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OPS Rules Blog: Insights into Supply Chain and Operations Strategy

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When is it a good time for supply chain network design?

 
Oil prices LNP chart

It is often said that 80% of the cost of a supply chain is locked in its initial design, see Dan Gilmore’s discussion. Supply chain design involves the number and location of facilities: plants, warehouses, and supplier base and how products flow through them from raw material to finished products.  In a similar spirit, it can be argued that 80% of a supply chain’s responsiveness, tolerance to risk, and efficiency is likewise locked in the initial design of the network. The implication of this widely recognized truism is, in short, that the more flexibility a firm has in its supply chain the greater the opportunity it has to discover better alternatives to its current supply chain network design.

Supplier Risk is Changing the Role of the Chief Procurement Officer

 
chief procurement officer


The article, "Companies are looking more towards their Chief Procurement Officers for a supply chain revolution" caught my attention as it summarizes succinctly what is now becoming a more important role and significant transformation in the way companies are managing their suppliers and their supply chain.

Traditionally, the role of the Chief Procurement Officer (CPO) has been a secondary one compared to others in top management. It was mostly limited to negotiating good deals and tracking supplier performance. Increasingly, however, the role is being seen as more valuable and central within many companies. In particular, the CPO is now accountable for supplier risk not only on the first tier but often on the second and third tiers. In particular, large multinationals are rethinking the way they manage and rationalize their supply chains and the way they can manage risk more centrally and strategically.


Managing Inventory in Our Daily Lives

 
shopper, grocery

Supply chain professionals see the world through a different lens than most.  Where others see products on the shelf, we think of the containers on a ship, or trailer hauling down the highway full of that product and the possible shipping lanes and utilization.

Supply Chain Analytics in Mergers & Acquisitions

 
mergers and acquisitions



Just within the first quarter of 2014, U.S companies registered $299.6bn in mergers and acquisitions; the highest Q1 by value since the pre-crisis level. Even globally, the M&A activity has been at fever pitch with a 39% increase in deal value, from $449.7bn in Q1 2013 to $625.4bn in Q1 2014 as noted here.

This week alone two mega-deals were announced: AbbVie announced it is buying Shire for $54B and R.J Reynolds Tobacco Company announced that it will buy rival Lorillard for $27B. 



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3 Areas BioTech can Benefit from Supply Chain Control Towers

 
pharma, supplychain, control towers

Many successful BioTech and BioPharma companies have seen exploding growth paths in the past 10 to 15 years. Starting off as small lab outfits in the late 1980s and early 1990s, they have grown today to multi-billion dollar companies with sprawling global operations. While enjoying continued high operating margins and large cash coffers, these operating margins are falling.  And while the industry standard for inventory turns is around 1.5 (equaling 9 months of product), product stock-outs happen repeatedly as well as more severe shortages such as Genzyme’s Cerezyme for Gaucher’s disease in 2010 or Gilead's shortage of Cayston

All You Need to Know About Multi-Echelon Inventory Optimization

 
inventory optmization

Written by Billy Hou, Haresh Gopalan and Jeff Keene. Multi-Echelon Inventory Optimization (MEIO) dates back to a 1960s paper, Optimal Politics for a Multi-echelon Inventory Problem, by A. J. Clark and H. Scarf, published in Management Science. This paper was so important to the field of operations management that Management Science named it as one of the Management Science 50th Anniversary Top 10 papers. 

Combining Machine Learning and Optimization in Supply Chain Analytics

 
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Chief supply chain officers plan to invest in analytics, business intelligence, and other software tools to bring more visibility to their supply chains, according to "Orchestrating a customer-activated supply chain," a report issued by the IBM Institute for Business Value. IBM canvassed 201 chief supply chain officers from 16 countries for the research. 

Supply Chain Analytics in Practice at Rue La La

 
RueLaLa, Optimization

OPS Rules Chairman David Simchi-Levi and his team at MIT developed a Demand Forecasting and Price Optimization Tool with online retailer Rue La La. This application received the 2014 INFORMS Revenue Management and Pricing Section Practice Award for a project that is expected to increase Rue La La’s revenues.

When is Supply Chain Optimization Too Optimal?

 
inventory optimization

Written by Jeff Keene with Jay Watt and Billy Hou. Often times when we are called in for a first discussion with a new client, we hear a similar story: “We know our supply chain is costing us money and we want to optimize it!”  The word “optimize” is important, because it is a buzzword that encompasses so much.  There are countless models and tools that we can use to optimize a supply chain: network design, inventory optimization, production sourcing, supply chain planning and more.  These all have the common theme of trading off cost versus another variable.  When we conduct sufficient analysis to develop a view of those tradeoffs, we can find the optimal point by picking the lowest cost.  But is this really the end of an optimization analysis?

8 Reasons Why Supply Chain Analytics Drives Performance

 
supply chain analytics

The most commonly used tool for supply chain analytics is still the spreadsheet. However, due to increasing complexity on many levels, spreadsheets are no longer enough to deal with the tremendous amount of calculation and real time data update.

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