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Supply Chain Videocast

Why Supply Chain Design

has Become a Must-Have

Skill for Today's Business

Leaders

Broadcast Made Possible by:

© 2012 LLamasoft, Inc. All Rights Reserved

The Challenge


Company Overview

4 4

We are:

• The global leader in Supply Chain

Design technology & solution services

We enable companies to:

• Optimize their end-to-end supply chain

operations

• Reduce corporate risk and identify

major cost savings

• Perform what-if analysis


Sample Customers

Automotive / Industrial Manufacturing Consumer Goods Defense

Hi-Tech / Electronics Food Beverage

Life Sciences Grocery Logistics

Apparel Manufacturing Petroleum

Public Health Retail Chemical

http://www.northropgrumman.com/index.html

http://www.transcom.mil/

http://www.generalmills.com/corporate/index.aspx

http://www.pepsico.com/

http://www.meadwestvaco.com/index.htm

http://www.conocophillips.com/

http://www.slb.com/index.asp?

http://en.wikipedia.org/wiki/Image:JohnsonandJohnsonLogo.gif

http://www.rockwellautomation.com/

http://www.chrysler.com/en/

http://unilever.com/default.asp

http://www.pinnaclefoodscorp.com/index.html

http://carestreamhealth.com/

http://www.syngenta.com/en/index.aspx

http://www.cocacola.co.jp/


Enabling Ongoing Ability to Engineer a Competitive

Supply Chain

– Training and coaching programs for analysts

– Methodology to enable retention of project knowledge

– Maintenance of supply chain models and updates for the latest modeling options

The right technology to address your specific issues

now and in the future

– Integrates all key metrics and design approaches

– Scales to model the entire enterprise

– Continuously innovating using the latest technology & design techniques

Unparalleled Experience in Designing Global

Corporate Supply Chains

– Support hundreds of supply chain design projects every year

– Exposure to latest approaches and best practices

– Developers of the leading supply chain design technology

Experience Technology Empowerment

LLamasoft Differentiators


Supply Chain Design System

How should I react

to an unplanned

event?

RAPID RESPONSE

What if we try this?

What if this

happens?

SCENARIO ANALYSIS

What is my current

supply chain

profile?

VISIBILITY

Customer Enterprise Data Parts – Bills of Material – Costs – Facilities

Suppliers – Demand – Lead Times - Capacities

LLamasoft Reference Data Transportation Costs – Risk Metrics – Labor Rates

Facility Costs – Emissions Benchmarks

Supply Chain Optimization & Simulation Engine Sourcing & Production Footprint – Product Flowpaths – Transportation Routes – Inventory Placement

CURRENT OPERATIONS Analysis of Existing Supply Chain

FUTURE OPERATIONS Strategy for New Supply Chain


Supply Chain Visibility

INTERACTIVE DASHBOARDS

• Analyze current cost-to-serve

• Highlight a geographic region

• Explore a business segment

RICH VISUALS OF SUPPLY CHAIN

• Flow of products

• Risk profile & locations

• Demand segmentation

DRILL DOWN REPORTS & METRICS

• % sourced from specific region

• Product profitability & cost structure

• Service levels & coverage


Scenario Analysis

OPTIMIZE SUPPLIER CONFIGURATION

• Single source vs. multi source

• Low cost vs. local

• High risk vs. low risk

EVALUATE ALTERNATIVE STRATEGIES

• Transportation mode selection

• Production footprint

• Inventory stocking locations and levels

SIMULATE & PERFORM WHAT-IF

ANALYSIS

• Fluctuations in lead-times

• Supply Disruptions

• Demand increases or decreases

• Fuel-cost spikes

What if we try THIS? What if THIS happens?


Rapid Response

Use the supply chain models to

evaluate contingency plans

Balance production & sourcing

against changes in demand

Prioritize demand during

supply short-falls

Restructure when cost

assumptions fail

How should I respond to an unforeseen event?

Supply Chain Design Questions

What is my actual cost-to-serve

each product to each customer?

From whom should we source?

How should we flow each product

through the network?

Where and when should we

produce each product?

Where should we stock product?

How much inventory is enough to

meet my customer service

requirements?

How much should I buy and at

what price?

How should I ship my products?

Supply Chain Design Metrics

Sustainability

• Greenhouse Gas Emissions / Energy • Hazardous or Banned Content • Waste

Supply Chain • Facility and Equipment Footprint • Inventory & Capacity • Complexity, Sourcing

Financials • Profit, Total Cost, Total Revenue • Fixed and Variable Facility Costs • Transportation, Inventory, Taxes

Service • On Time Delivery • Fill Rate • Coverage

Service • On Time Delivery • Fill Rate • Coverage

R I S K

Supply Disruption Transportation Variability Demand Volatility Supply Volatility Sensitivity to Costs Natural Disasters, Structural/Geographic Geopolitical Change


What Does My Supply Chain Look Like?


Four Regional Distribution Centers


Customers Throughout the Country


Widely Varying Demand by Customer


As-Is Costs and Operations

Financial Service Risk Supply Chain Sustainability


Optimized As-Is Supply Chain



Supply Chain Segmentation



Safety Stock Optimization


Demand & Lead Time Profiling

Multi-Echelon Safety Stock Optimization

Key Benefits and Usage

• Multi-Echelon Safety Stock optimization allows the model to achieve savings

in working capital while simultaneously maintaining or increasing service

level to stores

• Scientifically quantify cost or benefits of service level, sourcing, and

contractual lead time agreement changes.

