Supply Chain Network and Optimization Executive Seminar September, 2005

Supply Chain Network Foundation questions for the supply chain network discussion … Do you feel that your supply chain network is optimized? If not, what would you change? What is the biggest opportunity that would result from upgrading the network? How do you balance the trade-offs between low cost sourcing, supply chain costs and store/customer service? Who controls your inbound product routing, vendors or your company? What tools or techniques do you use to optimize your network?

Network Design Many network designs are not optimal. When you have control, you have the opportunity and the burden to implement efficient operations.

Overall Supply Chain Significant cost reductions possible.

Freight Terms The enterprise exercises greater control over inbound shipments when freight terms are collect, rather than prepaid. The dominant freight term today is collect.

The trend is to greater buyer control … with some fine tuning.

Transportation Mode Shifts As supply chain networks become more efficient, the trend will be to more efficient transportation modes.

Nodes in the Network The length of links in the network represent trade offs between transportation costs, distribution center costs, product/material first cost and customer service? How do you balance these trade-offs?

History and Demand Forecasts Accurate demand planning is important to network design and operation. However, few shippers have accurate demand planning processes and tools in place. Even accurate historical data is unavailable to some shippers.

Potential for Goal Conflicts From the retailers perspective, supply chain decision making is divided ...

Inventory Goals and Execution Setting Goals Meeting Goals Is there a balance of sales and inventory goals? Does Logistics have meaningful input into one of its primary cost drivers?

Optimal Decisions What are the best practices for optimizing decision making?

Supply Chain Network – Learnings Network design is a significant lever, but is frequently not optimized. The key is to have the right facility types, right number and right location. SKU rationalized is also key – the right quantities, inventoried at the right locations, and flowing through the correct parts of the network. Accurate demand planning and forecasting is key to using the network optimally. As companies take greater control of their inbound networks, transportation modes will shift. The burden of finding adequate capacity shifts from the vendor to the buyer. Company functions may have conflicting goals for vendor selection, product availability, and transportation costs. A process is needed to ensure an optimal solution based on an overall company strategy.

Questions?