David DuBose, vice president of Sedlak Supply Chain Consultants, defines "optimization" as it relates to supply-chain management today, and details some of the drivers behind that concept.
Q: What does “supply chain strategy and optimization” mean to you?
DuBose: I think about it as the framework of the supply chain. Where are the facilities, and where are they relative to one another? How were the logistics of the organization set up in terms of inbound trucking, or any type of transportation? It’s about defining the roles of those facilities so that they're as efficient as they can be.
Q: Turning to the marketplace, what are the biggest business issues and drivers at work today?
DuBose: Looking at the retail vertical, store volumes are trending downwards, while e-commerce volumes continue to grow at double-digit rates. If you’re an omnichannel retailer that uses both brick-and-mortar stores and e-commerce, how do you use store infrastructure to serve as points of distribution?
Q: How well a job are companies doing treating inventory as one big pool, regardless of where it is?
DuBose: That’s in a bit of flux right now. There are some system-related barriers to doing that. It has to do with whether the company wants a facility that serves e-commerce and store replenishment at the same time.
Q: A lot of companies simply can’t afford to have separate facilities for those purposes.
DuBose: It depends on the scale. Those two types of operations are very different. You're using high-speed sortation and robots and all that kind of fancy stuff to make everything work properly. You’ve got to figure out how to manage the flow of product and bucket of inventory the most effectively. Because you’re tying up working capital, and there are tradeoffs to consider.
Q: Is the whole reason behind the drive for optimization today changing? In the past, it might have been to cut costs. Now there's an imperative to serve customers in a manner that’s so efficient that it might not cut costs, but do the opposite. Is that a possibility?
DuBose: That’s absolutely true. Today you’re thinking about how to building service levels into your modeling. The service dynamic is taking on a larger and larger meaning, and is weighted more heavily.
Q: Where are the pain points? What are the hardest things for your customers and clients to achieve, to reach the goals we're talking about here?
DuBose: It’s about dealing with your asset base – whether it’s a combination facility, serving e-commerce or playing a specific role. Customers want things sooner. And the technology options have changed, in terms of the material-handling equipment that's available to the distribution center. These are multi-million-dollar decisions, and they take a while to execute.
Q: What are the big systems and changes in technology that are most valuable today?
DuBose: We we went through the phase where everybody put in an ERP [enterprise resource planning] system. Now there are really robust capabilities in supply-chain planning and execution systems, and very specialized systems for hard-to-forecast items. The trick is, how do you navigate all that? And how do you get these systems to integrate? You’ve got some I.T. work to do on the back end to make it all hook together. There’s a dizzying array of things that you can put into place, but being smart about how you do it's important.
Q: Make the business case for why companies should take action in this direction.
DuBose: Every situation is different. But these projects tend to be associated with healthy paybacks. You can find certainly high single-digit improvements almost routinely. And double-digit improvements are not uncommon at all. There's money to be spent, but when you leverage the state-of-the-art tools that are out there, you can find huge results.
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