There is increasingly needs to transform traditional linear supply chains where functional silos operate isolably into end-to-end circular supply networks to enable responsiveness, resilience, visibility, agility and digitalization.
Supply Chain Network Design is initiated when changes are made to existing organization or products such as new products to be introduced, synergy to be identified after brands acquisition, renew facility lease and etc., While companies are aware of the criticality for supply chain network refreshing and endeavour to balance service level against costs and risks, significant level of sophistication and fragmentation are inevitable.
The process of modelling a supply chain associates with a series of decisions: which vendor to work with, which route to take, which transportation method to use, which city to build warehouse in and so on.
The objective of Supply Chain Network Design is to answer which plant is optimal location for which product, which warehouse better fulfil certain customers.
After those decisions, all supply chain professionals are acquainted with one dilemma: cost savings and service level, you cannot have it both ways.
Traditionally, companies review their manufacturing and distribution network every 5 to 10 years. However, in today’s environment with emerging changes and disruptions, supply chain management demands unrivalled effort to strive against delays, short deliveries and quality issues.
Surprisingly not surprised, COVID-19, as a typical black swan event, forces entire industries to reconstruct and transform companies’ global supply chain model. The necessity and frequency of reassessing the manufacture and distribution footprint has surged. Therefore, many companies are going in for continuous network design exercises to enhance and strengthen their supply chains.
Effectively conducting a network design calls for a synthesis of operations knowledge, data driven solutions and ground-breaking thinkers; because it analyses and impacts entire organization’s supply chain. From the initiation to the conclusion, network design should be managed in a structured and professional manner.
Forizons’ proven Supply Chain Network Design approach :
Phase I Information and data collection
Confirm scope and stakeholders
Having a crystal-clear idea of objective as well as an honest assessment of cost in terms of finance, time and effort are essential for kick-off. Network design study could not be tackled in isolation, it must involve holistic end-to-end process functions: procurement, manufacture, logistics, sales and planning.
Interview As-Is processes
Successful Supply Chain Network Design always starts with a thoroughly review of current distribution network. This task is an important and time-consuming process, it enables us to align expectations and needs between client internal high-level boss and internal project team.
Collect and validate data
Typical information to collect includes item, location, cost elements, transportation method, unit of measure with constraints like lead time, fill rate, shipment frequency. Level of detail depends upon the type of analysis but it’s better to work with greatest level of detail possible.
Although strategic objectives differ by client, Forizons aims at consolidating four cost elements into total cost considerations: Transportation, Warehousing, Inventory Carrying and Tariff costs which avoids sub-optimal optimization.
Phase II As-Is Diagnosis and Scenarios envisioning
Model As-Is supply chain network
With validated accurate data and qualitative process clarification, As-Is logistics network is mapped. This includes centre of gravity analyses, diagnosis on current pain points, limits and constraints as well as opportunities which serves as a feasibility assessment for future goal.
Define To-Be scenarios
By introducing benchmark and think outside of literal box mindset, Forizons supports clients embracing all possibilities from holistic view of supply chain. We organize brainstorm workshop to define To-be scenarios together with clients.
Sales growth, macro environment risk mitigation, internal product portfolio adjustment and other customized elements can be concerned in various scenarios.
Phase III Supply Chain Master Plan definition
Simulate To-Be scenarios
Agreed To-Be scenarios are modelled to test the impact of different manufacturing and distribution nodes using existing and potential candidate locations from a financial and qualitative perspective.
Analyse sensitivity and compare scenarios
It is the key point that the model can be used to guide decision-making and to answer what-if questions. The model itself simply replicates ideal world, real world experts use multiple assumptions to further test costs and service impacts when different variables are moving.
The modelling approach allows the analysis of different scenarios as well as helping determine the best decision. Though mathematical coding models are powerful, they depend on high-level operational skills. By presenting the ‘best’ scenario, we develop road map to direct the realization journey.
Supply Chain Network Design Key Takeaways
Supply chain network design is not a once-off study but rather an on-going project.
We Forizons believe that internalized knowledge and expertise on client side reinforces the success of a network change implementation. For that reason, our key value is delivered through professional methodology including skill transfer.
Accept and react to the fact that supply chain has evolved.
Companies with best practises align IT system across regions which enables matching level of data collection globally. On the contrary, we had specific cases of clients who had no clear vision on actual sea freight cost and volumes or actual tariff cost with customs. Temporary solution was to request vendors for data support.
In Supply Chain 4.0, state-of-the-art IT systems are capable to provide all entities in supply chain with sufficient freedom and flexibility to get full visibility, such as EDI, IoT, Cloud computing. Under current COVID-19 pandemic, remote work policies and flexible workforce arrangements are the New Normal. IT systems and support are driven to be updated accordingly. Companies are pushed to act quickly to ensure they have the right systems to deliver smooth operation as the environment evolves.
Over the past decade, the focus on supply chain network for cost reduction and service level improvement have been effectively performed to absorb delays and disturbances to some extent. The volatile business environment with black swan type event like COVID-19, a terrorism, a trade war or regulation change, is forcing industries to build resilient supply chains not only reduce risks but also are prepared to speedily adjust and retrieve from unanticipated disruptions.
Recipe of how to implement a Supply Chain Network Design varies from industry to industry and company to company. Forizons brings together the data, analysis, simulation, scenarios and empowers clients to comprehend, carry on and sustainably boost.