Daily Archives: June 16, 2009

Does Scenario Planning Trump Location in Supply Chain Friendly Network Formation

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A recent Industry Week article on how to develop a supply chain-friendly network stated that scenario planning considerations can be just as important as location. The rationale is that, in response to the 2008 fuel spikes and recession, many companies are repositioning their logistics locations closer to end users and increasing inventory levels to insure full truckload shipments in a knee-jerk reaction. As a result, inventory overhead costs are climbing to unacceptable levels and product obsolescence is becoming an even greater risk than before. And the article makes a valid point.

But is real estate scenario planning, that addresses the likely results of adding to or changing your network sites, the answer, or is it full fledged network optimization backed by decision optimization technologies? While, as the article suggests, you need to look at and collect labor availability and rate, government incentive, required inventory level, transportation mode and rate, and warehouse operating cost data for each location under consideration, the only way you’re going to truly be able to understand the total cost of each potential decision and select the best, lowest-cost, network design that meets your service level requirements is with a network optimization tool as there’s just no way your spreadsheet calculations are going to capture all the costs, constraints, and business rules you’re going to identify in your scenario analysis. So while scenario planning is important, ultimately, the answer is selecting the best locations, and I would submit that can only be done with the aid of good network optimization tools.

Some Project Management Basics from SupplyManagement.com

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The one thing supply management has in common with IT is this: projects are never easy, and project management skills are becoming increasingly important if you want your project to be successful. To this end, a recent article in SupplyManagement.com, that claims you should rule with an iron triangle (referring to the parameters of time, cost, and quality that must be maintained in a constant balance), attempted to outline the key issues at each stage of a project that must be managed for project success. And while it’s impossible to sum up all the intricacies of project management in a single article, a few good tips never hurt — especially if you want to avoid the “seven stage syndrome” that is all too common in mismanaged and unmanaged projects (wild enthusiasm –> disillusionment –> confusion –> panic –> search for the guilty –> punish the innocent –> glory for the non-participants).

The following are some key issues, and tips, for each of the five main stages of a basic project life-cycle:

  • Initiation

    The project needs to be appropriately defined. Create a “project initiation document” that captures and documents key issues, key risks, project structure, and authority levels.

  • Planning

    If not controlled, “padding” can escalate out of control. It’s important to collectively break down the project into a set of manageable tasks that can be reasonably estimated without the need for excess “padding” by an individual outside of their comfort zone.

  • Resourcing & Cost-Estimation

    Costs can spiral out of control without a plan, and they will spiral out of control without a good plan backed by diligent homework that assigns (reasonably) accurate costs to each component.

  • Execution

    If not closely monitored, you’re likely to find out at 500 feet that your parachute lines are tangled … leaving you essentially no time to untangle them. But if you monitor closely, you can find out that they’re snagged at 5,000 feet, when you still have time to untangle them.

  • Completion

    This only happens if your project is well planned, well executed, and monitored closely. Otherwise, while you will end up somewhere, it won’t be where you want to be.