Supply Chain Planning: A Look Ahead
I’ve been encouraged to adopt New Year’s Resolutions and I’m not very fond of the idea. For me resolutions start off well intentioned and fizzle to more resemble the wispy ash of a fire that was once a well intentioned raging inferno. This is an attempt at a resolution. My goal is to write 12 posts this year and drink more water, you’re here because of the former.
In 2020, like a lot of supply chain professionals, my professional year was fraught with shifts in demand and interruptions in supply resulting in a need for fast paced analytics, informed decision making, and quick measuring of outcomes. Much was learned and forgotten about 2020. One of those such learnings is documented below.
Incremental improvements are the backbone to progress. Large projects like lights-out-planning or full automation etc. are further out into the future. Instead organizations should go after incremental improvements. The path to maturity will look more like taking small bites out of an apple. My first digitization project was to create a sourcing optimization application in 2018. The application’s core purpose is to determine optimal (based on lowest cost) sourcing between the supply nodes for production and distribution — as pictured below in red.
With our sourcing optimization application we can do scenario modeling and A/B testing; through this we have proved out the value of the investment by reducing sourcing costs. We quickly found other use cases such as capacity analysis and more robust network modeling. No additional costs for the new insights, just new ways of manipulating the model — this is incremental improvement.
Next up, in 2020 we endeavored to create our own tool for inventory optimization to allow algorithms and data sets to determine our inventory settings, with a focus on safety stock for replenishment. This is resulting in a reduction of costs and we’re expecting an increase in customer service. Some of the incremental improvements we’ve seen are attributed to implementing our sourcing and inventory optimization applications. In many ways the value has been extracted by getting the analysis and decision making out of Excel and into repeatable and scalable models — more about that in a future post.
Using the same platform as our inventory optimization application we plan to create several other applications representing even more incremental improvements. Many of our future use cases will be in support of current or existing processes such as S&OP and S&OE, transportation efficiency, and better predictions for new product innovation — just to name a few. With each of these we plan to incrementally improve our operations.
Looking ahead at 2021 we plan to continue to exploit RPA (Robotic Process Automation), Blockchain, and other prediction or AI types of incremental improvements, but with each of these we don’t plan to take major drastic leaps forward but rather incremental improvements that better position us for the future while also creating value now.
Every project that is a marriage of technology and supply chain should ultimately result in, positive operating income and/or an increase in shareholder/customer value. If lights-out-planning is the holy grail of Supply Chain then incremental improvements along the way will be the path towards finding that enlightenment.
For Further Reading
Prediction Machines by Ajay Agrawal, Avi Goldfarb, Joshua Gans
Competing in the Age of AI by Marco Iansiti and Karim R. Lakhani
The Goal by Eliyahu M. Goldratt
