By Louis Bourassa | Senior Manager, Supply Chain Design | Chainalytics |
Those familiar with supply chain design (also called network design, network modeling and other variants) understand there is more to delivering a successful project than building a model that solves in an optimization software tool. Of course you need a reliable model that is an accurate representation of your supply chain and capable of answering the questions you have. But you also need the confidence/buy-in from the senior management team that will be approving the changes and the operations teams tasked with implementing the changes. To achieve success, results must be implemented and this can be qualitatively expressed with the following equation:
[Success] =[Realized Improvement] = [Rigorous Model] x [Buy in]
Note that the two factors are multiplicative, not additive. You can have the most detailed and accurate model in the world, but if no one believes it, no actions will be taken. Likewise, you can have everyone believing in the model, but if it is over-simplified or if too many corners have been cut, the implementation will likely not produce the expected performance improvements.
Based on my experience and those of my colleagues at Chainalytics, these are the top five factors needed to ensure savings are realized in an SCD project.
1. Depth of Supply Chain Design Expertise
This element is part of the Rigorous Model element of the Success equation. Software for supply chain design such as Llamasoft’s Supply Chain Guru and JDA’s Supply Chain Strategist have made things easier, but skill and experience are crucial components to achieving accurate and precise results. As an analogy, knowing how to use Computer Aided Design (CAD) doesn’t make you competent in designing a bridge. SCD is both an art and a science. Should products be aggregated? How should they be aggregated? How do you narrow down your list of potential sites? How do I handle multi-stop transportation routes? How do I convince my boss that I have the right approach? How do I prioritize complexity with a limited amount of resources and time? Confident answers to these questions come only through experience.
2. Solid Data Foundation
Data, of course, is critical to building a rigorous model. We all know the saying “garbage in = garbage out.” But there are nuances here; not all data is created equally. Some data sets prove more important than others. Also, different data is needed depending on the questions you seek to answer. Customer demand data may not be needed when examining reverse logistics. Or more subtly, procurement data may not be needed if the inbound shipment data is relatively clean and complete.
Data is also linked to the first element discussed – SCD expertise. A skilled modeler must be able to deftly navigate around hurdles like spotty, unreliable or simply unavailable data. For instance, access to Chainalytics’ Freight Market Intelligence Consortium (FMIC) data when TL rates are needed on new lanes or LTL/Parcel lead-times for accurate service time modeling provides indispensable insight needed for networked design.
3. Repeatable Process
Process is a means by which the work is completed in a way that is repeatable and traceable. Let’s not kid ourselves, your model will need to be revised, rebuilt, or refreshed either at some point in the project or in a follow-up project! This is likely to happen many times as new questions arise and people potentially question the validity/source of the data.
Having a systematic approach that documents data sources, assumptions, procedures and design decisions will greatly help the modeling and the building of confidence around the results. This leads us to the last two elements.
4. Buy-In from the Subject Matter Experts
Getting the Subject Matter Experts (SME) and relevant functional leaders (e.g., Transportation Manager, Inventory Manager, Warehousing Manager, etc.) involved early in the project is an effective manner to achieve their buy-in. Having a transparent process with several touch points will cement their understanding of the effort and greatly facilitate the project’s progress.
A comprehensive baseline review meeting that includes the SMEs and functional leaders is a key step in an SCD project. Every effort should be made to achieve not just consensus, but unanimity that the model is an accurate representation of the supply chain to answer the questions being asked. After many weeks (if not months) of collecting data, cleaning data, validating data, and building a baseline model, there is typically a lot of pressure to quickly jump into running the optimization/what-if scenarios. Every effort should be made to validate the baseline model before moving on. This will avoid having to re-run corrected scenarios down the line which may result in cost overruns, late delivery and loss of credibility.
Getting SME buy-in will greatly facilitate achieving the next element.
5. Executive Sponsorship & Buy-In
SCD is typically a strategic/long term initiative. This is in contrast to tactical/short term planning functions in a supply chain like tendering a load, reordering raw materials or scheduling production on a manufacturing line. To be able to relocate DCs, shift production to other facilities, establish cross-docks, etc., you will need Executive sponsorship and buy-in to the project. With a rigorous model backed by SMEs and functional leaders, this will be much easier to accomplish. In effect, a bottom up approach builds trust in the proposed solution.
Bringing It All Together
To achieve a successful supply chain design project requires much more than building an investment-grade model. Likewise, if you are able to achieve buy-in at all levels of the organization, but built a model around average values and over simplification, the outcome can be much less than expected. Keep in mind the multiplicative effect of a rigorous model and organization buy-in when considering an SCD project:
[Success] =[Realized Improvement] = [Rigorous Model] x [Buy in]
Our Supply Chain Design practice focuses exclusively on SCD projects. In each of our engagements, we bring to bear in-depth expertise as well as an approach that has been refined over the several hundred projects our team has successfully delivered over the past 20+ years. We always love hearing feedback and discussing other key factors concerning client experiences and outcomes.
Louis Bourassa is a Senior Manager in the Supply Chain Design practice at Chainalytics and possesses broad-based expertise in strategic planning, supply chain/logistics management, and process optimization. He has 20+ years of experience analyzing key performance indicators and leading process improvements to reduce costs, enhance productivity, and maximize performance to impact the bottom line.
Read more about how Chainalytics provides supply chain design services and results for our clients:
- (SUCCESS STORY) Shaw Industries Partners with Chainalytics for Supply Chain Network Redesign
- (BLOG) Enhancing Supply Chain Network Design with Sophisticated Inventory Optimization
- (BLOG) ‘Drop Shipping’ Looks Set to Go Mainstream as More Retailers Get on Board
- (BLOG) How Supply Chain Modeling Opens Your Eyes to Supply Chain Improvements