Not so many years ago, supply chain design was considered to be an event that was initiated and completed once every three to five years, often as a paid engagement by third-party firms. Now there is an ever-growing movement of large, multi-national businesses bringing supply chain design in-house and adopting it as a core business process. Why the change? What’s the value of making supply chain design a core business process and what’s being missed by just doing a series of isolated optimization projects?

10 Tipsfor Elevating Supply Chain Design from a Project to a Differentiating Business Process

Why Don’t One-Off Optimization Projects Do the Trick? Supply chain design is the practice of creating living models to represent the existing structure and policies of the end-to-end supply chain, optimizing to identify a better future state supply chain and continuously running what-if scenarios to test new strategies and react to changing market conditions. Attempting one-off optimization projects to determine the design of an organization’s supply chain is likely to fail for several reasons. Here are just a few:

• Projects lack the benefit of process consistency and stan-dardization and readily-available data

• With no established design team and skill set, different analysts must relearn modeling skills for each project. If using an outside firm, the process is even more protracted due to lack of continui-ty and understanding of the business

• Initiatives lack adequate resources and funding and management, or may overlap with other isolated projects in other functional areas or geographies

• Short-term or hired analysts are often unable to adequately re-search and address multiple, often competing business problems and balance them against business objectives

Supply Chain Design Is the Practice of:

Creating living models to represent the existing structure and policies of the end-to-end supply chain

Optimizing to identify a better future state supply chain

Continuously running what-if scenarios to test new strategies and to react to changing market conditions

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Tips for Establishing Supply Chain Design as a Differentiating Business ProcessLLamasoft has supported more than 1,000 supply chain design initiatives for businesses worldwide and is wholly dedicated to the advancement of modeling technology and best practices. We’ve put together some tips for how to elevate supply chain design from an annual project to a core business process:

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Establish a Shared Service Center/Center of Excellence (COE)Supply chain design should be able to see across the entire business to optimize the true end-to-end supply chain and not just a specific business unit or business function. Shared service centers, or supply chain design centers of excellence, can pool talent and technology to provide analysis capabilities to the entire organization. This organizational structure can help the group avoid the pitfalls of local bias or politics and remain focused on data-driven business solutions.

Identify and Prioritize Design InitiativesAn excellent exercise for any business considering a move toward a supply chain design COE or in the early stages of development is prioritization of design initiatives. Involve executive sponsor(s) as well as representative department heads and analysts. Each initiative is mapped onto the matrix according to relative business benefit and relative ease of implementation. This process is in itself an extremely effective way of promoting valuable interaction and focused discussion among the team. The mapping process removes some of the subjectivity normally present in these decisions and requires input from the entire group. A view of potential projects will quickly take shape and become a starting point for either COE justification or a prioritized COE project plan.

Go After Quick WinsEven though supply chain design can identify major breakthroughs in cost savings or service, some recommendations can be disruptive and time-consuming to implement (open four new DCs, rationalize 200 products, etc.). In order to establish early credibility for an emerging COE, many companies will identify quick-win projects that are much easier to implement and still deliver significant cost benefits (product flow-path, inventory right-sizing, DC-to-customer assignments). Be sure to consider business goals and priorities when identifying projects, and don’t be afraid to advertise the successes around the company! Quick multi-million dollar wins can gain executive attention and establish early credibility for the supply chain designers, and are often used to justify further investment in staff and technology.

Put Parallel Focus on Game-ChangersWhile one part of the team is focused on tactical wins, another should be trying to break down historical legacies to explore what is truly possible through modeling, optimization and analysis of the end-to-end supply chain. When encouraged, supply chain analysts can socialize “design thinking” and help remove pre-conceived business constraints and design new greenfield supply chain operations that could lead to game-changing new business practices and competitive advantage. Numerous supply chain leaders give their analysts the license and time to be entrepre-neurs and innovators to find the “next big idea”. Some even go so far as to make games out of finding the most promising strategy for reducing costs, improving service or increasing revenue through simulation models.

A supply chain design COE creates and tests different potential supply chain initiatives to identify new, optimal network designs

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Get Advice From Companies at Different Stages of COE DevelopmentMany other businesses in your networking circles, supplier community or common technology users may be excellent resources for supply chain design COE experience and advice. Ask supply chain modeling software vendors about the design community they support and how you can get involved with other users. Many of your peers will be happy to act as a sounding board for your ideas and share the lessons they learned along the way.

