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About the Author |
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Toby Brzoznowski
Executive Vice President
LLamasoft, Inc.
Toby Brzoznowski is the Executive Vice President of LLamasoft, Inc. Toby has over 20 years of experience in building and growing businesses, focused on process improvement and analysis technologies. His expertise has been applied to bringing new and advanced technologies into mainstream use at global Fortune 500 businesses. In the last decade, Toby has been involved in the start-up of three Michigan-based technology companies and is a frequent presenter at supply chain and strategic sourcing events.
For more information, please visit www.llamasoft.com
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Supply Chain Comment
By Toby Brzoznowski,
Executive Vice President,
LLamasoft, Inc.
March 7, 2013
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Using Supply Chain Design to Build Your Supply Chain Risk Management Strategy
Creating Living Models of the Corporate Supply Chain Enables Three Key Elements of Supply Chain Risk Mitigation
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I’m guessing that for most people, the term risk management brings to mind images of hurricanes, fire or political unrest and the catastrophic impacts on the supply chain. Of course these unplanned events have the potential to wreak havoc on your supply chain and should factor into your overall risk management strategy, but they aren’t the most critical risks to the competitiveness of your business.
The biggest risk to nearly every company are competitors that are performing well—cost-effective, service-oriented, flexible, or responsive to changing business conditions. To make this more challenging, superior performance versus these competitors may take on different characteristics depending on market conditions, product types, geographies or economic circumstances.
Brzoznowski Says: |
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| By creating living models of the end-to-end supply chain, companies can examine how the supply chain will perform under a wide range of market conditions and assumptions, and analyze the trade-offs between cost, service and risk. |
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What Do You Say?
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Our Guest Experts |
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That’s where supply chain design comes in. By creating living models of the end-to-end supply chain, companies can examine how the supply chain will perform under a wide range of market conditions and assumptions, and analyze the trade-offs between cost, service and risk. These companies are able to mitigate business risk through the engineering of their supply chain operations, therefore enabling significant and sustained advantage over competitors.
By creating living models of the corporate supply chain, companies enable three key elements of supply chain risk mitigation: Visibility, Scenario Analysis, and Rapid Response.
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1. Visibility: What is the current structure and flow of goods through my supply chain?
Visibility into what you’re doing today is the essential first level of supply chain risk management. This activity answers the question, what is the current structure and flow of goods through my supply chain?
Supply chain modeling technology, utilizing your own data pulled from multiple sources, enables you to create baseline models of your existing network. Once you have a living model, you can visualize it in different ways utilizing maps or charts and graphs. You can create interactive dashboards to help answer specific questions or isolate problems or outliers in the model.
2. Scenario Analysis: What if we try this? What if this happens?
Once you have digital models of your supply chain as it operates today, you can use those models to perform valuable what-if analysis and optimize the supply chain operations for different scenarios according to your continuously-changing business climate. This scenario analysis is the key element of your risk management strategy. Running simulations in a digital environment to validate the effects of adding a new supplier or rolling out a new distribution structure can save you from making costly mistakes.
It’s easy, using modeling technology, to determine the cost-optimal supply chain network design, based on these assumptions. But what if any of those assumptions change? Will the cost-optimal design still be the right answer? When you have digital models of your supply chain, you can test the sensitivity of all of these assumptions, based on factors that present the most potential risk to your business.
3. Rapid Response: How should I react to this unplanned event?
Companies that make supply chain modeling a core part of their business strategy and have created an internal center of excellence are more ready for an unforeseen event or the next attack from Mother Nature. When unplanned events occur, these organizations can leverage their supply chain models and use them to determine the optimal “Plan B” or to determine the potential impact of a disruption and communicate this impact to suppliers and customers.
Turning off a supply node or reducing manufacturing capacity in a model and running new simulations to determine the impact on inventory levels and services rates can provide valuable insight and potentially a time-sensitive advantage in the face of challenge.
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Final Thoughts
Supply chain modeling can provide a company with visibility into the current supply chain and a method for scenario analysis and rapid response. When done right, these models can provide the foundation for a truly effective risk management strategy, enabling sustainable competitive advantage no matter what market conditions—or Mother Nature—may bring.
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Agree or Disagree with Our Expert's Perspective? Let Us Know Your Thoughts at the Feedback section below. |
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Recent Feedback |
This is good stuff. I have done this type of work for years and its value is tremendous. Simulating product flow is a great way to optimize vendor/customer relationships. Optimizing the location and service areas of plants and DCs pays long term benefits. When the models are set up the analysis for recovery from disasters and supply chain disruptions can be done rather quickly. This is a very valuable activity for those with large networks.
Will O'Brien
VP, Supply Chain Development
Lowe's Companies
Mar, 18 2013
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