Supply chain engineering has become an increasingly influential practice for companies looking for ways to improve efficiencies within their logistics operations. Felipe Molino, Director of Supply Chain Solution Engineering at NFI, oversees a team of supply chain scientists that holistically analyze and develop solutions for companies’ overall supply chains. The team uses a methodology where they combine data, design, planning, and execution of supply chains with a layer of visibility. They use rapid model building techniques to create repeatable and replicable processes to seamlessly flow from raw data to execution. With this scientific approach, they develop various theories detailing several adjustments companies could possibly make to positively impact their performance. In a recent interview, Molino shared insight into what companies can do to assess and improve their supply chains.
What is the objective for you and your team when working with a company?
Our objective is to model and test multiple supply chain scenarios for customers to find ideal solutions that can help them achieve their business goals. Based on data, we present multiple alternatives related to the customer’s operations. Within those options, we model various scenarios that detail how a specific adjustment can impact the entire supply chain. For example, we may show a set of scenarios for adding and removing facilities to test how that would affect total supply chain costs. Within each of these options, we will then model how each scenario can impact other variables in the operations. The goal is to create and visually present an ideal solution that can help a company improve its ROI. What differentiates this team from a traditional engineering team is that in most instances the client may not have an idea of what aspect of their supply chain needs improvement. With this open-ended direction, the team begins an analysis very similar to other scientific processes where the data is analyzed and theories are developed.
How often should companies re-evaluate their supply chain?
Each company is different depending on the complexity of their network. Within those networks, different components should be re-evaluated at different frequencies. For instance, a company’s entire supply chain network should be analyzed every six months to a year to benchmark performance and look for opportunities to improve. However, a customer should take a more in-depth look into variables of their operation, like their transportation, more frequently. For example, if a company operates a private fleet and owns assets, they should analyze the use and performance of those assets every few months.
What are key changes that a company could endure that should warrant a supply chain analysis?
As companies evolve and their business climate changes, many events can occur that would warrant a supply chain analysis. For example, any type of business growth from mergers and acquisitions or expanding to new markets should trigger a supply chain analysis. If there are changes in physical inventory like products being phased in or out or if there are changes to a product’s bill of material, it could impact an entire network. There are also external variables that would justify an analysis such as significant increases or decreases in fuel prices. In these instances, it’s better to be proactive in determining what would be the optimal transportation and distribution solution.
What are the most common data sources?
Data sources vary with each company and with each challenge. ERP systems are usually involved in aggregating data, as well as any transportation or warehouse management systems that are used today. In many cases, companies, big or small, may not have adequate data or even realize they need more information. Fortunately, this should not discourage them from engaging with supply chain scientists because 3PLs can work with those companies to fill in data gaps and improve how to capture data in the future.
What do you see being a company’s biggest challenges?
From my experience, the main challenge for companies is accessing and working with data in general. I see companies continue to analyze their supply chains using spreadsheets, manage operations through email, and lack proper traceability and visibility. There are more sophisticated ways, such as utilizing technologies like transportation management systems, for companies to improve processes. One industry-wide challenge I’m recognizing is there seems to be greater pressure to negotiate rates with carriers to decrease costs. What companies may find surprising is that about 80 percent of supply chain costs exist within where a company’s facility is geographically located1. In many scenarios, by moving a fulfillment center’s location, companies could more effectively reach greater portions of their consumer market and greatly impact their ROI.
What advice would you give to a company unsure if they are performing at optimal levels?
A step in the right direction would be to get a 3PL or consulting firm involved. There are certain insights that a company knows from their personal experience, but there are insights that 3PLs have from managing at a larger scale with numerous customers. In these instances, a 3PL can utilize shared resources and share success stories. Companies should be proactive in their supply chain designs and at times, that means looking externally. There is a shortage in supply chain talent and outsourcing can provide companies with more exposure to leverage talent and other resources. We can be viewed as a complement to a company’s internal teams. By collaborating, companies can gain insight to different perspectives and possible opportunities for improvement.
Felipe Molino is the Director of Supply Chain Solutions Engineering at NFI where he leads a team that designs custom supply chain science solutions for supply chain analysis, rapid model building, and dynamic data visualizations.