• Combine with network optimization to set optimal inventory planning

policies. ie Reorder point, order quantities by site by product

• Model can automatically profile historical sales data or use forecast and

forecast error as inputs

• IO Select functionality allows automated filtering of products with non-

normally distribution demand

Sourcing

Variability Demand

Variability

Transport Time

Variability

Transport Time

Variability

Transport Time

Variability

Production

Variability

$ $ $

Finished Goods

Holding Costs

$

Increasing OTIF to 97% increases working

capital by 14% while Decreasing OTIF to 93%

decreases working capital by 10%


Optimized As-Is Supply Chain



New Optimal Structure



New Transportation Routes



Designing An Optimal Supply Chain



Service Based Optimization


Center of Gravity Greenfield

Formulation

Service Based Greenfield Formulation

1 Day service increases by 38% from baseline with

Center of Gravity Analysis. It further increases by 5%

when Service Based GF Analysis is applied


• Depending on the objective, Greenfield analysis can either be performed

using Center of Gravity or Service Based methods

• Service Based Optimization allows the model to decide “How Many?” And

“Where?” given customer locations and service requirements.

• Service Based Optimization can provide a strategic advantage from a

service lead time perspective. The objective is to cover the most number of

customers using the fewest number of distribution points within a defined set

of service goals.

• Center of Gravity Formulation solves the “Where?” question given customer

locations, demand volumes and number of DCs as inputs.

• The Center of Gravity method can often yield the lowest cost solutions from

a freight perspective. It is often utilized for completely realigning the current

footprint or identifying the next best location to setup a facility.


Sales & Operations Planning






Pre-Position

Pre-Build

Demand


Business Continuity Planning Facility Outage Simulation


Business Continuity Plan

Baseline Sourcing Pattern

Predict & Visualize Operational Impacts with Discrete Event

Simulation

Stock Out

Storage Capacity Limit

Reached

Huanghua DC shut down increases freight spend by 2%

while service distance increases by 7%


Risk Management Commodity Pricing Shocks


Business Continuity Plan

Baseline Sourcing Pattern


At 180% increase in fuel price, freight spend

justifies setting up operations locally

for sourcing

SUPPLIER INBOUND LANES

WRDC TO DC TRANSER LANES

SUPPLIER INBOUND LANES

WRDC TO DC TRANSER LANES

• Pre-plan supply chain responses in response to various risks

in supply, demand, weather and geo-political events.

• Identify optimal alternate suppliers, carriers, production sites,

distribution paths, etc. prior to supply chain risk events

occurring

• Understand the impact to capital expenditures, operating

expenses and service to customers

• Combine optimal designs with discrete event simulation to

predict and anticipate impact to daily operations

• Model varying lengths of risks for different supply chain

responses


Tax/Duties Optimization

Financial Service Risk Supply Chain Sustainability Optimized Network without Tax Considerations


• Optimize network with tax/duties considerations

• Apply tax/duties/tariffs based on transfer pricing across

regions

• Calculate tax/duties/tariffs based on revenue

• Calculate tax/duties/tariffs based on import/export

arrangements

• Capture region specific product standard cost based on

production cost and exchange rate differences

• Determine tax/duties/tariffs based on region to region

movements

• Account for tax/duties/tariffs based on invoicing locations

Tax Efficient Network


Freshness Considerations

Financial Service Risk Supply Chain Sustainability Baseline Sourcing Pattern

Freshness

Cycle Inventory

Optimization

Shelf Life Constrained

Optimal Inventory

True Cycle Evaluation

Age Curve Generation

Average Touches in SC Design


• Production with freshness – what if’s to optimize production lot

size against probability of dumping

• Product flow contingency planning with freshness – flow paths

that minimize freight, inventory and spoilage costs

• Inventory planning with freshness – minimize inventory with

respect to shelf life, service level agreements and production

constraints

• Ability to track to true age of productions

• Minimize obsolescence and cost write downs for high turn-

over items (ie fashion, electronics)


BI, Ad Hoc DBs,

Spreadsheets

Corporate Data

ERP, MRP, TMS,

WMS, SCM, Etc.

Web UI Web Server

Enterprise

Supply Chain

Intelligence

AMB’s &

Input Pipes

Model

Database

Project

Knowledge

Database

Workstation

Mobile

Cloud Solver

Cloud

Data Services

Newest Technology Trends Enterprise, Cloud, & Mobile

Custom

Model-Based

Point Solutions

AIT

’s


Example: Using Tablets for Collaboration

Radical ease-of-use

100% visual design environment

Import traditional models or start

from scratch

Built in reference cost and

benchmark data

Ability to share with anyone

Export and upsize designs to

engineering grade software

apps


Summary

There is a big opportunity for cost savings within the

supply chain of most companies

Supply Chain Design is a process and business

function that can help unlock those savings and create

a sustainable business

The applications for supply chain modeling are

continuing to increase to keep up with a more volatile

business climate

Companies are beginning to leverage cloud and mobile

technologies to enhance their Supply Chain Design

capabilities

35

Copyright SCDigest

Resources

• Toby Brzoznowski, LLamasoft

– [email protected]

• www.llamasoft.com

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