The practice of trying to get the right goods to the right place at the right time in the right condition is virtually as old as time—and yet, each year, new trends, ideas, and best practices emerge in the fields of logistics and supply chain management. With the rise of digital technology and increased connectivity across the supply chain, the current rate of change in these fields is unprecedented. The world of logistics even 5 to 10 years from now will probably have undergone even more dramatic evolutions, and it may be virtually unrecognizable compared to the supply chains of the past.
Topics: Logistics 4.0
Let’s picture a hypothetical. You’re a sales and operations planner at a global manufacturer, specializing in a high-end variety of widget that other global companies tend to order in large quantities. Your sales cycle is fairly long, so every time a member of your sales team closes a deal it feels like a major victory. Recently, you’ve closed one of your largest deals yet, meaning that a large quantity of deliverables need to be produced in the immediate future. This will mean leveraging your production facilities at their maximum capacity for some time (potentially resulting in some wear and tear on your machines that will cause slowdowns later), but, like they say, “make hay while the sun shines.”
Imagine for a second that your factory is essentially a black box. Materials go in, and finished products come out, but what happens in between is fundamentally mysterious. What challenges would this present from an advanced planning and scheduling perspective? Sure, in this environment you can get a small sense of the correlation between raw material volumes and finished product volumes—you might even be able to gain a sense of which raw materials loosely correspond to which products. But surely there’s a lot of information you’d really like to have: how do different products differ in resource usage? What are the most common causes of delays and disruptions? How can you more effectively align your capacity with emerging demand levels?
As the global scope of the modern supply chain continues to increase, there’s going to be more data available to supply chain planners than ever before. For some businesses, this data will likely just sit there collecting dust—but in point of fact it’s increasingly going to be an important source of value for planners. Why? Because modern analytics processes, powered by technologies like AI and machine learning, are making that data exponentially more valuable as a source of usable insights.
Topics: Advanced Analytics
Digital supply chains can help manufacturing businesses reduce costs and disruptions in a variety of ways. They make it possible to predict potential breakdowns and bottlenecks far enough in advance that you can take steps to address them, just as they help you to boost operational efficiency through smarter sourcing, inventory management, and capacity management. More than that, going digital makes it easier for your business to integrate with other highly-digitized operations, meaning that especially sophisticated supply chain partners (whether they’re suppliers or logistics providers) will be more excited to partner with your business.
There’s been a big push towards lean manufacturing and logistics in the past few years, with manufacturers doing everything in their power to reduce inventory levels and rely less on their buffer stock. Because there’s a considerable element of risk involved in a truly lean supply chain, virtually all supply chains stop short of completely lean workflows. The one significant exception? The newspaper industry. While newspapers aren’t usually thought of as manufacturers in the traditional sense, they do produce a product in a systematic way in order to be shipped to end-users—with the crucial difference that anything resembling a buffer stock or inventory is rendered useless by the impossibly short lead times, as papers become obsolete just hours after they’re distributed.
Anyone who has ever rented a moving van for a day knows how hard it is to move furniture safely and efficiently. Loading a table and chairs into the back of a truck without getting them scuffed up is difficult enough—imagine trying to do the same thing on an industrial scale. But, for many in the furniture industry, moving goods that are designed to spend most of their lives sitting in one place is just a daily fact of life. Unsurprisingly, this tends to come with a lot of challenges that many logistics planners outside the furniture industry don’t have to face.
In his seminal work of economic theory, “The Wealth of Nations,” Adam Smith famously uses a pin factory as his example to illustrate a number of basic concepts in what was then modern capitalism. Today, the production of something as simple as a pin can essentially be a global affair. In all likelihood, your production facility needs to receive shipments of raw material from elsewhere in the world via a complex set of routes and distribution points. The factory itself may be part of a larger, international organization with diffuse planning processes taking place in parallel all across the world. And the finished product, once it’s been produced, might be sent anywhere in the world—after all, people all of all nationalities and backgrounds sometimes need pins.
Let’s say that you run a pizza delivery joint. As orders come in by phone or through your website, you have one employee who’s in charge of giving delivery estimates and getting the pizzas to the relevant doorsteps, and another who’s in charge of running back and forth between the storeroom and the kitchen to make sure that the chefs have everything they need to actually make the pizzas. If any of the ingredients in the storeroom get too low, that employee calls the relevant suppliers and arranges to receive and store the delivery. One day, you get a bright idea: what if the delivery person and the employee in charge of restocking the storeroom had direct visibility into one another’s processes?
Sales and operations execution, or S&OE, is a little bit like flying an airplane. In the modern era, you already have a host of processes that have been digitized and automated, including many of the actions that pilots themselves used to be solely responsible for. Your point of departure and destination, as well as the route that you’ll take from one to the other, is already fixed—all of which means that as a pilot your job is mostly to monitor incoming information and make slight adjustments as needed, even if those adjustments are just a fairly rote response to alerts being sent to you by your instruments.