The state of Network Optimization tools in India
Most companies who have a production and distribution network in India use optimization at some level. In fact, a very well known color and paint company in India had created their own network optimization tool much before the practice caught on here and commercial solutions started becoming available. Significant number of Indian supply chain planners depend on custom build spreadsheet or script based solutions developed in-house or provided by niche vendors. Depending on the organization these decisions are sometimes also taken locally based on empirical observation and experiential learning.
The scenario is changing though and larger technology solution companies are showing greater interest in the Indian market. According to supply chain planners in pharmaceuticals, food and consumer goods industry, commercial Network Optimization tool availability and usage is on the rise. Adoption is being driven by multinationals who having taken world-wide licenses for these tools in other geographies are extending them to their Indian businesses. We also need to understand that most of these solutions sit atop the ERP system installed and by and large installation of optimization tools is dependent on the wave of ERP installation. Most companies choose to go for an additional solution in average only after 5 years of taking the decision of commissioning an ERP application. However, the movement towards commercially available solutions is gaining traction because of the following advantages :
- well designed graphical user interface
- built in grids and validation logic to simplify data accumulation
- customizable interfaces to link with ERP solutions that a company may already be using
- integrated maps and other visual representation of the network
- ability to incorporate scale and complexity that cant be modeled easily
- better algorithms developed over years of specialized research which reduce run time, incorporate more decision parameters and provide mature results.
Key Vendors and Solutions
In essence, most ERP companies have supply chain network optimization tools available from their own stable or in their network of partners and collaborators. Leading the pack is specialized supply chain technology company i2 Technologies's Supply Chain Strategist and Inventory Optimization solution. The other major options are:
- JDA Software Supply Chain Planning & Optimization suite (with JDA's acquisition of i2 Technologies their product capabilities are expected to converge)
- Infor SCM Network Design
- Manhattan Associates – SCOPE suite of solution for supply chain optimization
- ORACLE Strategic Network Optimization
- IBM Supply-chain Network Optimization Workbench
While SAP doesn't have a specific supply chain network optimization solution of their own there are applications available from partners.
Selecting a commercial network optimization tool
The following table delineates some of the key decision criteria in selecting a network optimization solution.
Aqua MCG's capability in Network Optimization tool
At Aqua MCG we recognize sheer importance of network optimization and role of a suitable tool to aid these decisions. We have synthesized our deep, industry and geography spanning expertise in designing two in-house network optimization tools. Our tool works with the objective of optimizing economic value added to the shareholder by evaluating every investment made over multiple periods. The key business decisions evaluated are:
- Timing and quantum of a capital investment
- Facility decisions: Echelon, number, site, size, capacity and set up or close down decisions with regard to a facility
- Transport decisions: Mode, capacity, shipment size and frequency and routing decisions
- Inventory decisions: Inventory stocking decisions for different products - where and what is the optimal amount of inventory to be stored at each echelon
- Product replenishment decision: Model and source of product replenishment at every facility in each echelon from the upstream echelon
- Order servicing decisions: Customer order to be optimally serviced from which upstream facilities
- Service level decisions: Optimal service levels at which the distribution network should function
For a leading skin care, hair care and personal care manufacturer we used our tool to configure production plan so as to minimize transportation cost to key customers.
At Aqua MCG the idea is not to push a solution tool to the customer. We approach a customers problem from the perspective of what are the business goals and what needs to be done to achieve those goals. We pool our knowledge of the global best practices in supply chain and logistics and apply our experiential learning in formulating a solution. Our tool then becomes the means to handle the mechanics of problem solving allowing us to crystallize the various parameters that creates the ‘right solution’ for that customer. Very recently we assisted a refractory manufacturer with plants at two locations in India to decide on the necessity of creating new production facilities and select appropriate location for new plants in order to reach more customers. Our optimization tool played a crucial role when it came to analyzing the cost of creating network nodes at various locations and identifying the most effective location.
Last but not the least, the essential idea is to obtain results. Therefore, the key thing in success is to bridge the gap between what a tool recommendations as most optimum and what is finally implemented.