On September 5th at Berns in Stockholm, we opened the doors to the Optilon Supply Chain Conference 2024. It’s no secret that the world is changing rapidly. With the theme Navigating the New Era, we focused on understanding how these changes affect our businesses and how to stay competitive in this evolving market.
The day was filled with valuable insights from several outstanding speakers, along with a matchmaking segment where we had the opportunity to discuss both future challenges and opportunities in the industry.
Did you miss the conference? No worries—here’s a recap of the event!
NAVIGATING THE NEW ERA
The conference began with a breakfast where over 300 supply chain professionals gathered, energized for an insightful day ahead. Afterward, our moderator Sabinije von Gaffke welcomed everyone for the 10th time in a row.
Throughout the day, attendees were treated to a diverse range of perspectives and expertise from industry leaders:
First up was Alexandra Stråberg from Länsförsäkringar, who spoke about how the global perspective is business-critical and how it affects everyday life at national, regional, and local levels.
Vivienne Carney and Jim Thulin from AAK discussed how food safety and contaminant control are more critical than ever before. They explored ways to minimize the disruptive impact these issues could have on our operations and supply chains.
Maria Dahlén from Epiroc shared experiences and insights on the supply chain disruptions Epiroc has faced in recent years, beginning with the pandemic. She emphasized how we can effectively plan and prepare for future disruptions.
Hagen von Petersdorff from IKEA explored the transformative journey of integrating data science into supply chain operations. He highlighted the strategic shift that many companies, including IKEA, are making by bringing key analytics roles in-house.
Henrik Kniberg from Hups & Flitig.ai shed light on generative AI and how we can keep up with this rapidly evolving technology. He explained how both individuals and companies can stay relevant in the Age of AI.
Kim Gaba Jensen from Tesla talked about how Tesla is innovating the industry, manufacturing, and modern car ownership. He also shared the secrets behind Tesla’s staggering 55.4% compounded annual growth rate.
The final keynote speaker was Micael Dahlen, Professor of Wellbeing. He demonstrated how we can get more out of life, our relationships, and our careers. He shared findings from his own research, as well as others, and provided us with tips and tricks that are scientifically proven to help us enjoy our lives just a little bit more.
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MATCHMAKING
This year we introduced a special feature at the conference: supply chain matchmaking. Throughout the day, attendees had the opportunity to network with various professionals in the industry. Those interested in learning more about S&OP, Planning, Supply Chain Design, or AI & New Technology were able to discuss these topics with Optilon experts in the field.
These interactions did not only foster valuable connections but also inspired new ideas and collaborations within the supply chain community.
MINGEL & NETWORKING
In addition to the matchmaking segment, attendees had the opportunity to connect with like-minded professionals while enjoying delicious food and special supply chain-themed drinks. We also had an Optilon reporter mingling with the crowd, who asked the participants questions about future trends—stay tuned for those insights!
KEEP AN EYE OUT
If you missed the conference or want to share it with a colleague, we have gathered all the inspiring keynote presentations and mingling photos, which will be launched soon! Follow us on LinkedIn to be the first to know when they go live.
ABC inventory classification has been around for so long that most planners just assume it is the only way to segment inventory. Spoiler alert: it is not. And it is far from the best way. This method hails from the 1960s, a time when computers were room-sized giants. Today’s tech can do so much more. Let us dive into how inventory management has evolved into multi-echelon inventory optimization (MEIO), helping companies minimize inventory investment while hitting service-level targets and improving profitability.
How does ABC classification work? (And what’s wrong with it?)
To understand why ABC inventory classification falls short, let us unpack how it works. Traditional inventory management applications calculate safety stock for each individual Item-Location (warehouse) combination in isolation. For such an application to work, the planner needs to assign a service level target (%) for every combination.
With companies often managing tens or hundreds of thousands, or even millions, of Item-Locationcombinations, it is impractical to set service levels individually. A simplification is necessary, and ABC classification is one way of doing it.
A common approach is to use a 3×3 matrix with volume value on the Y-axis and order lines on the X-axis, creating a “double” ABC classification. Typically, 80% of the volume value is assigned to A items, 15% to B items, and 5% to C items. The same 80/15/5 breakdown applies to the number of order lines. A few high-volume value items usually hit the 80% threshold of the AA category quickly, leaving most items in the CC category.
Example of ABC classification.
Service levels are then assigned to each ABC class through a “trial-and-error” process. The AA class typically gets the highest service level targets, and the CC class gets the lowest.
If the aggregated service level doesn’t meet the company’s overall target, say, 95.o%, adjustments are made to the service level targets per class. Once the settings are in line with, or slightly above, the company’s overall target, 95.5% in this example, the process stops.
