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Supply Chain Videocast
Why Supply Chain Design
has Become a Must-Have
Skill for Today's Business
Leaders
Broadcast Made Possible by:
© 2012 LLamasoft, Inc. All Rights Reserved
The Challenge
© 2012 LLamasoft, Inc. All Rights Reserved
Company Overview
4 4
We are:
• The global leader in Supply Chain
Design technology & solution services
We enable companies to:
• Optimize their end-to-end supply chain
operations
• Reduce corporate risk and identify
major cost savings
• Perform what-if analysis
© 2012 LLamasoft, Inc. All Rights Reserved
Sample Customers
Automotive / Industrial Manufacturing Consumer Goods Defense
Hi-Tech / Electronics Food Beverage
Life Sciences Grocery Logistics
Apparel Manufacturing Petroleum
Public Health Retail Chemical
© 2012 LLamasoft, Inc. All Rights Reserved
Enabling Ongoing Ability to Engineer a Competitive
Supply Chain
– Training and coaching programs for analysts
– Methodology to enable retention of project knowledge
– Maintenance of supply chain models and updates for the latest modeling options
The right technology to address your specific issues
now and in the future
– Integrates all key metrics and design approaches
– Scales to model the entire enterprise
– Continuously innovating using the latest technology & design techniques
Unparalleled Experience in Designing Global
Corporate Supply Chains
– Support hundreds of supply chain design projects every year
– Exposure to latest approaches and best practices
– Developers of the leading supply chain design technology
Experience Technology Empowerment
LLamasoft Differentiators
© 2012 LLamasoft, Inc. All Rights Reserved
Supply Chain Design System
How should I react
to an unplanned
event?
RAPID RESPONSE
What if we try this?
What if this
happens?
SCENARIO ANALYSIS
What is my current
supply chain
profile?
VISIBILITY
Customer Enterprise Data Parts – Bills of Material – Costs – Facilities
Suppliers – Demand – Lead Times - Capacities
LLamasoft Reference Data Transportation Costs – Risk Metrics – Labor Rates
Facility Costs – Emissions Benchmarks
Supply Chain Optimization & Simulation Engine Sourcing & Production Footprint – Product Flowpaths – Transportation Routes – Inventory Placement
CURRENT OPERATIONS Analysis of Existing Supply Chain
FUTURE OPERATIONS Strategy for New Supply Chain
© 2012 LLamasoft, Inc. All Rights Reserved
Supply Chain Visibility
INTERACTIVE DASHBOARDS
• Analyze current cost-to-serve
• Highlight a geographic region
• Explore a business segment
RICH VISUALS OF SUPPLY CHAIN
• Flow of products
• Risk profile & locations
• Demand segmentation
DRILL DOWN REPORTS & METRICS
• % sourced from specific region
• Product profitability & cost structure
• Service levels & coverage
© 2012 LLamasoft, Inc. All Rights Reserved
Scenario Analysis
OPTIMIZE SUPPLIER CONFIGURATION
• Single source vs. multi source
• Low cost vs. local
• High risk vs. low risk
EVALUATE ALTERNATIVE STRATEGIES
• Transportation mode selection
• Production footprint
• Inventory stocking locations and levels
SIMULATE & PERFORM WHAT-IF
ANALYSIS
• Fluctuations in lead-times
• Supply Disruptions
• Demand increases or decreases
• Fuel-cost spikes
What if we try THIS? What if THIS happens?
© 2012 LLamasoft, Inc. All Rights Reserved
Rapid Response
Use the supply chain models to
evaluate contingency plans
Balance production & sourcing
against changes in demand
Prioritize demand during
supply short-falls
Restructure when cost
assumptions fail
How should I respond to an unforeseen event?
Supply Chain Design Questions
What is my actual cost-to-serve
each product to each customer?
From whom should we source?
How should we flow each product
through the network?
Where and when should we
produce each product?
Where should we stock product?
How much inventory is enough to
meet my customer service
requirements?
