Optimization Technology as a Catalyst for Supply Chain Innovation

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1 Optimization Technology as a Catalyst for Supply Chain Innovation

2 Supply Chain Innovation Innovation is one of those buzzwords that is used almost all too often in business but still remains as essential to maintaining a competitive edge. For many companies, innovation has become a key driver behind their company culture, especially when it comes to their supply chain. Advanced analytics and decision support tools have proven to be a valuable resource for progressive supply chain professionals driving transformation in their organizations. According to Gartner, the areas where companies are currently focusing their supply chain innovation efforts include: Segmentation Organizations are embarking on cross-functional segmentation efforts to reduce overall complexity. Value chains are segmented to manage similar clusters to do the same. Companies start working with customers and suppliers to build inter-enterprise processes, such as collaborative forecasting and inventory management. Technology enablement focuses on building connectivity with trading partners, as well as supporting cross-functional trade-offs between supply chain and other functional areas. It is that latter part, where companies often struggle to find the best way forward, largely because of the limitations in their software platform - which is in many cases, Excel. Cost-to-Serve Organizations are increasingly looking for ways to get higher visibility into their CtS. Improvement opportunities are initially identified by analyzing cost components. Using advanced analytics for deeper insights enables companies to find ways to improve their CtS in line with their strategic objectives. Integrating analytics for decision support provides valuable in-sights into day to day operations and business planning. While commercial off-the-shelf (COTS) supply chain software vendors do have good solutions for visualizing the CtS, their ability to effectively integrate with regular business planning processes has been limited thus far. Supply Chain Talent With supply chains moving more and more towards the heart of the company, attracting, growing and leveraging top talent is of eminent importance. In addition, we can witness a growing synergy between the world of operations and the world of analytics, raising the bar for supply chain staff to be savvy in applying analytics in the supply chain field.

3 Supply Chain Visibility In Gartner s words, the aim of end-to-end supply chain visibility (E2ESCV) is providing controlled access and transparency to accurate, timely, and complete plans, events and data transactions, content, and relevant supply chain information within and across organizations and services operating supply chains. As you can see in the following picture, the definition is centered on the functionality of the bottom 3 layers, forming the Information Hub. Most providers focus on that Hub role, in the form of a cloud-based service Gartner, Inc. and/or its affiliates. All rights reserved. While companies are certainly eager to drive innovation in their supply chain by tackling many or all of the key themes described above, most of them still struggle to find the right technology to support their efforts. Gartner indicates that around 65% of companies are still at stage 1 or 2 of their Demand Driven Value Network maturity model. They do not have an enterprise-wide planning process that brings viewpoints from various supply chain functions within the company together. In other words, they need the right technology and process to enable their innovation.

4 Finding the Right Technology According to a recent report by Supply Chain Insights LLC, the average company spends 1.7% of revenue on technology investments. Despite this, the chance of IT project success is only around 50% - a percentage that is often too low to merit the investment in the first place. In most cases, companies simply struggle to find the right technology to meet their business objectives. The struggle is fueled by three causes: 1. Inability to find COTS software that supports their innovation - This is not unusual. COTS vendors typically focus on serving the early and late majorities, so the needs of innovators and early adopters are not addressed. 2. Internal initiatives to streamline software - Many enterprise companies have ongoing efforts to reduce the number of software packages and vendors used internally, thereby slowing down innovation to the pace of their existing vendors. These typically consist of large ERP providers surrounded by a few certified siblings, who jointly have to maintain a huge legacy in software. 3. Difficulty integrating a solution into the existing IT landscape - When companies succeed in finding the best COTS solution, they face the challenge of integrating that solution into their existing IT landscape. It requires aligning processes, master data and user interfaces across several COTS solutions, which is quite difficult to pull off. What Should Companies Look for in a Technology Partner? At the moment, the vast majority of businesses rely on Excel for filling the gaps between their landscape of COTS solutions and an ERP system. In addition, Excel is used to explore, prototype and run new and innovative processes. Leading companies like Nike and J&J have elected to spur innovation by leveraging technology that allows them to do the following: MISSION CRITICAL ENTERPRISE APP IDEA PROOF OF CONCEPT Quickly create a prototype of a new and innovative planning idea, to test the concept and verify its feasibility; If promising, develop the idea further into a prototype, to explore the potential business value, and initiate building understanding, support and momentum for OPTIMIZATION APP