Now every item in each ABC class shares the same service level target. For example, if there are 10,000 stocked items in a location, all 5,400 items (54% from the ABC classification example above) in the CC class will have the same target. Safety stock levels can then be calculated.
The drawbacks of ABC classification
Now, let us pause and think for a moment.
The stock investment depends on the service levels set for each ABC class. Could other service level combinations achieve the same 95.5% result? Absolutely. There are countless combinations that could give the same 95.5% overall service level, all with different stock investments.
So, how do we know if our chosen assignment of service level per ABC class is optimal? We don’t. That is why this method is referred to as inventory management – not inventory optimization.
The example above describes one level, but supply chains are often more complex, with multiple levels/tiers (central, regional, and local warehouses). Some traditional inventory management software uses an 8×8 ABC matrix per location, with many locations, this becomes a very labor-intensive task to set up, not to mention maintain over time. And we still can’t be sure if we have the optimal set-up.
Why inventory optimization beats traditional inventory management
So, is there a better way to segment items, assign service level targets, and optimize safety stock levels today? Yes, there is.
While traditional ABC classification focuses on operational logistics, often ignoring sales, marketing, and customer needs, inventory optimization looks at the product range and the business.
This modern approach uses “Service Classes”, for example, “Accessories”, “High-margin products”, “own-brands”, and “Critical spare parts”. This categorization is more relevant to sales and marketing, who might not even understand ABC classification.
Stock-to-service for better inventory management
In inventory optimization, you set service level targets per service class, not ABC class. The software optimizes each Item-Location’s service level and safety stock level using a “stock-to-service” curve. This ensures that you meet the aggregated service class target but with minimal stock investment. Let’s think about this. Using the ABC approach, all items in a class are assigned the same service level as an input. In inventory optimization, the software optimizes the individual Item-Location service level, this is an output.
This automated differentiation of service levels (known as mix optimization) within each service class, considering lower bounds, is an outstanding way to reduce stock investment and increase service level at the same time. For example, “Accessories” might have an overall target of 93%, with a lower bound of 90%. The software then assigns service levels between 90% and 99.99% in such a way that the service class still reaches 93% as a group but with minimum stock investment, i.e. optimization. Similarly, “Critical spare parts” may target 99.5%, with a lower bound of 99.0%, still giving the system some level of freedom in the mix optimization step.
Multi-Echelon Inventory Optimization
The result? Each item in each location is optimized individually but in relation to all other items in the same service class and in relation to upstream and downstream locations (known as Multi-Echelon Inventory Optimization, MEIO). Actually, they compete about the stock investment among each other you could say. In inventory management, items are treated as isolated entities. Inventory optimization software models tens of variables such as demand variability, standard cost, order quantity, lead time, lead time variability and more – unmanageable with the traditional approach.
Modern inventory optimization automates the planning of complex supply chains with hundreds of thousands of Item-Location combinations, guaranteeing service levels with minimum stock investment. This is all done with a very limited number of planners.
Ready to upgrade your inventory management?
Are you still relying on old inventory management methods? Transform your inventory strategy today with cutting-edge inventory optimization tools. Say goodbye to outdated ABC classification and hello to smart, efficient, and cost-effective inventory optimization.
As the holiday season approaches, there’s no better time to catch up on some of our most popular spring articles. We’ve handpicked three top articles, perfectly summarized for a relaxing read in your summer hammock. Dive in and enjoy!
How to balance global and local in supply chain?
The transition from a solely global to a more balanced global-local supply chain is not without challenges. However, it is a necessary evolution to navigate the multifaceted global business landscape. But how? Here are 4 steps on how to balance global and local in supply chain.
The first step is to carry out a scenario analysis of local versus global needs. Network Optimization models can be used to analyze how different levels of glocalization impact your supply chain. The second step is to optimize cost, service, and risk adjustments. Network Optimization models can analyze cost trade-offs between global and local strategies, such as transportation, customs, or local compliance costs.
5 supply chain trends in 2024 you shouldn’t Ignore
A lot is happening in the world right now. Understanding these changes, how they affect our businesses, and the critical role the supply chain plays is essential for navigating the future and maintaining market competitiveness.
This article outlines five supply chain trends for 2024 by supply chain experts Anders Remnebäck and Fredrik Jersby that you shouldn’t ignore. The first trend they mention is that robotics and autonomous vehicles will revolutionize last-mile delivery. They also believe that AI and automated decisions will soon replace humans in various roles.
Want to dive into all the trends and learn more about how they can affect your supply chain? Read the full article here.
