Materials for New Book on Learning CPLEX Optimization

We’ve now posted all the CPLEX model and accompanying Excel and Access files to go along with the free e-book, A Deep Dive into Strategic Network Design Programming (for the files, scroll to the bottom of this book’s page).

This book is a compliment to the book, Supply Chain Network Design.  It is a great way for supply chain people to learn about optimization (which is a good skill to have).  And, for people who just want to learn about optimization, this book gives you a real problem to solve and allows you to explore issues that will come up in many different industries.

Reminder on the Business Issues in Network Design

The June 2013 issue of Inbound Logistics had an article on the importance of the “entrepreneurial spirit” in site selection.

The article is mostly about the large number of large companies in NW Arkansas (near Walmart) and of innovation at the port of Cleveland.

But, the start of the article reminds us that network design is usually about one or two primary factors and that different industries make different trade-offs:

[primary factors include:] labor cost and availability, proximity to market, transportation accessibility, utility rates, and business tax incentives. Different industries prioritize one criterion over another. Utility rates trump labor for more data-intensive purposes; heavy commodity sourcing may favor rail access over road.

But, the article also reminds us that issues like “entrepreneurial spirit” can be just as important.  This is a nice reminder that network design is a business decision.  There are many factors that can be quantified, but other issues, which may be just as important need to also be considered.

Michelle Comerford on 5 Issues to Consider Before Selecting Your Next Site

A recent article in the June 2014 issues of Inbound Logistics by Michelle Comerford of Biggins Lacy and Shaper & Co wrote on 5 issues to consider when locating facilities.

The article is a nice reminder of some familiar themes in site location:  fuel costs (and the truck vs rail trade-off), proximity to customer base (fast response), and sustainability (taking miles out of the system).

The article also reminds us of some hard-to-quantify business issues– driver and equipment shortages.

Finally, there is a point on “new product development” talking about possible moves to regional manufacturing strategies.



Network Design Software in the History of Supply Chain Managment

At CSCMP’s annual conference in Denver, CSCMP and Supply Chain Digest put together a video timeline of the history of supply chain management.  (The video starts around the 4:00 minute mark of this telecast).

The timeline includes major supply chain management innovations or key milestones.  Some of these include the first use of bar codes, the first MRP install, Toyota teaching its suppliers its Lean system, and the founding of FedEx and Walmart.

I was pleased to see that network design software made the list.  In 1972, “Dr. Arthur Geoffrion and Dr. Glenn Graves (UCLA) developed the first computerized network optimization tool…”

CSCMP History and Network Design


Top Three Reasons Supply Chain Models Can Go Wrong (From SC Digest)

Dan Gilmore of Supply Chain Digest has written a few articles on the value of supply chain modeling this year.  Then, a reader asked ”if the fear of bad models leading to terrible supply chain decisions wasn’t a key factor in some companies avoiding modeling.”

This was a great topic that comes up enough to address.  You can check out the full response in my blog post at SC Digest.  But, here are the top three reasons a model can go wrong:

  1. The results come in, but do not suggest a change
  2. You never get results and have to cancel the modeling project
  3. You implement the results and they turn out to be wrong

It is good to understand these reasons so you can avoid them.

Going Beyond Traditional Network Design at Ahold

I was recently reminded of a talk that Ahold and IBM gave in 2011 at the Material Handling Conference in Park City Utah.

It is a good network design case.  Here the details from the IBM blog site:

Ahold is an international retailing group based in the Netherlands.  Ahold had revenues of 29.5B Euros in 2010.   Ahold USA is a wholly owned subsidiary of Ahold.  Ahold USA operates Stop & Shop, Giant, and Giant Martin’s stores as well as the on-line grocer Peapod.

The title of the talk is “Beyond the Traditional Network Analysis.”

So you are challenged with managing a large portfolio of products and a complex set of vendors, customers and distribution locations. How do you make sense of this all and streamline your supply chain? This session takes you beyond the pin-on-a-map network analysis and examines factors such as sourcing strategies, inventory optimization, route planning and more. We will also review a grocery case study that involved the analysis of sourcing effectiveness, evaluation of DC investment opportunities, and relocation of legacy facilities to get the most out of their supply chain network. “



Network Design at Schwan’s Home Services

Inbound Logistics ran an article on network design at Schwan’s Home Services.

Schwan’s Home Services runs a direct to consumer delivery business for food products.  Before network optimization, they served 90% of the continental US with 475 company owned depots.  The depots each had around 10 to 15 trucks to make the deliveries.  The depots were replenished from their central warehouse in Marshall, MN.

According to their VP of Supply Chain, Jeff Modica, their fixed costs were too high and their supply chain was outdated.  They needed “a lower cost to serve” and “had to be more flexible.”

They used Deloitte Consulting to help with the modeling and to bring and outside perspective.

The article does a nice job in explaining the unique nature of Schwan’s Home Services’s labor and sales intensive business.  It also does a nice job of pointing out the the fact that the network modeling team had to communicate and get the buy-in from many different stakeholders within the company.   These projects are always a mix of quantitative analysis (and they used IBM’s LogicNet Plus) and qualitative factors.

Deloitte initially recommended closing a dozen facilities to start– to get some quick wins (always a good idea in projects like this).  Eventually, the closed 54 sites.  And, they changed the structure of their supply chain:

Additionally, Schwan’s has migrated to a hybrid model that uses existing company-owned depots, master depots with hub-and-spoke shuttle systems, and 3PL-managed facilities. As the company removes and/or re-tasks nodes, the network continues to change—setting the stage for further optimization in 2013.

The article doesn’t tell us the savings, but it does mention:

While the financial impact of Schwan’s network optimization is under wraps, it achieved marked operational and asset appreciation savings, in addition to avoiding some cost and gaining revenue from the sale of assets.

The article is worth a read.  This is a nice case study of a network design project.

Using Tableau Public for Sample Customer Analysis

Tableau has an offering called Tableau Public that allows you to easily publish your reports to the web.  As a corporate user, you should note that the data you publish is publicly available- so you will want to be careful what you publish).

For those who don’t know, Tableau is powerful and flexible reporting engine.  We have found it very helpful for understanding your supply chain.  One of our clients, Armstrong World Industries reported that this reporting allowed the modeler to sit down with the business user and answer questions about the supply chain on the spot.

Below is a quick example of the type of reports you can generate.  I loaded customer level data showing the time in transit from the warehouse in Chicago, the total demand, and the demand broken down by mode (rail or truck) and by product (A, B, or C).  The first tab you see below shows the each of the customers, sized by demand, and colored by the transit time from the Chicago warehouse.  You can get a lot of information from your supply chain with a map.  (The map below should be interactive so you can play around with it on your own).