Does it really have to be all that complicated?
Supply chain and Network Optimization projects are perceived by many to be very large and complex processes taking months and hundreds of thousands of dollars (sometimes a million + $’s) to complete. Many also think that network optimization is just for big companies that have the internal bandwidth, resources and budget to take on these important tasks. Furthermore, bring in the high paid big suits from one of the big 10 consulting firms as well, because no one at your company has a clue how to conduct these complicated projects. To top it off, you likely don’t have the software nor the budget for the software much less anyone internally with experience running these sophisticated tools. So, is supply chain optimization just too expensive, time consuming and resource sapping for small to mid-sized companies? Has anything changed in recent years to make this process less painful and less costly and time consuming?
Actually, there are several main factors contributing to this FALSE notion that supply chain optimization is too complicated and costly for small to mid-sized companies:
1. The big software companies specializing in the development of supply chain optimization software have raised multiple rounds of funding and plowed millions into software development while continuously “improving” and developing their models to be more and more inclusive and complex. Anyone that has worked with different software programs in any business knows that the more detail you add to the models, the more difficult it is to use. These capability enhancements have been going on for years now. Imagine the complexity. Not to mention the cost to license the software!
2. The larger consulting firms make money by billing for more time. Most of today’s optimization models/software fit the big consulting firms perfectly. It takes more time to populate the models with data and solve the “enormous” problems; therefore, it will take the consultants longer to complete the project and analyses. It’s a perfect match and they want everyone to think this is just the way that it is. Moreover, and what many consultants won’t tell you is (and this is often, but not always the case), there are software engineers (employed by the software developers, not the consulting company) hidden in the background of your project doing the heavy modeling and lifting. That’s because even the consulting companies often do not have the internal bandwidth or skill sets to utilize and maximize the software to its capable limits.
3. There really hasn’t been many (if any) alternatives out there that try to simplify this process in order to make it more affordable and easier to implement these important projects, especially for smaller companies.
Until now! The answer is NO, supply chain and network optimization really doesn’t have to be all that complicated. First, it only takes four (4) very important components to conduct and maintain an accurate and cost effective supply chain strategy.
1. Good data and if not, find a way to get it! I can tell you based on my 35 years of experience, the quality of the data is directly linked and related to the quality of leadership and how well a company is performing financially. If a company is not paying attention to the quality of their data nor using their data on a daily basis to measure business performance, then it’s definitely a company under performing in multiple areas. Especially profit margins. This is another subject I’ll be writing about soon, so stand by on this important subject.
2. Professional experience specifically in designing supply chain networks. Make very sure that you are hiring someone with lots of specific experience that can show and prove that their network designs have been effective from both a service and financial perspective. Get references and check them!
3. A good and practical supply chain set of modeling tools that are designed to simplify, not over-complicate your project. The cost of these tools should be included in the hourly rates of the consultant, not add on software licenses that cost tens of thousands per month plus tariff licenses and other related software costs.
4. Use new “BI” (Business Intelligence) visualizations/analytics to monitor performance on an on-going basis. Symmedian calls this our Analytics as a Service program. Optimization should happen every day!
Believe it or not, most small to mid-sized companies following these four (4) basic rules above can achieve fantastic network design results in just a few short weeks. On top of that, you should find a lot of easy to implement cost savings opportunities discovered during the project that should directly pay for the cost of your project multiple times over. Pay back on these types of projects should be a couple of months at most.
In effort to keep this short and effective, I’ll end with this thought. In many cases, companies cannot implement a “perfect world” network strategy anyway. There are going to be real world constraints that will limit your ability to reap maximum benefit day one. Even more reason not to spend a fortune on a supply chain strategy project. Supply Chain Optimization should be considered a continuous and perpetual part of your company’s culture and modus operandi along with making sure your data is ALWAYS clean, easily obtainable and accurate. Optimization is NOT a once every five-year project that can adversely impact your profitability the year it takes place due to its high cost. Your company’s leadership and the employees who work for them should expect optimization to occur every day. This is what Symmedian teaches its customers. And, our customers get very good at this QUICKLY.