7 tips to successfully go live with your new supply chain planning system
In today’s fast-paced business landscape, optimization is key, especially in supply chain. With the right system in place, companies can boost efficiency and ultimately drive greater success.
Yet, rolling out a new supply chain planning system is a complex task – and pushing that button can feel quite daunting. To pave the way for success, read the full article to get all the seven tips to help you go live with your new supply chain planning system.
We are wishing you a wonderful summer filled with relaxation and a lot of insightful reading! And pssst! Don’t miss signing up for the Optilon Supply Chain Conference 2024 in September! You can find everything about the event and how to sign up here.
See you there!
The countdown for the Optilon Supply Chain Conference 2024 has officially begun! Join us on September 5, 2024, at Berns in Stockholm for a day of inspiration, collaboration, and innovation.
In today’s rapidly evolving business landscape, staying ahead requires more than just keeping pace – it demands forward-thinking strategies and adaptable solutions. That’s why the Optilon Supply Chain Conference 2024 is dedicated to exploring the latest trends, technologies, and best practices shaping the future of supply chain management.
Participate in engaging keynote presentations, networking, and an interactive Q&A to empower you with the knowledge and tools needed to navigate today’s new era.
Who is speaking at the Optilon Supply Chain Conference 2024?
Here’s a sneak peek at some of our keynote speakers at the conference:
Alexandra Stråberg, Länsförsäkringar: Outsight for Insight
In today’s interconnected world, maintaining a global perspective is paramount for business success. Alexandra Stråberg, Chief Economist at Länsförsäkringar , will shed light on how global events impact businesses at national, regional, and local levels. Through her presentation on “Outsight for Insight,” Alexandra will illustrate the complex yet crucial link between global events and everyday operations, empowering attendees to navigate and adapt to an ever-changing landscape.
Jonas Kjellberg, NORNORM: Embracing Cracking the code of circularity
Sustainability is no longer a choice but a necessity for companies worldwide. Jonas Kjellberg, from NORNORM, will delve into the importance of embracing circularity in today’s business landscape. Drawing from NORNORM’s innovative subscription-based furnishing service, Jonas will demonstrate how circular business models can revolutionize industries, minimize waste, and pave the way for a more sustainable future.
Micael Dahlen, Professor of Wellbeing: A Small Talk on Happiness
Join Micael Dahlén for an enlightening discussion on happiness and its impact on our personal and professional lives. As a Professor of Wellbeing, Micael will share scientifically proven tips and tricks to enhance happiness and creativity. Through his engaging presentation, attendees will discover actionable strategies to find greater fulfillment and satisfaction in life, relationships, and careers.
How to Register for the Optilon Supply Chain Conference 2024
Don’t miss out on this exclusive opportunity to network with peers, learn from the best, and gain actionable insights to drive your supply chain forward. The tickets are free but the space is limited, so secure your spot today!
See you at the Optilon Supply Chain Conference 2024!
In today’s fast-paced business landscape, optimization is key, especially in supply chain. With the right system in place, companies can boost efficiency and ultimately drive greater success. Yet, rolling out a new supply chain planning system is a complex task – and pushing that button can feel quite daunting. To pave the way for success, here are 7 tips to help you go live with your new supply chain planning system.
The need for an advanced supply chain planning system
There are many reasons for implementing a new advanced supply chain planning system. While some companies want to reduce tied-up capital and improve agility, others want to optimize inventory levels and refine forecasting processes.
In an increasingly turbulent world, businesses are also looking to invest in more robust systems to mitigate risks and increase operational resilience. They want a flexible solution that can navigate the rapid changes of the global landscape and offer security.
There is also a growing demand for automation among businesses that rely on manual data entry and individual expertise. These businesses want to move away from a high-risk, people-dependent set-up to a more process-driven approach that enables growth and scalability without personnel dependency.
Are you one of those companies, eager to adopt a future-ready solution, yet cautious about ensuring a flawless launch on the scheduled date?
How to successfully go live with your new supply chain system
To pave the way for success, here are 7 tips to help you go live with your new supply chain planning system.
1. Define clear and measurable goals
When implementing a new supply chain planning system, it is crucial to establish goals that clearly articulate what you aim to achieve with it. These goals should be specific, quantifiable, and measurable so that you can track progress over time. They should address specific pain points or areas of improvement within the supply chain that are aligned with your organization’s strategic priorities. Setting clear goals also makes it easier to communicate the purpose and expected outcomes to your organization. Also establish a timeline to create a sense of urgency and accountability. This will help you focus efforts and ensure timely progress towards implementation milestones.
