APICS Professional Development Webinar

Using 21st Century Tools to Model, Simulate, and Optimize Your Supply Chain Network

Camila Suarez & Ben Unpingco

12.5.19

Agenda

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book.

01

Why we Model

02

Modeling in Steps

03

Use Cases

03 04

Making Decisions (Current State)

Source: AIMMS, Buyer’s Guide for Supply Chain Network Design Software

The Use Cases we see in the Market

Prescriptive

(What is currently happening)

Predictive

(Under future/abnormal conditions)

• What If my demand exceeds capacity?

• Where should I move the operation?

• How many shifts should I run?

• Where should I produce what product?

• What is my network actually acting like?

• Where do I have opportunities for quick

wins in my network?

• How do my metrics compare to my

competition’s metrics?

Target DesignQuestion to be Resolved

Current Design (based on seeing the work)

Criteria for Success

Barriers to Impact

Execution Plan/ Track Results

What did we learn and what is next?

Common Design & Decision Applications

• Mid-Long Term Forecasting• Product Life Cycle• Causal Modeling• Clustering

• Distribution Network Optimization• Manufacturing Footprint Optimization• Strategic Optimal Sourcing• Product Flow Optimization• Mid/Long Term Capacity Planning• Production Optimization• S&OP Support• Cost to Serve Optimization• Portfolio Optimization• Tax & Supply Chain Optimization• *Product Freshness• Mergers & Acquisitions• *CO2 Optimization

• *Holistic Inventory Optimization• Safety Stock Optimization• Service Level Optimization

*Project may cross technologies

Network Optimization Inventory Optimization

• Contingency Planning• Bottleneck Detection• Business Logic Insights• Risk Analysis

Simulation

Demand Modeling

• Transportation Asset Optimization• Route Optimization• Mode Optimization/Bid Optimization• *CO2 Optimization• Hub Optimization• Backhaul Optimization

Transportation Optimization

*Project may cross technologies

Process to build a Digital Twin

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Scope DefinitionData Collection

& AnalysisBaseline Modeling

& Validation

• Business problem & objectives

• As-is SC structure and processes

• High-level scenario requirements

• Data & integration requirements

• Modeling strategy

• Staffing roles & responsibilities

• Project scope

• Detailed project plan and timeline

• Summary of input data in multiple formats

• Trends and patterns

• Documentation of any assumptions or

alternative methods for data gaps

• Baseline performance capture

• Validated baseline model

• Documentation of validation criteria

• Comparison of operational and financial

statistics against model results

• Baseline presentation

Scenario AnalysisBusiness Change

PlanImplement &

Repeat

• Cost summaries by categories

• Service metrics

• Capacity utilization

• Detailed maps for supply chain flows

• CO2 emission implications

• Comparison of cost and service

• Scorecard comparison of scenarios

• Business case

• Implementation roadmap

• Final executive presentation

• Support for other supply chain projects

• Planning post-project benefit audit

Modeling In Steps

“Great Network Design will make a poorly run supply chain better

But a great supply chain will not make a poorly designed network any better”

~ Source Unknown

Base

lin

eO

pti

mal

Modeling in Steps

1. Baseline (Historical)

2. Optimal Baseline (Best with current structure)

3. Rationalization Scenarios (what should be in the network)

4. Optimization Scenarios (how everything should work together)

Measuring the success of the Digital Twin

• Know what KPIs matter• Miles Traveled

• Fill Rate

• Service Distance

• OpEx

• Operable Results• How well did we model?

• Can we implement the

proposed changes?

• Realistic Savings?

• Repeatability• Can we replicated the modeling

process quickly and accurately

• Did we learn anything new? • How revealing was the exercise of

constructing and operating the

model?

• Unexpected learnings

PotentialUse Cases

Identify GAP and Value

Financial

Service &

Performance

Process

Efficiency

People Skills

Cost Reduction X%:

• Baseline cost: Sourcing Cost, Transportation Cost – IB, Transportation Cost – OB, Warehouse Costs

(Fixed & Variable), Production Costs and Inventory Carrying Costs (All or Some).

• Volume and Time

• Service level increment ->5%.

