1. Operations Research
The Value of Optimization
in Economic Down-Turn
Written by John Poppelaars,
Principal Consultant ORTEC
Visit his blog at:
john-poppelaars.blogspot.com
INFORTEC 2009 NR 2
With the current economical developments in which governments have spent billions to save banks
and car manufacturers from bankruptcy, many companies struggle to survive. Companies facing
severe drops in revenues need to take decisions fast. In such a situation, it is very tempting to just
focus on cost cutting, but the real challenge is to find a strategy that preserves long term profitability,
but assures short term continuity.

2. Focus on Long and Short Term models. For the pickup and delivery new opportunities for both TNT and its
As Michael Porter said on the INSEAD process, the routes of the vehicles customers.
Knowledge Forum at the end of last are being optimized using a dynamic
year, a period of economic downturn routing approach. Parts of the routes Agility
requires the right management focus are reassigned to balance workload Operations Research not only has
on short and mid term developments across the vehicles, minimizing the added value in cost optimization
to deliver the company’s required per- required total number of routes. In the or right sizing. The fluctuations in
formance and sustainability. However, air and road networks, the utilization volume, depending on the economic
it does also create opportunities for of movements is optimized. Together, developments, require TNT Express
future positioning and results. Opera- these short term models deliver TNT to become a more agile company, like
tions Research supports management Express the agility to adapt its day ASML. ASML, the world largest wafer
to find the strategy to accomplish that, to day operation to ongoing volume stepper manufacturer, has volume
combining long and short term objec- decreases while saving millions in cost.
tives.
Creating a Model
The essence of Operations Research
is to model reality using a quantitative
description and deploy it to identify
viable solution directions. It creates the
insight required to identify to the best
possible decision. More importantly, Such a new strategy
a mathematical model enables the could require another
identification of factors that influence supply chain design and
the decision to be taken and their a different operational
impact. Through sensitivity analysis the process
real bottlenecks of a supply chain or
process can be found. Using scenario
analysis, the model allows you to
identify how decisions are influenced
by all kinds of future developments, Reorganizing the Supply Chain fluctuations of 70%-80% within the
supporting the construction of fact Also TNT’s customers are hit by the semiconductor business cycle of 4-5
based and robust strategies. economic downturn and are being years. They still survive, and in fact do
forced to rethink their supply chain. very well, because they created a very
TNT Express GO Initiative Demand has become more and agile organization which can cope with
The TNT Express “GO Initiative” is a more unpredictable, forcing many these volume fluctuations. Operations
perfect example of how Operations companies from a ‘make-to-stock’ to Research is an essential methodology
Research supports short term continu- a ‘make-to-order’ strategy. Such a new in that process.
ity, preserves midterm capabilities and strategy could require another supply
creates opportunities to expand your chain design and a different operational The above examples show the strength
current business. process. Together with ORTEC, TNT of Operations Research and the value
For the short term, TNT focuses on now is able to show new ways of it can create for any company. At
productivity and agility. On a day to day organizing the customer’s supply present, it enables board members to 5
basis, the available workforce in hubs chain. With our models and expertise, identify the right strategy to survive the
and depots are constantly balanced different designs are generated and economic downturn, become agile and
with the required amount of work, using evaluated, leading to new robust ways on top of that, create opportunities for
forecasting and manpower planning to reorganize the supply chain, creating future positioning. I