2. Get involved and take ownership already in the design phase
The design phase of a new supply chain planning system lays the foundation for its success in many ways. It is during this stage that key decisions are made regarding system architecture, functionality, and user experience. While it may seem tempting to leave the design solely in the hands of experts, getting involved early on is important for understanding how the new system works, ensuring it meets your organization’s needs, and taking part in the decision-making process. Even though you may have experts handling the technical aspects of the system design, it is essential for you to take ownership of the process. By doing so, you not only increase the likelihood of successful implementation but also foster a sense of buy-in among the users in your organization.
3. Make sure to get everyone on board – especially the sceptics
In the journey of implementing a new supply chain planning system, effective change management is essential for success. The impact of this transformation usually extends beyond the project team, often including finance, sales, sourcing, and procurement, either directly or indirectly. Identifying key people and engaging them is critical for project success, especially in addressing sceptics and dissenters. Winning over these hesitant voices can serve as a catalyst for internal project advocacy. Once convinced, you will often find that these people evolve into project ambassadors, championing its cause.
4. Devote enough time to thorough testing and validation
Ensure you allocate enough time for testing and validating your new supply chain planning system. This process will help identify and address potential issues before going live, facilitating a smoother transition. Address all potential challenges and uncertainties right from the start. Run both systems – your existing and the new one – simultaneously to carefully examine any differences. Compare and analyze the results to uncover underlying reasons for discrepancies and use feedback from pilot testing to make necessary adjustments and improvements. This proactive approach will establish a robust foundation and mitigate risks as you proceed with the implementation.
5. Don’t aim for perfection – stick to the 80/20 rule
While striving for excellence is important, it is essential to acknowledge that achieving absolute perfection is unrealistic. Understand that there will always be corner cases, exceptions, and unforeseen challenges. Embrace this reality and adopt the 80/20 rule: focus on addressing the most critical aspects that will have the greatest impact. Be prepared to address issues as they arise, using a proactive approach to correct any discrepancies. It is crucial to prioritize the optimization of systems for the majority rather than clinging to outdated ones. The effectiveness of any system should be measured by its ability to improve overall functionality for the majority. Striving for adequacy ensures steady progress while maintaining flexibility to address emerging challenges.
6. Time to push that button and go live with your new system
It is easy to fall into the safety net trap. However, after thorough testing and validation, it is crucial to recognize the pivotal moment: the decision to transition to the new supply chain planning system. Summon the courage to push that button and go live! While it may seem daunting, remember that after investing considerable time, money, and resources, proceeding otherwise would be a financial misstep. By initially keeping the old system in parallel, you will have a contingency plan, in case of any unforeseen issues.
7. Start with the most receptive market and let them lead by example
When rolling out a new supply chain planning system across multiple countries, begin with the market most receptive to change. By allowing them to lead by example and create an early success story, you instill motivation and interest in other markets to transition to the new system. Start the deployment there and then gradually expand to the other markets. This is an effective strategy for promoting the new system internally across your global organization. This approach also acknowledges and empowers the individuals involved in adopting the new system, highlighting their achievements.
Here to support you throughout your supply chain journey
Are you ready to adopt a future-ready supply chain planning system and eager to ensure a flawless launch on your planned schedule? With a track record of over 1,000 successfully completed projects and a 30-year integration heritage, Optilon is a trusted partner in supply chain optimization. From technology selection to seamless implementation, integration, and ongoing support and insights, we are committed to accompanying you every step of the way on your supply chain journey.
A lot is happening in the world right now. Understanding these changes, how they affect our businesses, and the critical role the supply chain plays, is necessary to navigate the future and maintain competitiveness in the market. This article outlines 5 supply chain trends in 2024 by supply chain experts Anders Remnebäck and Fredrik Jersby that you shouldn’t ignore.
1. Robotics and autonomous vehicles will revolutionize last-mile delivery
There is a huge wave of technological progress underway, leading to advancements and breakthroughs. Robotics and autonomous vehicles are at the forefront of this transformation, although it has taken longer and proven to be far more challenging than anticipated.
The ultimate challenge lies in achieving fully autonomous vehicles capable of navigating entirely new urban environments without prior training or constraints in that particular area. This involves more than simply getting from point A to point B; it is about mastering complex real-world scenarios.
Similarly, integrating robotics into human environments presents its own set of challenges. But if we can create bots with human-like abilities, from ordinary tasks to understanding nuanced contexts, and combine this with fully autonomous vehicles, last-mile deliveries will be revolutionized.
