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Modeling provides a safe environment to test transportation policies, says Mike Mulqueen, senior director of product management at Manhattan Associates. Most companies need to regularly re-evaluate these policies, which are the basis for rules and protocols like required service levels, min/max inventory levels and so on, he says. "Often these policies decay over time in terms of how well they actually support the supply chain," he says. "Companies need to ask if the underlying rationale is still valid, whether the policies are still aligned with overall corporate strategy and what the impact would be of changing them."
One customer that has worked with Manhattan in this area is Papa John's Pizza. "At Papa John's we look at our transportation network as an entity that is growing and changing every day as stores open and close and as there are weather events and marketing initiatives," says Eric Hartman, senior director of logistics and support at Papa John's International. "Our policies need to be flexible enough to account for changes in demand while still meeting the needs of our customers."
Variability is the greatest challenge to Papa John's in this regard, Hartman says. "As the internet has grown and become more of a business tool we are able to market to our customer base with a lot more precision. As a result, we see greater variability in demand from day to day, which was leading us to be more reactive than necessary," he says.
Papa John's also partners with Manhattan for demand planning, Hartman says. "The demand planning application takes into account our historical volume and looks forward at likely future demand," he says. "We take that information and use Manhattan's algorithm tool, which is a high-density route planner, to build a model." This model always is reviewed by Papa John's transportation team "because you always need that human interaction to allow for things you can't input, such as a parade in San Francisco," he says.
The biggest benefit that Papa John's has derived from modeling is an enhanced service model, Hartman says. "By that, I mean a model that allows us the greatest service flexibility at minimum cost so we can react to our store's operational needs in the face of this variability, which often is driven by marketing initiatives."
Mulqueen underscores the importance of flexibility. "Historically, TMS providers like Manhattan focused on execution, but the problem with that is we were constrained by the transportation policies in place. Working with companies like Papa John's, we now can go back and really challenge those policies with "what if" modeling. This allows us to do non-incremental changes; TMS systems are designed to do incremental changes by optimizing around existing policies, so it is powerful to challenge those policies and align them to better achieve corporate goals and strategies. And then we test those changes in a safe and simulated environment, which is a lot better than trying them out in real life and dealing with a possible service failure," he says.
Good data is crucial to the process, Mulqueen says. "Papa John's has a lot of data and we were able to create sound statistical models with the data they provided. Many organizations are data starved and that becomes a roadblock, but with the advent of big data organizations are better understanding this issue, so hopefully more companies in the future will be like Papa John's."
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