Supply chain design is becoming a core business process rather than an occasional project due to changes in technology, business practices, and market volatility. Establishing supply chain design as a core process through a shared service center can help optimize the entire supply chain through continuous modeling, scenario testing, and identification of better future state networks. This provides consistency, standardized processes, and access to data that isolated optimization projects lack.

1. Not so many years ago, supply chain design was considered to be
an event that was initiated and completed once every three to five
years, often as a paid engagement by third-party firms. Now there
is an ever-growing movement of large, multi-national businesses
bringing supply chain design in-house and adopting it as a core
business process. Why the change? What’s the value of making
supply chain design a core business process and what’s being
missed by just doing a series of isolated optimization projects?
10Tipsfor Elevating Supply Chain
Design from a Project to a
Differentiating Business Process

2. Why Don’t One-Off Optimization Projects
Do the Trick?
Supply chain design is the practice of creating living models
to represent the existing structure and policies of the end-to-
end supply chain, optimizing to identify a better future state
supply chain and continuously running what-if scenarios to
test new strategies and react to changing market conditions.
Attempting one-off optimization projects to determine the
design of an organization’s supply chain is likely to fail for
several reasons. Here are just a few:
• Projects lack the benefit of process consistency and stan-
dardization and readily-available data
• With no established design team and skill set, different analysts
must relearn modeling skills for each project. If using an outside
firm, the process is even more protracted due to lack of continui-
ty and understanding of the business
• Initiatives lack adequate resources and funding and management,
or may overlap with other isolated projects in other functional
areas or geographies
• Short-term or hired analysts are often unable to adequately re-
search and address multiple, often competing business problems
and balance them against business objectives
Supply Chain Design Is
the Practice of:
Creating living models to represent the
existing structure and policies of the
end-to-end supply chain
Optimizing to identify a better future
state supply chain
Continuously running what-if scenarios
to test new strategies and to react to
changing market conditions
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3. Tips for Establishing Supply Chain Design as a Differentiating Business Process
LLamasoft has supported more than 1,000 supply chain design initiatives for businesses worldwide and is wholly
dedicated to the advancement of modeling technology and best practices. We’ve put together some tips for how to
elevate supply chain design from an annual project to a core business process:
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Establish a Shared Service Center/Center of Excellence (COE)
Supply chain design should be able to see across the entire
business to optimize the true end-to-end supply chain and not just
a specific business unit or business function. Shared service
centers, or supply chain design centers of excellence, can pool
talent and technology to provide analysis capabilities to the entire
organization. This organizational structure can help the group avoid
the pitfalls of local bias or politics and remain focused on data
-driven business solutions.
Identify and Prioritize Design Initiatives
An excellent exercise for any business considering a move toward
a supply chain design COE or in the early stages of development
is prioritization of design initiatives. Involve executive sponsor(s) as
well as representative department heads and analysts. Each
initiative is mapped onto the matrix according to relative business
benefit and relative ease of implementation. This process is in
itself an extremely effective way of promoting valuable interaction
and focused discussion among the team. The mapping process
removes some of the subjectivity normally present in these
decisions and requires input from the entire group. A view of
potential projects will quickly take shape and become a starting
point for either COE justification or a prioritized COE project plan.