Having a vehicle that efficiently travels from point A to point B is one thing. Still, the last 20 meters present a unique challenge: delivering the package, navigating to the building, ringing the doorbell, or leaving the package securely. Without solving this final leg, the efficiency of reaching point B is diminished.
It is evident that we are steadily progressing in this direction, leveraging technologies like reinforced learning, and neural networks. Once all the necessary components align, the impact on the entire supply chain will be profound.
As one of the founders of Skype pointed out, this could even make delivering something as small as a single toothbrush profitable. The question is: How long will it take to fully realize this vision?
2. AI and automated decisions will replace humans
In the past year, there has been explosive growth in reinforced learning and neural networks, opening new possibilities for supply chain planning. We foresee that this advancement will pave the way for digital supply chain planners and autonomous supply chains capable of making decisions based on sophisticated models.
We are moving towards a future where human involvement in decision-making becomes less prominent, mirroring previous transitions in technology adoption. Historically, we transitioned from manual processes to automation with the introduction of industrial robots, followed by the integration of Enterprise Resource Planning (ERP) and advanced planning tools.
As more decisions become automated, this shift may lead to a reduction in the roles of middle managers. However, humans will continue to play a pivotal role, becoming more involved in dialogue and collaboration with automated systems. Human expertise will remain essential in guiding and fine-tuning these automated processes to align with strategic objectives and evolving market dynamics.
3. Electrification will impact industries unable to transition fast enough
The transition to electrification is a critical trend that calls for urgency. The scale and complexity of shifting the world from fossil fuels to renewable energy are immense but inevitable. It won’t happen overnight; rather, it will unfold gradually, with hybrid solutions emerging before complete electrification.
And there will be winners and losers. For companies reliant on fossil fuel-driven transportation, understanding and planning for this transition is paramount. However, this requires a certain scale and capability. Companies with legacy investments in outdated technologies will struggle, while others, like Tesla, are poised to accelerate this transition through vertical integration.
In Europe, the failure of car manufacturers to adapt to electrification could have significant consequences on jobs and compliance with new regulations, such as bans on gasoline and diesel cars.
In essence, the electrification trend represents not only a technological but also a geopolitical shift with far-reaching consequences. Only companies that proactively plan and innovate will thrive in this new era of sustainable energy.
4. The transition from on-premise software to cloud will bring challenges
There has been a noticeable shift towards cloud services, with companies increasingly favoring web-based solutions over traditional on-premises setups. Initially driven by consumer-oriented needs, this trend has extended to the entire Enterprise Resource Planning (ERP).
Moving critical transactions and data to the cloud offers significant cost benefits. However, this transition may also introduce limitations on flexibility and adaptability, raising concerns about potential lock-in effects, integration costs, and data accessibility.
One pressing question is whether cloud systems will become more closed and rigid or if customers will demand greater access and interoperability. As companies navigate this transition, it is important to carefully evaluate the trade-offs and consider their long-term strategic objectives.
5. A turbulent world will demand a shift in supply chain strategy
We find ourselves in a new era marked by significant turbulence globally. From war and conflicts to climate change and new legislation. This increased unpredictability has underscored the importance of supply chain and the ability to withstand disruptions.
As a result, the interest in scenario modeling and understanding the consequences of events is rapidly growing. More companies recognize the need to invest in people who understand supply chains and systems that can help them swiftly react to events when they happen – and more importantly – proactively anticipate and mitigate risks.
To reduce risk exposure, many are moving towards more regional and local supply chains. This shift represents a departure from the previous focus solely on cost optimization. While centralizing operations can offer cost savings, there are risks associated with a single point of failure. The expenses of redundancy are now outweighed by the potential consequences of its absence.
At the same time, new sustainability legislation is reshaping supply chains, mandating not just reporting but also restructuring supply chain operations for compliance. This means companies will want to balance sustainability with cost and risk as well as service levels to make trade-offs and conclude when to use which strategy.
To navigate these changes effectively, companies must establish robust foundations for decision-making. Planning is key, and continuously exploring alternatives and scenarios and developing action plans are crucial to meet future challenges.
Authors Fredrik Jersby and Anders Remnebäck have deep knowledge and vast experience in the supply chain field.
Do you need the help of a supply chain expert?
Understanding the ramifications of these changes and trends is paramount. Remaining stagnant is not an option; instead, embracing a forward-leaning approach is essential for adaptation and success. The goal is to create supply chains that are resilient, adaptable, and sustainable, capable of weathering the storms of an increasingly turbulent world.
At Optilon, we are experts in efficient supply chain decision-making. Our solutions help businesses design and optimize their supply chains through well-proven processes and technology. We can help you create a future-state roadmap with scenario comparisons and analyses. We can assist in articulating supply chain complexity and relevant actions, evaluate the consequences and risks, and make decision recommendations. Sounds interesting?
