Approaching an Efficient Horizon with Continuous Network Optimization

Continuous network optimization recognizes that supply chains are complex organisms. They need to respond to many changing factors, including:

• variation in demand,
• supplier capabilities,
• freight rates,
• commodity pricing,
• disruptions,

And the list goes on…

Supply chain leaders need a more efficient way of managing these smaller, faster changes. Continuous network optimization creates an environment where supply chain planning operates at the next level.

Cost Service Level and the Efficient Horizon

Leaders who commit to operating at higher levels, commit to operating at an “Efficient Horizon”.

This level of performance requires precise balancing of capacity and working capital to meet a defined level of customer service. In other words, there is very little “slack” in the planning environment—any unplanned external or internal changes will be immediately felt in customer service and costs.

World class organizations can sustain living models of their networks and keep them tuned to small, frequent changes. These changes are phased into execution by synchronizing data from changes in demand, inventory, and supply planning systems. That’s where continuous network optimization comes into the picture.

The Logility Supply Chain Platform is uniquely suited to execute Continuous Network Optimization. Here’s how:

Run continuous optimizations: Logility’s Network Optimization application can run any number of simulations based on changes and can incorporate multiple variables in its objective function. That way the least landed cost solution can be found that also fits within service, responsibility, and resilience objectives. 

Sense quantifiable changes: The resident applications, specifically, demand planning, supply planning, and inventory planning all have key variables that contribute to a network model.  The integration layer natively feeds changes to Logility’s Network Optimization models and keeps them “evergreen”. No longer does a modeler have to manually create a new model.

Offer suggested changes and impacts to decision makers: Even the smallest changes in the flow of product in a supply chain has universal impacts, it changes the use of capacity, the formula for safety stock, and the overall customer service metric—just to name a few. A critical step to Continuous Network Optimization is for the rapid and systematic presentation of recommendations to decision makers. This might be subtle changes in distribution to customer assignments or changes in supplier quantities. These decisions need to be accepted or rejected and a new flow optimized based on decisions. Organizations use Logility to find these improvement opportunities and put tangible impacts to their changes.

Coordinated/Phased Execution: Once a change is approved the work has just begun. To maintain the fine tuning of a supply chain, proposed changes have to be phased in and coordinated across systems.  Take the simplest change—a customer to distribution center assignment change – and consider its impact on the organization. The timing of this change must coincide with an adjustment in safety stock for all distribution centers, supply planning must ensure the continuity of flow to the customer, and demand planning must now consolidate forecasts into new SKU-location combinations. Logility’s Continuous Network Optimization does this high order math for the planner and coordinates the change with faster, smaller adjustments. 

The net-net of Continuous Network Optimization is that finer and more frequent optimizations keep the system stable and operating at that efficient horizon as described earlier. Organizations who adopt this methodology will move faster and feel more stable. 

The size of the prize is large:

On the one hand: A leader can be assured that their supply chain can deliver the service, resilience, and responsibility that are in its core objectives.

And on the other hand: The leader knows it is the least landed cost solution. In our experience, an optimized network will have lower landed and logistics costs on the order of 5-20%.

Learn more continuous network optimization throughout our website. Try starting with our video on dynamic inventory modeling, a capability that calculates inventory levels as planners solve for network flow.