4. Go After Quick Wins
Even though supply chain design can identify major breakthroughs
in cost savings or service, some recommendations can be
disruptive and time-consuming to implement (open four new DCs,
rationalize 200 products, etc.). In order to establish early credibility
for an emerging COE, many companies will identify quick-win
projects that are much easier to implement and still deliver
significant cost benefits (product flow-path, inventory right-sizing,
DC-to-customer assignments). Be sure to consider business goals
and priorities when identifying projects, and don’t be afraid to
advertise the successes around the company! Quick multi-million
dollar wins can gain executive attention and establish early
credibility for the supply chain designers, and are often used to
justify further investment in staff and technology.
Put Parallel Focus on Game-Changers
While one part of the team is focused on tactical wins, another
should be trying to break down historical legacies to explore what
is truly possible through modeling, optimization and analysis of the
end-to-end supply chain. When encouraged, supply chain analysts
can socialize “design thinking” and help remove pre-conceived
business constraints and design new greenfield supply chain
operations that could lead to game-changing new business
practices and competitive advantage. Numerous supply chain
leaders give their analysts the license and time to be entrepre-
neurs and innovators to find the “next big idea”. Some even go so
far as to make games out of finding the most promising
strategy for reducing costs, improving service or increasing
revenue through simulation models.
A supply chain design COE creates and
tests different potential supply chain
initiatives to identify new, optimal
network designs
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5. Get Advice From Companies at Different Stages of COE
Development
Many other businesses in your networking circles, supplier
community or common technology users may be excellent
resources for supply chain design COE experience and advice. Ask
supply chain modeling software vendors about the design
community they support and how you can get involved with other
users. Many of your peers will be happy to act as a sounding board
for your ideas and share the lessons they learned along the way.
Get Out In Front of the Predicted Supply ChainTalent
Shortage—But Be Selective
As the supply chain sector grows and business are focusing more
on differentiating initiatives that require significant supply chain
investment and staffing, the demand for talent is rapidly
increasing. At the same time, the gap between demand and avail-
ability of supply chain professionals is widening. Baby Boomers are
exiting the workforce and GenXers are struggling to keep up. To
complicate things even more, there is a significant skills gap as the
industry demands workers with broad business acumen as well as
logistics and analytical skills. Be aware that it may become more
challenging to recruit for your COE, but don’t hire just anyone who
has the right degree. Successful team members should be
effective problem solvers—people who think analytically and are
natural researchers and implementers of new processes.
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Project vs. Process: Why the
Change?
Supply chains are evolving from a necessary cost to a
source of competitive advantage
Why is supply chain design now becoming a core
process and business function? Three factors seem
to have converged to trigger this switch: technology,
business practice and volatility.
• Technology: Major breakthroughs in supply chain
design and cloud technology have enabled model-
ing to be relevant to many more business functions
and at a much more detailed level of analysis.
This means that supply chain modelers can now
answer questions related to sourcing, production,
inventory, transportation, taxes, replenishment,
cost-to-serve and more.
• Business Practice: The pace of change within
business is at an all-time high. New products are
being introduced at a rapid pace. New markets are
being entered. New partnerships are being formed.
All this change requires continuous modeling and
optimization to keep costs and service in order.
• Volatility: Change is not just happening within
companies. Disruptive changes are occurring all
over the globe that can drastically affect cor-
porate supply chains. Increases in labor costs
throughout “low-cost” countries, wild swings in
fuel costs and adjustments in commodity pricing
must all be factored in to ongoing supply chain
strategy. Even weather-based disruptions can
quickly wipe out profits if not addressed swiftly.
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6. Pursue Design Mastery within theTeam
Now that you’ve got a team of bright, talented analysts dedicated
to supply chain design, be sure to invest in their growth and
development. In addition to giving them powerful and easy-to-learn
design technology, build a roadmap for supply chain design mas-
tery for each analyst. Identify the milestones and requirements—
and benefits—for each step in their progression from new hire to
program leader. Establish a process for onboarding, project
shadowing and technology training. Amid the analytical and tech-
nical skills, don’t forget the importance of learning and practicing
skills such as presenting to a group, project management and
influencing others.
Extend Supply Chain Modeling to the Cloud
A SaaS-based modeling platform can give supply chain designers
a collaborative platform to expand the value of supply chain model-
ing throughout the organization. A cloud-based supply chain design
platform integrates all design applications and data and enables
businesses to more rapidly execute large, impactful projects.
Web-based access to models and data can be leveraged by mul-
tiple stakeholders within the company and can support executive
dashboards and short-term planning. Plus, the cloud can
also be a centralized location for all models and data so
that the information needed is always available,
current and accessible to the entire team.
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7. Fill Gaps in Modeling Data with Cloud-Based Reference Data
Analysts often struggle to populate data for potential networks
with new lanes, future demand and potential facilities. The final
analysis is only as good as the data put in, so make sure it’s
accurate and complete. Your supply chain modeling software
provider should offer reference and benchmarking data you may
lack, such as transport costs, facility costs and transit time
estimates. This will speed the modeling process and improve the
accuracy of results. Be sure to inquire about KPIs and metrics the
vendor has gleaned through project experience as well, to help
analysts validate inputs and outputs for new models.
Use a Data Blending and AnalyticsTool for Automated Model
Building
Now you have the right data, but how do you access it in all the
places it resides, without spending half your day on the phone
with IT? Automated access to ERP and other enterprise data
through a data analytics tool can significantly reduce the time
required to gather, cleanse and blend disparate data and ready it
for modeling use. With established connections to enterprise data
sources, you can essentially create a “library” of models for
repeatable use, which will enable those analysts with non-SQL
backgrounds to get into the data and get busy.
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8. Points to Remember
Supply chains are evolving from a necessary cost to a source of competitive advantage.
Ultimately, success in continuous improvement through design requires a balanced
consideration of people, process and technology within the supply chain design center of
excellence. Businesses that adopt a COE have the ability to:
• Quickly and easily build models to visualize and analyze the current network
• Continuously test what-if scenarios using current and future network and demand
• Quickly validate potential network changes against real-world variability
• React rapidly to unplanned supply chain events
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9. Gartner Research Links Centers of Excellence to Tangible Value in the Supply Chain
The research clearly states that supply chains that effectively implement COEs are achieving better results and progression through the stages of supply
chain maturity. Most of the companies in Gartner’s 2013 Supply Chain Top 25 have one or more centers of excellence. Additionally, according to Gartner’s
2013 study of 100 global supply chains, organizations with supply chain COEs:
• Report a broader supply chain span of control
• Are more often viewed as “partners to the business”
• Have greater implementation of more advanced supply chain practices such as segmented supply chains, end-to-end business planning or product/ser-
vice portfolio management
• Report greater success in meeting their goals with respect to revenue, margin, and return on assets
• Are twice more likely to have met their revenue and margin targets than those without a COE
G00257750
Centers of Excellence Are Critical Enablers of Success in Supply Chains
Published: 21 April 2014
Analyst(s): Ken Chadwick
©2014 LLamasoft, Inc. All rights reserved. v.11072014
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