As the year comes to an end, we look back on all the important things we’ve learned in 2023. The supply chain industry keeps going through changes, making it important for businesses to stay updated with the latest trends and smart ways of operating.
During this year, we have shared a lot of knowledge and expertise about supply chain. In case you’ve missed it, we have summarized our three most popular articles from this year. Check them out and happy reading!
The time to embrace supply chain is now
The world has changed a lot recently, with a global pandemic, wars, and economic uncertainties. This has made it crucial for businesses to rethink how they handle their supply chains. Companies are moving away from just focusing on cost and looking more at reducing risk, improving speed, and ensuring sustainability. Shifting to local supply chains might seem like a solution, but it’s not a one-size-fits-all fix. Want to know more? Read the full article here
7 Global Supply Chain Trends in 2023
In this new global environment, businesses also need to adapt to emerging trends. In this article, you will find important shifts in supply chain strategies, emphasizing the paradigmatic move from cost-centric approaches to risk awareness. It highlights trends such as reshoring, differentiation, and the growing importance of sustainability and transparency. These trends signal a transformative era where supply chain design and digitalization take the center stage. Maybe these trends will follow us into 2024? Read the full article here.
Discover the Potential of Your Inventory Through Smart Supply Chain Planning
Are you struggling with balancing inventory? You are certainly not alone. Balancing inventory in a changing market has become a big challenge for Nordic businesses. But there’s good news: smart planning can help you make the most of your stock and improve your supply chain. Read the full article to understand how, so you can pave the way for supply chain success.
Thank you for an incredible year filled with valuable supply chain insights. We’re looking forward to what 2024 has to bring. Are you looking for any other information about Optilon? You can find more information on our web page or get social with us on LinkedIn. Make sure to follow us there so you don’t miss any news, tips, or opportunities.
The transition from a solely global to a more balanced global-local supply chain is not without challenges. However, it is a necessary evolution to navigate the multifaceted global business landscape. But how? Here are 4 step on how to balance global and local in supply chain.
How to balance global and local in supply chain
Prescriptive algorithms, like Linear and Mixed Integer Linear Programming (LP/MILP), are powerful methods commonly used for Network Optimization problems. Network Optimization can be used to mathematically solve complex supply chain problems. These problems can be related to logistics, facility location, resource allocation, inventory positioning, and the flow of goods. The goal is to minimize costs, meet service requirements, and maximize performance metrics, all while considering various conditions and assumptions.
Combined with massive scenario analysis, Network Optimization models allow you to gain insights not only into the uncertainties stemming from our unpredictable world, but also those created by the limitations in available data and its quality.
4 steps toward a balanced global and local supply chain
Here are 4 steps to achieve a more balanced supply chain using Network Optimization models.
1. Carry out scenario analysis of local versus global needs
Network Optimization models can be used to analyze how different levels of glocalization impact your supply chain. It helps you understand the effects of global versus local strategies across different regions, segments, and phases of the product life cycle. By testing different demand scenarios, the models provide insights into configurating a global-local supply chain to meet demand changes in different markets.
2. Optimize cost, service, and risk adjustments
Network Optimization models can analyze cost trade-offs between global and local strategies, such as transportation, customs, or local compliance costs. It can also assess the impact of glocalization on service levels, such as response times to market changes and customer lead time. They can also evaluate the impact of supply disruptions and assist in designing a supply chain that mitigates risks associated with geopolitical issues or other global disruptions.
3. Improve sustainability and regulatory compliance
Network Optimization models can help you analyze the carbon footprint of different supply chain configurations and design a supply chain that aligns with your company’s sustainability goals. When it comes to legal adherence, it can capture the costs and implications of regulatory compliance across different regions under various glocalization scenarios.
4. Optimize capacity planning and multiple objectives
Network Optimization models can help you optimize production and distribution capacities to meet demand in the most cost-effective manner, in alignment with the global-local configuration. It can also facilitate multi-objective optimization to achieve a balanced approach between global efficiency and local responsiveness, along with other objectives.
Do you need advice from a supply chain expert?
At Optilon, we see the Network Optimization model as a cornerstone of long-term strategic planning and an ideal tool for analyzing the impact of glocalization. We support a modern implementation that relies on thorough scenario analysis, aims for automating the analytic process, and becomes part of your ever-evolving decision-making process.
Contrary to common beliefs, we argue that the “algorithmic approach” is not about finding one perfect answer. Instead, it is about increasing organizational awareness of various possibilities. This heightened awareness will empower you to consistently make well-informed decisions, especially in the face of uncertainty.
