Analyst Insight: There are exciting developments in technologies and processes in the area of network design. Currently, both processes and technologies are rapidly evolving, offering exciting opportunities. It is one of the most critical investments for supply chain leaders in 2015. – Lora Cecere, Founder of Supply Chain Insights
Over the course of the last decade, network design technologies have rapidly evolved to optimize, source, make and deliver together through the use of concurrent optimization. The technology providers in the network design market have been smaller and more focused, taking advantage of the rapid changes in technology computing power. As a result, the progress in technology and network design is exciting.
Today, the investment in network design is one of the most important investments that a supply chain leader can make. The complexities of a supply chain cannot be optimized in an Excel spreadsheet. They are just too complex, and the recent advancements in network design technologies now make the design of a supply chain more feasible.
The term network design means different things to different people. The processes are evolving. While companies will spend years to design and build factories, the realization that they need to consciously design supply chains is a step change for many organizations. It is a paradigm shift. The good news is that there are more capabilities in technologies today to support these teams’ efforts.
As a result, companies are increasing the frequency of network design and including it into sales and operations planning, sourcing strategies and supplier development work, and also collaborative work with customers in the design of the channel and product flows. For most organizations serious about network design, it is no longer one or two people. In qualitative interviews with companies greater than $5bn, we see teams of 10 to 50 people actively working on the design of the supply chain. Today, 40 percent of companies greater than $5bn in revenue have a Supply Chain Center of Excellence, and the network design function is a key component of this team’s effort.
It is also no longer just the design of the physical supply chain; instead, it is about network flows, decoupling points, cash flows, and form/function of inventory. While traditional supply chain planning technologies yield a return on investment in nine months, supply chain network planning models yields a ROI in less than three months. An opportunity too good to pass up?
In 2015, expect to see more emphasis on network design activities and the coalescence of network design processes with S&OP and tactical supply chain planning. The capabilities of the technologies are rapidly evolving and the need to design supply chains for form and function of inventory and push/pull decoupling points is becoming increasingly important.