Fleet Optimization Technologies are Powerful Tools for Improving Supply Chain Performance
Most companies leave lots of money on the table when they deploy them. Getting the most from them requires that companies spend time thinking about how they are going to be applied, how they will measure the results and the definition of success. The following points hold true whether you are optimizing inventory, transportation, labor, etc. in your supply chain.
Don’t just optimize what you do today.
The typical question asked when discussing optimization technology is “How much will it save me?” In all cases, the answer is a range from say 5% - 15%. The biggest reason for the range is the degree of change associated with use of optimization technology. The low side comes from optimizing the current processes and taking into account the current supply chain restrictions. The high side is based on looking at the business processes and restrictions and asking what could be done differently to take best advantage of the optimization technology. Deploying optimization technology provides an excellent opportunity to reexamine your supply strategies, tactics, etc.
Fix the overall definition of success with key metrics prior to deployment.
When this doesn’t happen, deploying these tools becomes a subjective and painful journey. For example, in the world of route optimization it is not uncommon to hear from the existing planners that they don’t like the way the optimized routes “look”. What does “look” mean? If the goal was reducing total miles and vehicles, then they may not look like the nice “petal” routes that the planner put together in the past. However they may have taken out 15% of the miles driven and 10% of the fleet that used to make the same number of deliveries. That’s the definition of success. If you get that definition up front, you will be amazed how quickly you can get the value you are expecting from optimization technologies.
The more variables and fewer restrictions - the better the results.
Supply chain optimization software works best when there is more flexibility to make as many trade-offs as possible. In the world of logistics, there are lots of variables that can be traded off. For example, in a VMI environment, delivery quantity and frequency can be traded off to reduce transportation costs. As long as the end customer doesn’t run out of your goods, you can make all the transportation decisions you want, and there is no reason to fix a transportation delivery schedule.
Use optimization technology to help determine improvement opportunities.
They really can be continuous improvement tools. It’s amazing how many opinions there are in an organization when it comes to where there may be savings. One of the ways to move from opinion to fact is to use optimization technologies to show the value of making changes to the business. If your optimization technology was “base-lined” to model your operational performance, then evaluating changes to its configuration can help identify where the big opportunities exist. Don’t underestimate this approach as optimization technologies are very good at finding counterintuitive answers. With all the “urban legend” in supply operations, sometimes the only way to make significant change that challenges the norm is to be able to compare the “what if” to the current performance. The great part of this approach is that you have a “sand box” that allow you to be creative without touching the actual operations. From there, all the doubters can dig into the results and verify the validity of the proposed solution.
Supply chain optimization technologies provide tremendous opportunities to improve productivity and customer service. However, their effectiveness can be severely limited by the deployment and success measurement strategies.