Get Out In Front of the Predicted Supply Chain Talent Shortage—But Be SelectiveAs the supply chain sector grows and business are focusing more on differentiating initiatives that require significant supply chain investment and staffing, the demand for talent is rapidly increasing. At the same time, the gap between demand and avail-ability of supply chain professionals is widening. Baby Boomers are exiting the workforce and GenXers are struggling to keep up. To complicate things even more, there is a significant skills gap as the industry demands workers with broad business acumen as well as logistics and analytical skills. Be aware that it may become more challenging to recruit for your COE, but don’t hire just anyone who has the right degree. Successful team members should be effective problem solvers—people who think analytically and are natural researchers and implementers of new processes.

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Project vs. Process: Why the Change?Supply chains are evolving from a necessary cost to a source of competitive advantage

Why is supply chain design now becoming a core process and business function? Three factors seem to have converged to trigger this switch: technology, business practice and volatility.

• Technology: Major breakthroughs in supply chain design and cloud technology have enabled model-ing to be relevant to many more business functions and at a much more detailed level of analysis. This means that supply chain modelers can now answer questions related to sourcing, production, inventory, transportation, taxes, replenishment, cost-to-serve and more.

• Business Practice: The pace of change within business is at an all-time high. New products are being introduced at a rapid pace. New markets are being entered. New partnerships are being formed. All this change requires continuous modeling and optimization to keep costs and service in order.

• Volatility: Change is not just happening within companies. Disruptive changes are occurring all over the globe that can drastically affect cor-porate supply chains. Increases in labor costs throughout “low-cost” countries, wild swings in fuel costs and adjustments in commodity pricing must all be factored in to ongoing supply chain strategy. Even weather-based disruptions can quickly wipe out profits if not addressed swiftly.

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Pursue Design Mastery within the TeamNow that you’ve got a team of bright, talented analysts dedicated to supply chain design, be sure to invest in their growth and development. In addition to giving them powerful and easy-to-learn design technology, build a roadmap for supply chain design mas-tery for each analyst. Identify the milestones and requirements—and benefits—for each step in their progression from new hire to program leader. Establish a process for onboarding, project shadowing and technology training. Amid the analytical and tech-nical skills, don’t forget the importance of learning and practicing skills such as presenting to a group, project management and influencing others.

Extend Supply Chain Modeling to the CloudA SaaS-based modeling platform can give supply chain designers a collaborative platform to expand the value of supply chain model-ing throughout the organization. A cloud-based supply chain design platform integrates all design applications and data and enables businesses to more rapidly execute large, impactful projects. Web-based access to models and data can be leveraged by mul-tiple stakeholders within the company and can support executive dashboards and short-term planning. Plus, the cloud can also be a centralized location for all models and data so that the information needed is always available, current and accessible to the entire team.

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Fill Gaps in Modeling Data with Cloud-Based Reference DataAnalysts often struggle to populate data for potential networks with new lanes, future demand and potential facilities. The final analysis is only as good as the data put in, so make sure it’s accurate and complete. Your supply chain modeling software provider should offer reference and benchmarking data you may lack, such as transport costs, facility costs and transit time estimates. This will speed the modeling process and improve the accuracy of results. Be sure to inquire about KPIs and metrics the vendor has gleaned through project experience as well, to help analysts validate inputs and outputs for new models.

Use a Data Blending and Analytics Tool for Automated Model BuildingNow you have the right data, but how do you access it in all the places it resides, without spending half your day on the phone with IT? Automated access to ERP and other enterprise data through a data analytics tool can significantly reduce the time required to gather, cleanse and blend disparate data and ready it for modeling use. With established connections to enterprise data sources, you can essentially create a “library” of models for repeatable use, which will enable those analysts with non-SQL backgrounds to get into the data and get busy.

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Points to RememberSupply chains are evolving from a necessary cost to a source of competitive advantage. Ultimately, success in continuous improvement through design requires a balanced consideration of people, process and technology within the supply chain design center of excellence. Businesses that adopt a COE have the ability to:

• Quickly and easily build models to visualize and analyze the current network• Continuously test what-if scenarios using current and future network and demand• Quickly validate potential network changes against real-world variability• React rapidly to unplanned supply chain events

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Gartner Research Links Centers of Excellence to Tangible Value in the Supply ChainThe research clearly states that supply chains that effectively implement COEs are achieving better results and progression through the stages of supply chain maturity. Most of the companies in Gartner’s 2013 Supply Chain Top 25 have one or more centers of excellence. Additionally, according to Gartner’s 2013 study of 100 global supply chains, organizations with supply chain COEs:

• Report a broader supply chain span of control• Are more often viewed as “partners to the business”• Have greater implementation of more advanced supply chain practices such as segmented supply chains, end-to-end business planning or product/ser-

vice portfolio management• Report greater success in meeting their goals with respect to revenue, margin, and return on assets• Are twice more likely to have met their revenue and margin targets than those without a COE

G00257750Centers of Excellence Are Critical Enablers of Success in Supply ChainsPublished: 21 April 2014Analyst(s): Ken Chadwick

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