S&OP is a critical business process for transforming strategy into execution and driving supply chain performance. Even though technology has advanced, many companies are still stuck using old-fashioned and inefficient methods, And there are some big misconceptions that are getting in the way. They exist because businesses don’t fully understand what S&OP is really about. It is time to debunk the myths.
What is S&OP?
Let’s begin by discussing what S&OP – Sales and Operations Planning – actually entails. S&OP is a forward-looking planning process, superior to the operational process and subordinate to the strategic process, bridging the gap between the two. It serves as a mechanism for aligning a company’s strategic objectives with its operational activities.
S&OP is used to continuously identify disparities between a company’s desired goals and its current trajectory, and find strategies for closing these gaps. This can include a range of actions, such as intensifying sales efforts within specific markets or product segments, increasing manufacturing capacity to meet projected demands, or reallocating resources to areas where they are more effectively used. In essence, S&OP is a structured approach to navigate a company toward its desired future state.
5 myths about S&OP – let’s debunk them
Now, let’s clear up some common myths and get to the bottom of the real value of S&OP.
Myth 1: S&OP is not a relevant operational process today
The concept of S&OP originated in the 1950s, evolving from a production-centric approach to enhance efficiency. It was never designed to be a process for gaining detailed knowledge of every aspect of a company’s operation. Instead of striving for operational precision, S&OP is a tool for planning and fostering flexibility. Today, the fundamental need for tactical planning persists.
Many of today’s companies find themselves caught in the “too late corner.” They primarily focus on assessing their order backlog for the next couple of months, and as a result, they struggle to maintain control and end up spending their time putting out fires.
To overcome this, it is not viable to merely focus on the short term and hope for the best. Looking further into the future and making the most of the information you can capture is essential. Companies must adopt a broader perspective and examine the dynamics of supply and demand across extended time horizons. This entails not only periodic assessments but also frequent monitoring to identify fluctuations and their recurring patterns. A key objective is to understand the flexibility required and how quickly you should adjust your capacity.
Myth 2: It is not worth it, as we cannot predict the future anyway
S&OP is not about predicting the future – it is about planning for the future. Sure, you can use it to analyze historical sales data and create forecasts to align supply with demand. But to unlock the true potential of S&OP, it should be used to understand where your business is today and where you want to be in the future. What is your current trajectory, and what is your desired destination?
This approach places you in control rather than at the mercy of the process. It allows you to gently steer your business in the intended direction. You can accelerate, decelerate, and manage marketing and capacity efforts accordingly.
Used correctly, S&OP is a multifaceted decision-making and gap-bridging process designed to guide your company toward its strategic objectives. It is not about predicting the future – it is about understanding the evolving reality that lies ahead.
Myth 3: S&OP is yet another time-consuming planning process
If this sounds familiar, it might be time to ask yourself this question: How much of your time do you spend on firefighting? The answer might reveal a significant gap in your organizational structure – an absence of a well-defined S&OP process.
As the old saying goes, “If you don’t plan, you plan to fail.” This is especially true when it comes to S&OP. While it isn’t a magic bullet that guarantees flawless outcomes, it serves as a cornerstone for informed decision-making and facilitates a culture of collaboration.
Imagine sending eleven soccer players onto the field without briefing them on their roles, the game strategy, or whether they should play defensively or offensively. Chaos would occur, and the chances of succeeding would be fairly small.
In the world of S&OP, the scenario is strikingly similar. Planning not only saves you from the chaos of reacting to problems as they arise. It also grants you a more transparent path toward achieving your objectives. S&OP, when executed right, is not just another planning procedure, but a value-adding mechanism.
Myth 4: S&OP is solely a supply chain issue
This myth is rooted in a silo mentality where each department operates in isolation, failing to communicate or collaborate effectively. This is often driven by performance metrics solely tied to individual functions. A “you handle yours, and I’ll handle mine” attitude dominates the workplace, and the overall success of the company – which should be the primary objective – becomes overshadowed.
In contrast, S&OP is the opposite of this approach. It shifts the individual focus towards an integrated plan and places the organization within an ecosystem where all departments work together towards a common goal, collectively contributing to the company’s success. The breakdown of traditional silos and adoption of a broader perspective fosters collaboration. Succeeding in S&OP is very much connected to acknowledging interdependence and prioritizing collective performance.
In summary, S&OP is not just a supply chain concern. It is a collaborative effort that involves the entire organization, including sales, operations, product development, finance, sourcing, procurement, and marketing.
