The Edge Factor - Mar 2017

The Edge Factor

      Contributions by: Neha Uttam  

 

Supply chain network design and modelling:

Creating Value to complex supply chains

Nowadays, supply chains are more dynamic and complex due to rapidly changing global markets,increased geographical expansion of the businesses and availability of wide range of products. The product life cycle has drastically reduced from 7 years in 1970s to under 2 years in 2010s, which results in loss of stability insupply chain operations. It is becoming difficult for companies to examine the structure of supply chain from strategic point of view taking into account the pressure of competition, profit maximization and interdependencies of all processes. According to Gartner, strategic decisions that take place up front in the supply chain network design and modelling process contribute to 80% of total supply chain costs.

Supply chain network design and modelling helps the companies in designing the supply chain network to deliver the required service or product at the lowest possible cost, optimizing the inventory to meet the anticipated customer demand, selecting best transportation mode and utilizing capacity to develop a cost-effective transportation strategy.

Companies that don’t model their supply chain every quater are finding 80% of cost locked in

 

A New perspective

Global supply chains require collaborative work on the areas of supply chain models, networks, flaws, costs, regulation, information flow, risks and their mitigation. The decisions for procurement, manufacturing and distribution are no longer made once in five years. The strategic decisions are now taken quarterly. Supply chain modelling helps in frequent analysis of network alternatives and dynamically allow for the selection of best available option.

The problem is changes do not happen in isolation; they always occur with the amalgamation of other complex situations. The factors contributing to the design & modelling of a supply chain include reshoring, global transport infrastructure, carrier capacity, freight rate trends, fuel cost, customer focused fulfilment of products or services and reverse logistics.

Case Study

A world leading sellers of hard drives and memory storage products wanted to re-design their supply chain for air freight to distribute their products in a cost effective way. They adopted supply chain network optimization model for this purpose. With the help of the optimization model, a new supply chain design was chosen, which moved half of their current volume to ocean freight; which ultimately resulted in the savings of $66 million per year, 24% of their annual transportation and distribution costs.

Conclusion

Companies design or redesign their supply chain for various reasons including changes in market, business and customer requirements to achieve strategic cost reduction and maintain high service levels. Supply chain network design and modelling can contribute in attaining the objectives of cost reduction and service level improvement over time by better aligning your supply chain with your business needs.

CGN Global has been worked with various clients in the field of supply chain design, network modelling and simulation. In a recent project, the client was facing the problem of inventory build-up due to frequent model changes, difficulty in forecasting and lack of visibility of dealer stock. With the help of analytics, simulation and modelling, the loopholes in their supply chain were identified, which in turn helped the client to formulate the strategy for inventory reduction by 20%.

Reference

https://www.forbes.com/sites/ciocentral/2012/10/04/managing-the-risks-of-a-globalized-supply-chain/#35d045839d84
https://www.allthingssupplychain.com/supply-chains-getting-complex-not-necessarily-problem/
http://deliver.jsi.com/dlvr_content/resources/allpubs/logisticsbriefs/OptiSuppChai.pdf/
http://www.llamasoft.com/can-you-save-quarter-your-supply-chain-costs-each-year-case-study/
http://www.logisticsmgmt.com/article/supply_chain_network_design_embrace_the_culture_of_modeling

What we found interesting

"Here is an interesting video on designing global supply chain networks"

 

https://www.youtube.com/watch?v=Eh04dsSOK00

 

Supply Chain Network - Design and Modeling

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