Supply chain costs are recorded in the financial accounts but this information is usually high level. Organisations will know their warehousing and distribution costs, factory expenditure and inventory holding costs but the headline figure doesn’t disaggregate down. Unless these costs can be analysed and understood at the item level and used to configure the supply chain planning system, the network will be set up wrongly and profitability compromised.
Oii uses the power of Artificial Intelligence to model optimal supply chains. Our patented software identifies the right mix of cost and agility to enable the organisation to maximise service to the customer whilst minimising total supply chain cost. It makes the service v cost trade off transparent down to item level enabling visibility of the impact of the planning configuration on cost and margin. It details each individual cost component whilst finding the optimal total cost to maximise efficiency and improve profitability.
The cost of running your supply chain is directly impacted by the way the supply chain is set up and planned. Factors such as network design, replenishment strategy, stock holding and delivery frequency drive underlying costs. Understanding how these and other planning dynamics impact expenditure is crucial to avoid inefficiencies.
Every item in the network will have a unique cost profile driven by factors such as:
These attributes impact the way items are planned and produced and in turn the underlying costs associated with providing them to the customer. The planning configuration needs to find the optimal cost profile to meet the level of service targeted.
The right mix of total supply chain cost is a trade off. Greater agility and throughput reduces inventory but drives up factory complexity and transportation fees. Likewise safety stock to offset variability and meet higher service targets must be balanced against inventory holding costs and the risk of obsolescence. A common issue with cost reduction initiatives is that improvements in one area are offset by negative impact elsewhere in the network. The target is to find the best overall mix.
Without transparency of costs at item level and the capability to model this balance effectively plans will drive inefficiency and the organisation will lose out financially.
The software uses Artificial Intelligence to find the best supply chain planning configuration. It does this by building the millions of options that are available in real time and identifying a costed and optimised solution that is the best fit for your organisations specific strategic needs. Each option is considered in terms of factors such as:
Oii applies a unique concept called SMSpace™ a multi dimensional virtual hologram where all potential future supply chains for a particular network are built, costed and compared. In SMSpace™ the tool models multiple configuration options and plays these out over time, assessing both the probability of the outcomes and the cost versus service profile of each one.
Supply chain costs are tracked at item level enabling the tool to compare every planning configuration option, quantify supply chain costs for each one and through that process determine the best fit. In doing this it enables the optimal configuration to be determined whilst also making the total supply chain cost and its components visible for every item supplied by the business. By making underlying costs transparent the tool also identifies those areas where targeted reduction initiatives will have the most impact.