Myth 5: A fancy S&OP tool is overkill when we have spreadsheets
Even though technology has advanced, many companies still rely on spreadsheet programs such as Excel or rule-based processes in ERP systems to manage their S&OP. So, isn’t using spreadsheets good enough? Well, it depends on the purpose.
Excel is a great tool for creating prototypes to test ideas in the context of S&OP. However, it is primarily designed for data input and manipulation rather than supply chain planning. As it relies on manual data entry, it has significant limitations in supporting comprehensive planning requirements, making it prone to errors.
The problem usually arises as organizations grow in their product portfolio, markets, or volumes. The more data they put into the system, the more complex it gets. This often leads to shortcuts and inaccuracies, making it inefficient and difficult to manage. Consequently, businesses may experience higher costs and operational inefficiencies.
Relying on spreadsheets for supply chain optimization and critical business decisions simply isn’t sustainable. Companies need to realize that spreadsheets must be replaced with more robust solutions for S&OP that support their future business requirements.
Do you want to improve your S&OP process?
Don’t settle for outdated S&OP methods. It is time to say goodbye to manual and tedious Excel corrections and welcome a highly flexible and easy-to-use solution.
With a track record of over 1,000 successfully completed projects and a 30-year integration heritage, Optilon is a trusted supply chain optimization partner.
Our flexible system for S&OP can be tailored to align with your specific processes while remaining adaptable to your evolving business needs. It is easy to implement and offers effortless integration with other systems to streamline your operations seamlessly.
Supply chain has always been a vital aspect of business operations, but recent worldwide events have highlighted just how critical it is. How can companies take advantage of this new supply chain era? Can AI and robotics revolutionize the industry? How does China shape the future of trade? That’s just some of the topics that were discussed during the Optilon Supply Chain Conference 2023, held September 7 in Stockholm.
With the theme “From Boring to Boardroom,” the conference delved deep into the world of supply chain management, showcasing its critical role in today’s ever-changing business landscape. One key finding was that there is now a strong human component to an industry that is very much tech orientated. Storytelling is and will be a big part to this multi-dimensional aspect of supply chains forward.
The conference had a lineup of distinguished speakers, panel discussions, and networking opportunities that left all of us inspired and empowered. Did you miss the event? Here is a recap!
EXPLORING THE SUPPLY CHAIN LANDSCAPE
The conference welcomedover 250supply chain professionals, eager to gain insights into the future of supply chain management. The day started off with a thought-provoking keynote byChristina Boutrup, who shed light on “The China Factor” and how it shapes the future of trade.
Throughout the day, attendees were treated to a diverse range of perspectives and expertise from industry leaders:
Katarina Blomkvist, in her session on “Building the Supply Chains of Tomorrow”, emphasized the importance of innovation and adaptability in supply chain management.
Jesper Metz from H&M discussed “How Supply Chain Analytics Create Clarity and End-to-End Optimization”, showcasing the power of data-driven decision-making.
Danica Kragicfrom KTH delved into “Machine Learning, Artificial Intelligence and Robotics”, highlighting both the hopes and challenges they present for the future of supply chain management.
Nicklas Jonssonfrom Exeger explored how they revolutionized the field with Powerfoyle – a unique solar cell that transforms all forms of light into electrical energy.
Patrik Johansson from Stora Enso shared an inspiring success story about projects that included machine learning for network optimization. He also presented how you can exceed expectations demonstrating how innovation can push boundaries through creativity.
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EXPERT PANEL DISCUSSION
The conference also hosted an expert panel discussion that explored how supply chain management has evolved from a boring topic into a critical boardroom discussion. The panel included Unni Olldén (Synsam Group), Gabriella Norén (AIRA), Richard Molin (Höganäs), and Jens Stenquist (Optilon), offering valuable insights into the challenges and opportunities facing the supply chain industry.
CONNECTING SUPPLY CHAIN PROFESSIONALS AND NETWORKING
One of the standout features of the conference was the networking sessions. Attendees had the chance to connect with like-minded professionals together with good food and bubbly drinks. We heard discussions about everything from how companies retrieve their inventory to how e-commerce affects supply chain planning. You could really feel the atmosphere in the room – it was electric.
LOOKING FORWARD
As the Optilon Supply Chain Conference 2023 concluded, attendees left with renewed enthusiasm. The event showcased that supply chain management is no longer perceived as “boring” but rather as a dynamic field driving innovation.
STAY TUNED
In case you missed this conference, or want to share it with a colleague, we have gathered all the inspiring keynote presentations and the panel discussion and will launch it soon! Follow us on LinkedIn if you want to be the first one to know when the recordings are live.
