Supply Chain Brain

Maximizing Your Savings
in Trying Economic Times
Driving Growth Up
in a Down Economy

Squeezing more than 4 to 5 percent in savings

from your supply chain should not be a prob-

lem, even in this difficult economy, says

William Talerico, director of global manufac-

turing at CombineNet.

“Savings is a tricky term,” Talerico says, and defining your terms up front helps to define your goal and what you need to achieve it. You must realize that there are three kinds of savings: identified, implemented and realized.

Soliciting bids from transportation carriers illustrates the first type. Potential partners submit prices for service, and you have the identified savings. “That’s not always imple-mentable,” Talerico says.

The much more realistic implemented savings number depends on capacity utilization and the business rules and constraints of the stakeholders in your organziation.

Neither example should be confused with realized savings. “That means, when you look back a year from now and ask how much of the identified or implemented savings did we actually capture and recognize on the balance sheet, you ask, how much of that is left?

“Today, with the market down, with workers being sent home and everybody trying to get as much savings out of the supply chain as they can, you’d better keep that realized number pretty close to the implemented number and not allow for evaporation or leakage of those savings.”

That’s more easily done if the implemented savings number is accurate to begin with. That calls for careful scrutiny of carriers. Awarding a contract to anyone who can’t satisfy demands could easily require falling back on a higher-cost carrier.

“You want to look at a number that you can execute tactically against throughout the whole year,” says Talerico.

An integrated business planning solution

simultaneously models supply chain processes,

products, market requirements, financials,

constraints, and interdependencies, says Ron

Wilson, director of business development for

consumer goods at River Logic.

Senior executives and business and financial planners are always under the gun to increase financial performance, Wilson says, and he feels that he has an integrated business planning solution to do the job.

Among other things, he says, such a solution should help increase enterprise-wide visibility into key profit and cost drivers at several levels—product, channel, customer and asset. This is while at the same time accounting for supply chain and business constraints, Wilson says.

The solution he has in mind, offered by River Logic, is called Enterprise Optimizer. It’s designed to enhance the sales and operations process through the evaluation and optimization of demand plans, inventory policy, and master planning.

“It’s ideal for aligning strategy with operations to determine the right decisions in sales, operations and finance before you actually make them,” he says.

This kind of advanced modeling can be used by CEOs in contract negotiations, the finance department in capex initiatives, for asset management by operations personnel, by marketing to determine customer profitability, by sales in pricing decisions, by procurement professionals to determine material aavailability, to plan production, and by logistics staff to analyze fleet issue and inventory levels.

Wilson distinguishes integrated business planning from business intelligence. The latter, he says, is historical in perspective and can’t reliably say what the future will be.