This is the second post in a series of posts designed to introduce you to problem solving strategies that you can use to attack your sourcing and supply chain problems. Last Sunday we discussed eleven strategies you could use to help you understand the problem. Today we are going to discuss a generic methodology for attacking problem formulation.
The easiest way to formulate a problem is to simplify the task. There are three basic strategies you can use to accomplish this.
( 1 ) Simplify the Problem
If the problem is too challenging, simplify the problem. In spend reduction, don’t look at the category but look at each commodity. Don’t look at the commodity as a whole, but as a collection of cost components. Look for the key elements, visualize them, and redefine the problem as a simpler problem on those key elements.
( 2 ) Solve One Part at a Time
If you need to rationalize your supply base, instead of trying to rationalize your supply chain as a whole, just focus on rationalizing it for a key category. Then repeat the process. Instead of trying to define the optimum transportation route from Mumbai, India to Atlanta, Georgia, redefine the problem as trying to find the optimal land and sea route and the optimal air route, and take the best option. Then, instead of trying to find the optimal land and sea route, find the best routes from Mumbai to the nearest ports, the available sea routes from those ports, and the land routes from the available receiving ports to Atlanta. The best route will then be a combination of one route in each set. If one option in each set is clearly the best, and they match up, you have your route. If not, simply load this small amount of data into a network optimizer and you will quickly have your answer.
( 3 ) Redefine the Problem
Instead of trying to determine the minimum number of suppliers you can use to supply a given product to your different receiving centers with seven days notice, just focus on finding a fixed size sub set of suppliers from your current supply base that cover most of the receiving points. Chances are you can eyeball this. Then, for each receiving center not covered, choose the supplier that covers the most remaining receiving points. Continue until all your receiving centers are covered. If your starting set was good and most of your suppliers can cover a significant number of your receiving points, this technique could quickly replace dozens or hundreds of suppliers with a handful. You’ve accomplished significant consolidation with very little effort. If you still have too many suppliers, work with the best remaining suppliers to cover more centers more flexibly. Instead of trying to optimize a network with potentially hundreds or thousands of nodes, you are optimizing core supplier capabilities, which is not only an innovative solution, but a better solution in the long run.
Next Sunday we will discuss some strategies to aid with the third step of the Operations Research Modeling Process: Model Construction.