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An Optimistic Skeptic's View of How to Plan a Network

Analyst Insight: Network planning suffers from an abundance of inappropriate technology, coupled with far too little pragmatic, common sense. Everyone is familiar with the optimization tools that are routinely applied; all are based on long-term shipment forecasts by SKU, by zip code or even finer measurement. Now wait a minute! We can't even forecast next month's demand; how in the world can we forecast demand detail five years in the future? The skills and skepticism of the millennials just may have the solution. – Robert Sabath, Principal Essentialist SCM, Trissential

An Optimistic Skeptic's View of How to Plan a Network

It's time for common sense, coupled with sophisticated computer tools. Supply chain specialists have to bite the bullet; we have to look at the soft side as well as the statistics. We have to open our perspective to work with corporate strategists, marketing gurus, and even sales managers. We have to start with long-term plans. What do we know for sure about long-term demand? What geographies do we want to penetrate? How are we going to change customer service? What will be the competitive levers? Are we going to make any acquisitions? How likely are we to become more consumer-centric? Or less? How are the characteristics of the products we sell likely to change? What will be coming from new competition? How likely are we to change within the brick-and-mortar/internet/omni-channel continuum? Only after we answer those questions can we somehow guesstimate how much stuff will be moving from here to there (and possibly from somewhere to here) well into the future.

Next, it's time to face reality. What does it cost to move to another facility? Do we have realistic options at every potential optimum point? Which of our suppliers and customers are most sensitive to our locations? How much difference does that make?

Network planning requires an anchor in today's locations, methodologies and processes, with careful entanglement of our best guesses of the unknowns listed above. Laying out a network, procuring the facilities, selecting the right equipment, understanding the product lines, building the processes and procedures are all large, cumbersome, complex and time-consuming activities that don't need to be redone with every new annual plan, product rollout, acquisition, or promotion. Building in the flexibility and understanding the likelihood of each potential change provides the weapons for a network to be viable, responsive, and a significant competitive advantage.

That said, we still need to hunker down with the traditional network planning processes, but only after recognizing that we must – at least once – strip the model technology naked to understand whether it suits us appropriately. Think about that complex computer model that we probably overpaid to acquire. How well does it consider our seasonality? Does it embrace our realities regarding new product introductions, inclusion or exclusion of fashion goods, product lifecycles, and statistical demand patterns? Can we effectively manage our inventory as if it is in fewer locations, thereby reducing safety stock? How does our cost of money today resemble what it was when we bought that software? How quickly can we really turn around an order? Are our suppliers still located where they used to be? Is it time to consider alternative suppliers? What premium transportation options are available, and at what cost?

                                                         The Outlook

We’ve already witnessed the initial steps toward a new rational balance. Look forward to enhancing the deep knowledge of the “I’ve seen it all” folks with the technology comfort of the “Gee whiz, thumb-manipulating computer geeks”. Grab one of those very clever operations research MBAs, and immerse them in moving the location model from "brilliant and generically accurate" to "targeted, perfect, your very own". Only by working together can the two sides generate real and functional solutions.

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