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Supply Chain Planning can weather the economic storm 09 July 2008

Despite increasingly black pictures being painted about the economy, UK industry has the capacity to ride the storm as a new breed of supply chain professionals lead companies out of the worst effects of the economic crisis.

That’s the view of global supply chain consultants and software developers Barloworld Optimus whose Global Business Development Director Fraser Ironside is witnessing the worldwide downturn from both sides of the Atlantic...

He adds that despite the scale of the economic downturn – already dubbed ‘a recession’ in the US and increasingly now in the UK, the opportunity exists for companies to emerge stronger and better equipped to face even tougher conditions in the future as supply chain professionals ‘master the science’ of network reconfiguration as the most effective way of weathering the storm.

 “Companies in the UK, Europe and the US are being hit – and hit hard from a cost and revenue perspective.   But we’ve been here before, and the difference between this recession and every previous economic squeeze is that concerted supply chain planning efforts offer the opportunity to take the sting out of the worst effects.

“Technology allied to the growing expertise of the supply chain professionals now using it, means that though the next eighteen months promise to be a rough ride, what traditionally would have amounted to broad brush cost cutting across an organization could now be better targeted through supply chain network reconfiguration and optimization” he commented.

 He added that as companies are being spurred into exploring every available avenue to cut costs, the situation has focused attention on the role of the supply chain practitioner like never before – and that those that invested in the appropriate planning skills and technology are now seeing the benefits of being able to head-off the worst of the problems before they arise...

“Having the right people armed with the right supply chain planning tools and methodologies has placed companies in the fortunate position of being able to not only react far more quickly to circumstances, but to have already considered the impact on their supply chain of such seismic cost and revenue changes” he said.

Fraser Ironside says that fuel prices remain the biggest threat to companies on both sides of the Atlantic – and that as the escalating cost of fuel ‘impacts detrimentally’ on supply chains, the network models that were seen as optimal even three years ago are now being re-shaped...

“One of the most notable effects of the new economic climate is a reversal of the decade long trend of warehouse centralisation across Europe. Rising fuel costs are making the traditional centralised warehouse model look expensive and subsequently companies are looking to open up more warehouses at the country level in order to minimize the transportation miles” he said.

Fresh from hosting a live weblink to the North American supply chain network this week, Fraser Ironside said that in the US – where the company’s clients include Nokia, McDonalds and Colgate-Palmolive – the scale of the economic situation is forcing companies to face up to the major benefits that can be achieved through effective supply chain planning and management, and that supply chain IT and software are being recognised as the key to survival.

“Supply Chain planning and optimization capabilities have become a prerequisite for developing and maintaining responsive supply chains, and with the software now available to pinpoint precisely where and how savings can be made in the supply chain, inventory management and network optimisation tools represent the most effective antidote to deepening economic pressures” he said.

Last year, Barloworld Optimus – with 90 staff globally, with 34 based in the UK – posted its best results ever, notching-up more than sixty new software and consultancy deals in its third successive year of marked new-business growth.

The Solihull-based company is the developer of world-beating network modelling and inventory optimisation tools CAST, Optimiza and CINO.

Optimiza is an advanced inventory optimization application that, unlike traditional inventory re-ordering systems, takes into account the unique supply and demand characteristics of supply chains, geared to effectively reducing stock levels by between 15-50% while increasing service levels by as much as 20%.   A recent application for aviation metals provider Apollo Metals resulted in forecast accuracy up by 70%, backorders reduced by 80%, inventory reduced by 25%, and availability improved by 16%.

 With 350-plus licences and over 1300 trained users world-wide, CAST is already viewed as market-leader in Europe and increasingly in Asia and is widely to evaluate and identify different supply chain strategies, in turn leading to significant cost savings and service improvements.

Extensive proving trials for Barloworld Optimus’ latest carbon emission optimisation software CAST-CO2, have already returned results for a leading global manufacturer, including a 28% reduction in carbon emissions alongside a 9% decrease in transportation costs across Europe.

CINO (Combined Inventory and Network Optimisation) Is Barloworld Optimus’ new super-advanced supply chain optimization tool, specifically developed to combat the potentially fatal downside of multi-sourcing and multi-echelon inventory flow with the added  ability to build and compare complete ‘what if?’ scenarios.

“Against a background of supply chain costs escalating by a massive 60% over the past decade, and an economic world hit by increased global volatility, rising interest rates, rocketing fuel and commodity prices, having the right software in place alongside the required skills to make it work to its best advantage is likely to prove the key to ultimate success or failure as the world of the supply chain pro becomes ever more crucial” he said this week.