How much should I buy and at
what price?
How should I ship my products?
Supply Chain Design Metrics
Sustainability
• Greenhouse Gas Emissions / Energy • Hazardous or Banned Content • Waste
Supply Chain • Facility and Equipment Footprint • Inventory & Capacity • Complexity, Sourcing
Financials • Profit, Total Cost, Total Revenue • Fixed and Variable Facility Costs • Transportation, Inventory, Taxes
Service • On Time Delivery • Fill Rate • Coverage
Service • On Time Delivery • Fill Rate • Coverage
R I S K
Supply Disruption Transportation Variability Demand Volatility Supply Volatility Sensitivity to Costs Natural Disasters, Structural/Geographic Geopolitical Change
© 2012 LLamasoft, Inc. All Rights Reserved
What Does My Supply Chain Look Like?
© 2012 LLamasoft, Inc. All Rights Reserved
Four Regional Distribution Centers
© 2012 LLamasoft, Inc. All Rights Reserved
Customers Throughout the Country
© 2012 LLamasoft, Inc. All Rights Reserved
Widely Varying Demand by Customer
© 2012 LLamasoft, Inc. All Rights Reserved
As-Is Costs and Operations
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Optimized As-Is Supply Chain
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Supply Chain Segmentation
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Supply Chain Segmentation
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Safety Stock Optimization
Financial Service Risk Supply Chain Sustainability
Demand & Lead Time Profiling
Multi-Echelon Safety Stock Optimization
Key Benefits and Usage
• Multi-Echelon Safety Stock optimization allows the model to achieve savings
in working capital while simultaneously maintaining or increasing service
level to stores
• Scientifically quantify cost or benefits of service level, sourcing, and
contractual lead time agreement changes.
• Combine with network optimization to set optimal inventory planning
policies. ie Reorder point, order quantities by site by product
• Model can automatically profile historical sales data or use forecast and
forecast error as inputs
• IO Select functionality allows automated filtering of products with non-
normally distribution demand
Sourcing
Variability Demand
Variability
Transport Time
Variability
Transport Time
Variability
Transport Time
Variability
Production
Variability
$ $ $
Finished Goods
Holding Costs
$
Increasing OTIF to 97% increases working
capital by 14% while Decreasing OTIF to 93%
decreases working capital by 10%
© 2012 LLamasoft, Inc. All Rights Reserved
Optimized As-Is Supply Chain
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
New Optimal Structure
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
New Transportation Routes
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Designing An Optimal Supply Chain
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Service Based Optimization
Financial Service Risk Supply Chain Sustainability
Center of Gravity Greenfield
Formulation
Service Based Greenfield Formulation
1 Day service increases by 38% from baseline with
Center of Gravity Analysis. It further increases by 5%
when Service Based GF Analysis is applied
Key Benefits and Usage
• Depending on the objective, Greenfield analysis can either be performed
using Center of Gravity or Service Based methods
• Service Based Optimization allows the model to decide “How Many?” And
“Where?” given customer locations and service requirements.
• Service Based Optimization can provide a strategic advantage from a
service lead time perspective. The objective is to cover the most number of
customers using the fewest number of distribution points within a defined set
of service goals.
• Center of Gravity Formulation solves the “Where?” question given customer
locations, demand volumes and number of DCs as inputs.
• The Center of Gravity method can often yield the lowest cost solutions from
a freight perspective. It is often utilized for completely realigning the current
footprint or identifying the next best location to setup a facility.