5 the new idea. If the concept fits the business and provides the necessary value, you can develop an actual end-user application. Flexible technology would then allow you to scale that end-user application to whatever dimension in any direction, be it geographical, number of users, size of dataset, etc. Deploy Optimization deep into their organizations to empower end users with the capability to create multiple best-fit solutions for their scenarios, evaluate options, and select the best way forward for their business. Similarly, business leaders like Shell, Kroger, Zalando, Unilever and BP choose AIMMS Modeling and Optimization platform as a competitive advantage. Optimization it is their catalyst for innovation! Let s take a closer look at some AIMMS use cases. Introducing Global Cost-to-Serve Analytics with AIMMS One of our clients in the energy sector recently modelled an application that allows users around the world to perform their own Cost-to-Serve analyses. Initially, the project was intended as a one-off analytics exercise. But due to the benefits of the analysis, the client decided to develop an application that could be used by multiple users. Deploying it on the AIMMS PRO platform facilitated integration with transactional systems and accelerated the application s adoption around the world. The company s employees now use it on a regular basis, it s been embedded into their daily operations. Developing a Central Supply Chain Control Tower A large Paper Merchant was driven by market dynamics to adopt the latest developments in (de-)centralized supply chain control. As a first step, they needed to shift from having a locally-managed supply chain to a centrally-managed supply chain concept. In just four months, they built a completely tailor-made control tower application that enables them to have central visibility and control over their EMEA supply chain operations. The application draws on data from several different SAP clients, providing a visibility platform to promote informed decision making on a daily basis, tackling replenishment, inventory levels, transport flows and client-to-warehouse allocation from a single place. It took 2 months for the company to roll out the app in half of their European offices. The AIMMS-based application provides a solid foundation for further enhancement like multi-echelon planning, transport planning and S&OP integration. Embracing Pricing Optimization A global apparel manufacturer developed a pricing model to determine optimal product price levels, considering geography, product group, competitor pressure, client category, and stage in product life cycle. In so doing, they have ventured into a stage beyond price segmentation. The company is currently being deploying an AIMMS-based application across the entire enterprise with the AIMMS PRO platform. With the app, the company will be able to maximize the gross margin on each product line, by optimizing the price levels much more granularly while taking many more aspects into account. All of these cases have something powerful in common - a leadership that knows where they are heading to, how to get there, and how

6 technology can help them get there. These companies are also using AIMMS to explore new ideas, prototype these ideas and apply them in real-life situations, and deploy them as user friendly applications on a solid web platform. Fuel Your Supply Chain Innovation with AIMMS Optimization Technology Stop searching for an Off-the-Shelf software package to support your innovation. Take your company s future into your own hands and stay ahead of the crowd by adopting a modeling technology that supports you every step of the way. Sources: 2014 Gartner Supply Chain Executive Conference, London; Various Gartner speakers IT Project Success: Same Probability as the flip of a coin? by Lora Cecere (found at article/ it-project-success-same-probability-as-the-flip-of-a-coin?trk=mp-reader-card) Contact Us for a Demo North America Chris Gordon chris.gordon@aimms.com Asia Pacific Lei Wang lei.wang@aimms.com EMEA Christophe Frère christophe.frere@aimms.com South America Gertjan de Lange g.de.lange@aimms.com About AIMMS AIMMS is an innovative technology company with offices in Europe, the US and Asia. For 25 years, the company has been developing and selling a unique mathematical optimization platform. AIMMS customers can create high business impact with optimization engines and solutions that enable optimal decision making on complex strategic, tactical, and operational problems. info@aimms.com Copyright 2015 AIMMS. All rights reserved.