• Inventory on hand reduction from 2% to 7%

• CO2 reduction in X Tons

• Number of Trips reduction in at least 1 per line in a week

• Frequency reduction: from 3 times per week to twice per week

• Process Time reduction in at least 10%

• Develop people skills improve at least one level

Question to be Resolved

Key points

• Reference something

that the organization/

leadership cares about

• Identify the GAP

(Current design vs

Target Design)

• GAP must be

quantifiable

Merger & AcquisitionsUse Case

Mergers and Acquisitions (M&A)

M&A drives a large number of options to select from for the design of the new organization’s supply chain

Constraints

Inputs

• Regulations

• Taxes

• Total capacity of each facility

• Open and Close costs

• Shared resource/tooling

availability

• Projected demand based on

combined products and

customers

• Number of facilities (existing and

potential)

• Fixed Cost, Closing Cost, Startup

Cost

• Sourcing Policies

• Depreciation plan

• Market share/coverage

• Demand fluctuations

• Customer portfolio

• Inventory holding Cost

• Potential new lanes, volumes and

costs

• Targeted synergy savings

Demand

Portfolio

Opex

KPIs

Source

Negotiation

Vertical

Merger

Capex

Budget

Horizontal

Merger

Organizational Impact

Beneficiaries & Metrics

Primary Beneficiaries

› Demand Planning

› Sourcing

› Manufacturing

› Logistics

› Finance

› Merchandising

› Marketing

› Sales

› Pricing

Metrics Impacted

› Revenue increase

› Improved service

› Cost avoidance

› Reduced risk

› Sourcing cost savings

› Production cost savings

› Inventory cost savings

› Transportation cost savings

› Fixed op cost savings

› Handling cost savings

Model the Current Structure,

costs and constraints of each

company to be merged

Build and Optimize

Design a future supply

chain

Visualize and analyze

the supply chain

operations

Inventory OptimizationUse Case

Inventory Optimization

Decide best use of safety stock based on desired service levels and overall working capital

Constraints

Inputs

• Demand must be satisfied

• Service Level Requirement

(Max/Min, ABC category)

• RM/FG material inventory

balance

• Inventory Capital

• Product Specification (Cost,

Weight/Volume)

• Inventory Carrying Cost

• Customer Demand Quantity

• Order Date or Date of Receipt

• Initial Inventory

• Lead times with Variability

• Inventory Turns

• Inventory Capacity

• Production Capacity

• Distribution Capacity

• Shelf Life

• Minimum Order Quantity and

Replenishment Frequency

• Fixed Network

• Service Level and Service Time

Postponement

Strategy

Service Level

and

Segmentation

Site Stocking

Option

Demand and

Supply

Variability

Prebuilt stock

Lead time

Demand

Classification

Inventory

Budget

Cycle stock

Organizational Impact

Beneficiaries & Metrics

Primary Beneficiaries

› Demand Planning

› Sourcing

› Manufacturing

› Logistics

› Finance

› Merchandising

› Marketing

› Sales

› Pricing

Metrics Impacted

› Revenue increase

› Improved service

› Cost avoidance

› Reduced risk

› Sourcing cost savings

› Production cost savings

› Inventory cost savings

› Transportation cost savings

› Fixed op cost savings

› Handling cost savings

Tax and Duties

Taxes & Duties

Decide optimal product sourcing and flow paths incorporating tax and duty costs

Constraints

Inputs

• Export restrictions

• Production Capacity/Capability

• Storage capacity/compatibility

• Lead time requirements

• Production locations

• Sourcing Costs

• Labor Costs

• Conversion Costs

• Transportation Costs

• Rules related to FTZ, FTA,

Bonded Warehousing

• Freight capacities

• Product shelf-life

• Local content requirements

• Other overhead and variable costs

• Selling Price

• Duty/Tax rates

• Transfer price/Markup

Free Trade

Agreements

Off-Shore

vs

On-Shore

Taxable

Income

Free Trade

Zones

Where to

Produce

Labor

Costs

Local

Content

Flow PathBonded

Whse

How do we address?

Primary Beneficiaries

› Demand Planning

› Sourcing

› Manufacturing

› Logistics

› Finance

› Merchandising

› Marketing

› Sales

› Pricing

Metrics Impacted

› Revenue increase

› Improved service

› Cost avoidance

› Reduced risk

› Sourcing cost savings

› Production cost savings

› Inventory cost savings

› Transportation cost savings

› Fixed op cost savings

› Handling cost savings