Blog postsMarch 29, 2017
Supply Chain Strategy: Thoughtfully Designed, or an Afterthought?
Many of the world’s best-known companies’ supply chains grew from a series of historical accidents rather than intentional design. Because of this, a simple activity like mapping and visualizing supply chain flows can often spark critical questions such as, “Why are materials sourced from Region A, produced in Region B, then air-shipped as a finished product back to Region A?” By creating living models of the corporate supply chain, companies can examine how their supply chains will perform under a wide range of market conditions and assumptions and analyze the trade-offs of cost, service, and risk.
We at LLamasoft eat, sleep, and breathe supply chain design every day and the largest and most successful companies leverage this technology to lead the pack. While more and more organizations adopt design every day, there are still a wealth of companies just learning about the huge gains they can net with design. How is design differentiated from planning and execution, how can I leverage the technology, and how can I turn it into a sustainable it business process?
Why intentionally design your supply chain?
Volatility and change have become the new normal in today’s increasingly variable and global supply chain climate. External factors like government regulations, variable weather, geo-political turmoil, and more can be difficult to predict or manage but still must be accounted for in the design of your network. Internal factors like product launches, merger and acquisition activity, objectives like being a cost-driven or a service organization and among others may cause disruptions to the state of your current network, but are important to reach organization goals. These pressures have always existed, but they are now exacerbated by increasing competition and accelerating change, creating a greater sense of urgency for supply chain professionals to be able to respond to them quickly and with greater precision.
Tackle challenges with design
Most organizations have planning and execution systems in place as part of their tactical and operational strategy. So what is design and where does it fit in? Design fits within a more overarching strategic approach, but one that can have significant impact on the tactical and operational functions of the business. One undeniable truth: good planning and execution cannot overcome bad design.
Planning and execution systems are critical to running a business. Supply chain design tools are critical to determining how a business should run.
Supply chain design empowers professionals to look beyond ‘what network do we have?’ to ‘what network should we have?’ which can make an impact on the strategic, operational and tactical level of the business, allowing companies to net the largest possible return on investment. If any of these questions are being asked in the executive boardroom, supply chain design can likely provide insight:
Supply chain design drives measurable cost savings
Supply chain modeling with LLamasoft has enabled businesses around the world to uncover significant supply chain cost savings. On average, LLamasoft customers saved: 9% on inventory costs, 7% on sourcing, 6% on handling, 11% on production costs, 11% transportation costs, 10% on fixed costs and 12% on total supply chain variable costs.¹ According to a survey by the University of Michigan, more than 70% of companies that have supply chain design centers of excellence identify savings of at least 10 million dollars along with significant improvements in both time and cost efficiency².
Supply chain design is now a must-have capability for businesses to keep up with the pace of change and sustain a competitive advantage. Leading businesses have established centers of excellence and put in place an integrated supply chain design platform and business processes to rapidly and accurately answer tough supply chain what-if questions and generate effective and clear recommendations for decision support.
We love helping our customers design thriving supply chains. LLamasoft enables organizations around the world to model and optimize their supply chain operations for major improvements in cost, service, sustainability, and risk mitigation. We’re driven to make supply chain optimization easier, better, and faster, so you can make the world a better place. We continue to innovate with an aggressive development roadmap including new solutions for supply chain visibility, planning, and predictive analytics.
LLamasoft is excited to join with FLEXE to provide access to the FLEXE warehousing marketplace to our customers for use in supply chain design. Whether it’s trials in new markets, testing impact of providing one- or two-day shipping, short-term promotional events, demand outpacing plans, temporary loss of capacity due to weather events, labor disputes, or building damage, finding warehouse capacity and fulfillment services in your target markets, assessing the overall fit in your network design will now become easier for our customers with integrated access to the FLEXE marketplace.
1: LLamasoft 2015 and 2016 Benefit Benchmarking Study
2: University of Michigan 2015 Supply Chain Design COE Research