Supply Chain Design and the effects on shipping

Supply Chain Design and the effects on shipping

Agenda Introductions Supply Chain Evolution LLamasoft - Company Supply Chain Guru - Product Shipping Demonstration Q & A

Introductions Tom Davies Director of European Business Development Over 20 years experience in Supply Chain Mechanical Engineering - Portsmouth University MSc in Manufacturing: Management and Technology MBA - Cranfield University Wanted to be a design engineer have been in software all my working life where did it all go wrong I hear you say? Tom.Davies@LLamasoft.com, mobile 07770 642 683 What is Supply Chain Design?

Supply Chain Evolution Supply Chain Design is the transformation of the supply chain from an historical accident to an intentionally engineered system Supplier Production 4

Design vs. Planning Planning systems automate, streamline and optimise existing operations Design systems allow organisations to develop the supply chain environment within which planning systems work Planning & Execution Systems Design Systems A WMS manages the detailed movement and storage of goods in a distribution centre An ERP systems manages and records transactions with suppliers and customers, documenting revenues, costs and profits A TMS manages the transport operation, building routes and loads, tracking vehicles and allocating shipments to subcontractors A production scheduling system plans what to make, on which equipment and in what order, given existing production capabilities A design system determines the best numbers and locations of distribution centres and which products should be stocked where A design system can determine which suppliers to use, how customers should be served and how profits can be maximised A design system can determine the flow of products through a network, and which modes should be used to optimise costs within service constraints A design system can determine which products are made at which line, at which facility, minimising cost and maximising utilisation 5

Long Term Short Term When to Use Supply Chain Design Design questions can be routine, periodic or rare They may be short term or long term, and can be categorised as: Structure, i.e. the physical makeup of the supply chain Policy, i.e. decisions on flow and operations Structure Should I open an inbound consolidation centre? Do I need to add some local DCs? Should I use overflow warehousing to cope with peak storage requirements? How many DCs do I need to meet my growth plans, and when should I open them? When and where should I create additional production capacity? Should I out-source production of these parts? Policy Should we pre-build to meet seasonal demand? Should large customers be served direct from the factory? Where should I position inventory to achieve desired service levels? Can I profitably introduce this new product into the Asian market? Do I source components in low-cost but distant countries? Should I invest in alternative transport modes to get cost benefits 6

LLamasoft Overview Privately owned software company headquartered in Ann Arbor, MI, USA Global Support Centers United Kingdom, South Africa, China, South America Industry leader in supply chain design & predictive analytics Provide software and consulting services to help organizations design supply chains that will: Reduce cost, Maximize profit, Improve service, Hedge against risk 7

Sample Customers Automotive / Industrial Manufacturing Consumer Goods Defense Hi-Tech / Electronics Food Beverage Life Sciences Grocery Logistics Apparel Manufacturing Petroleum Public Health Retail Chemical 8

Supply Chain Guru Modelling Approach Different business issues require different levels of detail and algorithms Network design requires: Products aggregated into groups Transport represented as flows Single or multiple time periods Inventory optimisation requires: Products at sku level Multiple time periods Transport and supply variability Simulation requires: Products at sku level Transport in shipments Scheduling of events over time Transportation optimisation requires: A summary view of products Detailed description of shipments and locations Constraints on driver and vehicle capacities Network Optimization Enterprise Simulation Inventory Optimization Supply Chain Guru Modeling Application Transportation Optimization Single User Interface Numerous Modelling Algorithms Common Database 9

Network optimisation Determines the optimal infrastructure and product flows in a network Models can be single or multiple time periods Site costs can be fixed and variable with volume based step-changes Transport can be modal and represent actual rates Production can be included with work centres, production rates and bills of materials Constraints can include capacities and time based service levels, including end-to-end lead times Scenarios can be set up to: Include or exclude specific sites and/or modes Change data and settings for sensitivity testing Results can be displayed as maps, graphs and tables Supplier Plant Whse DC Customer DC Customer Supplier Plant Whse DC Customer 10

Inventory optimisation Safety stock optimisation Considers actual or probability distributed daily demand and supply patterns Multi-echelon algorithms take into account risk pooling effects Output is safety stock by product, site and period to fulfil service requirements Supply/demand balancing Multi-period modelling including production Production can take place in one period and can be held over to meet peak demand Sourcing Variability Transport Time Variability Production Variability Transport Time Variability Finished Goods Holding Costs Transport Time Variability Demand Variability 11

Enterprise simulation Simulates performance of a supply chain before a final implementation decision is made Is used to predict how a supply chain will perform over time to test robustness and sensitivity Allows the testing of policies for: Sourcing Holding and replenishing inventory Selecting transport mode Identifies bottlenecks and service problems Can be used for risk analysis and contingency planning Performance measures include: Cost Cycle time, service rate and fill rate Facility/resource utilisation Customer (Demand) Sourcing rules Transport rules Inventory policies DC Sourcing rules Transport rules Inventory policies Plant Manufacturing rules 12

Transportation route design Strategic planning and network design Fleet size and mix Depot location and boundaries Territory planning Impact of time windows Shift patterns Combining or separating operations Providing metrics for delivery costing Optimise and manage fixed routes Implement strategic changes Re-plan fixed routes to cater for changed circumstances Develop fixed routes for different seasons (level of activity/weather patterns) Manage daily volume fluctuations 13

Shipping impact on Supply Chain Design Labour costs Rising in BRIC Countries/Regions Shipping developments Infrastructure developments Shipping consistency Costs Risk exposure Slow steaming Other Port disruptions Trends Green awareness Companies modelling

Shipping impact on Supply Chain Design Rising labour costs will shift manufacturing focus Rising fuel prices should support shipping Focus on Making shipping more consistent for delivery Shipping developments (reduce costs) Holding in-transit Inventory Minimise risk exposure Leverage C02 awareness Support new shipping infrastructure developments Accurate design shows real costs

Q & A