© 2012 LLamasoft, Inc. All Rights Reserved
Sales & Operations Planning
Financial Service Risk Supply Chain Sustainability
© 2012 LLamasoft, Inc. All Rights Reserved
Sales & Operations Planning
Financial Service Risk Supply Chain Sustainability
Sales & Operations Planning
Pre-Position
Pre-Build
Demand
© 2012 LLamasoft, Inc. All Rights Reserved
Business Continuity Planning Facility Outage Simulation
Financial Service Risk Supply Chain Sustainability
Business Continuity Plan
Baseline Sourcing Pattern
Predict & Visualize Operational Impacts with Discrete Event
Simulation
Stock Out
Storage Capacity Limit
Reached
Huanghua DC shut down increases freight spend by 2%
while service distance increases by 7%
© 2012 LLamasoft, Inc. All Rights Reserved
Risk Management Commodity Pricing Shocks
Financial Service Risk Supply Chain Sustainability
Business Continuity Plan
Baseline Sourcing Pattern
Key Benefits and Usage
At 180% increase in fuel price, freight spend
justifies setting up operations locally
for sourcing
SUPPLIER INBOUND LANES
WRDC TO DC TRANSER LANES
SUPPLIER INBOUND LANES
WRDC TO DC TRANSER LANES
• Pre-plan supply chain responses in response to various risks
in supply, demand, weather and geo-political events.
• Identify optimal alternate suppliers, carriers, production sites,
distribution paths, etc. prior to supply chain risk events
occurring
• Understand the impact to capital expenditures, operating
expenses and service to customers
• Combine optimal designs with discrete event simulation to
predict and anticipate impact to daily operations
• Model varying lengths of risks for different supply chain
responses
© 2012 LLamasoft, Inc. All Rights Reserved
Tax/Duties Optimization
Financial Service Risk Supply Chain Sustainability Optimized Network without Tax Considerations
Key Benefits and Usage
• Optimize network with tax/duties considerations
• Apply tax/duties/tariffs based on transfer pricing across
regions
• Calculate tax/duties/tariffs based on revenue
• Calculate tax/duties/tariffs based on import/export
arrangements
• Capture region specific product standard cost based on
production cost and exchange rate differences
• Determine tax/duties/tariffs based on region to region
movements
• Account for tax/duties/tariffs based on invoicing locations
Tax Efficient Network
© 2012 LLamasoft, Inc. All Rights Reserved
Freshness Considerations
Financial Service Risk Supply Chain Sustainability Baseline Sourcing Pattern
Freshness
Cycle Inventory
Optimization
Shelf Life Constrained
Optimal Inventory
True Cycle Evaluation
Age Curve Generation
Average Touches in SC Design
Key Benefits and Usage
• Production with freshness – what if’s to optimize production lot
size against probability of dumping
• Product flow contingency planning with freshness – flow paths
that minimize freight, inventory and spoilage costs
• Inventory planning with freshness – minimize inventory with
respect to shelf life, service level agreements and production
constraints
• Ability to track to true age of productions
• Minimize obsolescence and cost write downs for high turn-
over items (ie fashion, electronics)
© 2012 LLamasoft, Inc. All Rights Reserved
BI, Ad Hoc DBs,
Spreadsheets
Corporate Data
ERP, MRP, TMS,
WMS, SCM, Etc.
Web UI Web Server
Enterprise
Supply Chain
Intelligence
AMB’s &
Input Pipes
Model
Database
Project
Knowledge
Database
Workstation
Mobile
Cloud Solver
Cloud
Data Services
Newest Technology Trends Enterprise, Cloud, & Mobile
Custom
Model-Based
Point Solutions
AIT
’s
© 2012 LLamasoft, Inc. All Rights Reserved
Example: Using Tablets for Collaboration
Radical ease-of-use
100% visual design environment
Import traditional models or start
from scratch
Built in reference cost and
benchmark data
Ability to share with anyone
Export and upsize designs to
engineering grade software
apps
© 2012 LLamasoft, Inc. All Rights Reserved
Summary
There is a big opportunity for cost savings within the
supply chain of most companies
Supply Chain Design is a process and business
function that can help unlock those savings and create
a sustainable business
The applications for supply chain modeling are
continuing to increase to keep up with a more volatile
business climate
Companies are beginning to leverage cloud and mobile
technologies to enhance their Supply Chain Design
capabilities
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