Supply chain network optimization grabs attention when leadership talks strategic planning, supporting growth, adding new product lines, and so on. Supply chain network optimization solves a very complex problem for companies, and the problem is that most supply chains have been developed with a series of decisions made over time.
The problem isn’t in those decisions themselves. The problem is that as time goes on, the supply chain grows and becomes increasingly complex.
When you increase the size and complexity of a supply chain, you also increase the impact of inefficiency. Inefficiencies begin to have large, ripple effects on costs, service levels, and overall ability to manage the supply chain. The good news is that we can solve this complex problem.
The aim of supply chain network optimization is to understand how the supply chain works today, and identify alternatives that support changes in a business.
Traditionally, supply chain network optimization focused on minimizing cost and maximizing profit.
Of course, that’s still a focus for every successful company. What’s different today is that businesses are differentiating themselves by offering customers bold service guarantees.
Amazon was a trailblazer here with Prime 2 Day Shipping that launched in 2005. Walmart didn’t step up to the plate until 2017, but the war is on now.
Companies are moving from 2 day shipping to next day pickup to same day delivery, and sc network optimization objectives are weighing heavily towards meeting minimum service levels.
The service war is just heating up. Last mile delivery is the next wave of service disruption as companies find ways to deliver from a hub to a final delivery destination within a day, if not hours. Companies like DHL, UPS, and Amazon are testing drone deliveries around the world.
Once a company sets a goal like 2 day delivery, optimization is one of the tools that helps them create the supply chain strategy and infrastructure to achieve the goal.
Supply chain optimization is about systems thinking, and make the right decision for the system to work as whole.
Optimization allows companies to make the right decision when they are considering supply chain changes that impact the system.
When a company is trying to decide how to build a supply chain that meets an optimal objective of maximizing profit while meeting a 2 day delivery time frame, they need to consider plant locations, distribution center locations, capacity for their facilities, what products to produce or buy and from where, inventory requirements, and customer service levels.
Supply chain network optimization is used when making a decision in any of these areas to ensure the focus is on improving the system.
The simple answer: When the supply chain is changing…or preferably before the supply chain changes.
The long answer:
At SimWell, we believe that optimization ought to be within reach for every company. Tools like AnyLogistix make that possible by combining the best in class simulation engine and best in class optimization engine with a simple interface that allows anyone to design, optimize, and simulate their supply chain. Combine network optimization, greenfield analysis (GFA), risk analysis, supply chain master planning, and more with AnyLogistix.
You can do supply chain network optimization yourself, and SimWell provides the tools and support to make you successful. If you’re too busy, we are a supply chain consulting company with experts on staff that are able to do it for you.
SimWell is the North American leader in simulation and optimization solutions. If you need help with supply chain network optimization, or you need to find the right tools to do it yourself we can help.
It starts with a conversation. Send us a live chat, or click Start the Conversation in the top right. We want to learn about your supply chain challenges, and see how we can help.