Supply chain design helps companies compete and win by giving them the tools to connect all the parts and capacities of their supply in a rational, measured and efficient manner so that the other tools—the ERP, WMS, TMS and APS - can do their jobs in an environment that maximises their effectiveness. These planning tools, as valuable as they are, are only as good as the network they function in and that network should be designed, not just happen.
The Evolution of a Supply Chain
Most corporate supply chains evolve over time through a series of individual decisions made in the face of immediate business needs. These decisions often appear to make perfect sense at the time and for the specific issue being addressed, but what is the actual cumulative effect of such decisions? These decisions probably seemed right at the time they were made; they saved a capital expense, or made an individual part of the company more profitable, or maximised production capacity at a single facility. But over a longer period they created inefficiencies in the supply chain.
Most companies make dozens, if not hundreds, of decisions that impact their supply chains each year. If each one is made in a vacuum, the inefficiencies can multiply and over time cripple a company, leaving it with a supply chain that eats up precious resources and negatively impacts the bottom line.
If these decisions are made in a supply chain design environment, especially one where solutions can be optimised and the results simulated, these decisions can be vetted to understand their total effect on the supply chain. Inefficiencies can be corrected or prevented from ever being implemented.
Design vs. Planning
Planning systems are incredibly valuable for running the day-to-day aspects of a business. Planning and execution systems automate, streamline, and optimise the existing operations of an organisation. They keep many of the important parts of a company running smoothly, but what if the existing operations are not designed properly or not correctly positioned in relationship to each other? How well can the supply chain perform if the foundation upon which it is built is flawed from the start?
Planning and execution systems are critical to running a business.
Supply chain design tools are critical to determining how a business should run.
When to Use Supply Chain Design
Any time there is the potential for a significant change to the business operations of a company, there is an opportunity to leverage supply chain design. Some opportunities are a matter of course (a revised demand forecast, changes in the customer base) while others are more periodic (expansion into a new market or reaction to an acquisition) and some are rare (the company’s suppliers in Thailand are all under water) but in all of these cases design decisions need to be made. Making decisions with the aid of sophisticated models and tangible analysis on the impact of those decisions increases the likelihood of a desired outcome.
Supply chain design is used to answer questions. Some of these questions are focused on near-term challenges while others look out over a longer-term time horizon. Questions also typically fall into the category of structure (the physical makeup of the supply chain) or policy (the decisions on flow and operations).
If any of these questions are being asked in the executive boardroom, supply chain design can likely provide insight:
Creating a Supply Chain Design Competence
In order to use supply chain design as a competitive weapon, a company must first develop a competence in the process of continuously engineering their supply chain. Because supply chain design is very much a “human process” it is not enough to simply purchase and implement a software tool. The companies that do this best focus on three core elements:
1. The Technology
When selecting the right supply chain design technology, a company should first determine the types of questions and challenges that their business will need to address. It would be best to find a single application or software platform that addresses each of these needs to avoid additional maintenance, training and IT infrastructure issues. The system should be able to scale to address the size and scope of models that the company will be building. As important as the technology itself, the software supplier should be able to support the organisation through continued innovation and system maintenance.
2. The Individual
Supply chain design is a very human activity, so it important to invest in the designers as much as the technology. Even with the most user-friendly software, the key analysts and modellers will require training, mentoring, and support to become proficient as designers. Since accurate operational costs and enterprise data are essential to supply chain design, creating a cross-functional team to provide access and validation of this data is also critical.
3. The Organisation
Finally, to achieve excellence in supply chain design, it is important to implement a methodology and systems that will facilitate the retention of project knowledge. IT systems can enable knowledge management, but the practice of knowledge management has to be fostered throughout all levels of the organisation. To keep the supply chain design team focused on key business initiatives, corporate executives must know what questions the team can answer and be kept updated through consistent delivery of key metrics so they can understand the progress that is being made and the importance of the results.
By establishing these three key pillars, a supply chain team can be successful, not just for a single project but as an integral, repeatable process within the organisation. Not only will the design team be able to execute supply chain design reviews at regular, scheduled intervals but they will also be able to add value whenever decisions are being made that will impact the supply chain. In addition, they will represent an important resource for the company when the inevitable unforeseen circumstance occurs that shocks the supply chain. While a fully trained, competent supply chain design team can’t prevent a natural disaster, they can make reacting to one easier and less costly.
Contributed by Rod Stout, Business Modelling Associates