally we were going to run about 75 models but ended up running more than 130, to be sure there was no second guessing when we turned dirt,” remembers Shanley. “No matter what scenario we presented—expanding the existing plants, using more copackers—the program only wanted to build one plant.”

It is interesting to note that the studies often come up with counter-intuitive solutions and that it is important to run many scenarios to make sure you have a good and robust solution.

His article sites the growing congestion on the highway system, the ports, the railways, and the airports.  The impact of this congestion will be an increase in time and variability in the supply chain.

If your company can master the techniques of squeezing time and variability out of its logistics system, you can avoid some of the degenerating effects of transportation congestion and bottlenecks– and use your position as a weapon against less savvy rivals.

The solutions we offer can help you take time and variability out of your supply chain:

• Network design helps you make product in the right location and place your facilities correctly to reduce overall leadtime
• Inventory optimization helps you make the trade-off between air and sea as well as determine how you should position inventory in the supply chain.  This helps you better buffer variability or understand the cost of long lead times.
• Advanced production scheduling can allow you to react quickly to changes in demand.   Combine this with inventory optimization for your raw materials and you can minimize the rigidity of long frozen schedules.

As Manufacturing Executive pointed out:

Making good on its 2008 promise to continue developing the functionality of the ILOG technology it acquired in a $340 million deal, IBM today announced a slate of updated products that includes supply chain optimization and plant scheduling software.

Of note to manufacturers is the release of IBM ILOG LogicNet Plus XE 7.0 and IBM ILOG Plant PowerOps 3.2, applications respectively aimed at helping companies plan their supply chains and create production schedules.

What is exciting for for supply chain managers is that these releases continue to show significant innovation to allow managers to make better decisions for their business.

For example, as an industry first,  LogicNet Plus allows company to create tax efficient supply chains– an important consideration for many global firms.  Plant PowerOps now runs five times faster.   This speed-up allows for increased flexibility and allows you to react in real-time to events in your supply chain and to changes from your customers.

This complete remaking of the supply chain started with network modeling and led to interesting insights.

First, a network optimization study, performed in just a few months using a commercial tool but with just in-house talent.

That study clearly showed the opportunity to rethink Home Depot’s massive network…

With a solid design in place, Home Depot could begin implementation and innovate in many other ways.

Here’s the link:  http://www.scdigest.com/ASSETS/ON_TARGET/09-06-09-2.PHP?cid=2506&ctype=content

No matter the economic conditions, firms strive to match capacity with demand.  You can get much closer to matching these with some additional flexibility.  What Prof. Simchi-Levi demonstrates is that a little additional flexibility in your supply chain can go a long way.

• Ease of use
• Ability to start quickly
• Sophisticated optimization technology (ILOG’s CPLEX)
• ILOG support

Also interesting in the interview was the discussion of a very important, but often overlooked,  piece of the project: providing understandable results that can be presented to decision makers to get buy-in. Reemtsma indicated that it was easy to extract those hard facts from LogicNet Plus so that the results speak for themselves.