The idea of a supply chain architecture can be used not only for the overall planning of the supply chain, but also for local optimization. The former is system engineering, like a comprehensive war, involving a multi-dimensional global structure from strategy to tactics; the latter is a specific project, just like launching a annihilation war, aiming at a certain problem.
We will introduce one of the practical tools of supply chain architecture thinking in local optimization: the ten major methods of supply chain optimization. Because its shape resembles a wheel, the author named it “supply chain optimization wheel”, which means reducing costs and improving efficiency through its continuous rolling. The entire “optimization round” is divided into three layers:
The innermost layer is the “problem layer”, that is, the problem we encounter, such as targeting the bull’s-eye, which is the starting point of local optimization. There is only one method for the “problem layer”, that is, bottleneck positioning.
The middle layer is the “three-stream-one-axis” layer, which is vertically optimized from the three-stream (real logistics, information flow, capital flow) dimension, horizontally from the time axis dimension, and vertically and horizontally. There are four methods for the “three-stream-one-axis” layer, namely, real logistics planning, capital flow planning, information flow planning, and timeline planning.
The outermost layer is the “five layers”, the so-called “five” is: data, visualization, simplification, standardization, automation
We will explain the tools and methods involved in the “Optimization Wheel” one by one, but there is no way to expand the space. The reader can find more specific content in the author’s monograph “Supply Chain Architect”.
The key to the problem layer is to identify the problem, so you first need to locate the problem.
Technique: Bottleneck positioning
Tools: Problem Description 5W1H, TOC Constraint Theory
Key points: The problem is often the bottleneck in the supply chain. We can use the tools of TOC constraint theory to accurately locate and try to solve the bottleneck. TOC has a lot of tools and methods, which itself is a complete set of tools, such as TOC focus five steps, DBR model. It is worth mentioning that the TOC theory usually uses the theory of lean thinking to judge and interpret the problem. The combination of double swords is often powerful. For problems that cannot be solved by the TOC, after clear positioning, you can find a solution in the second-tier “three-stream-one-axis” layer.
“Three-stream one-axis” layer
Manipulation: real logistics planning
Tools: push-pull combination, delay strategy
Key points: The core of real logistics planning is to solve the mismatch problem that occurs in the process of real logistics. For example, push-pull integration is a balanced decision between the customer’s expected delivery period and the supply chain’s deliverable period; the delay strategy is a balanced decision between the customized and standardized processes. Such problems are solved in the real logistics planning.
Approach: Capital Flow Planning
Tools: cash cycle planning, supply chain finance
Key points: The capital flow planning mainly solves the problem that the funds in the supply chain are mismatched in time. Therefore, the cash cycle needs to be calculated first. For the mismatched part, a targeted solution is required, with the goal of achieving positive cash inflows. For the part of the funding gap caused by mismatching of funds, consider using supply chain financial instruments.
Technique: Information Flow Planning
Tools: Information Collaboration Platform, Internal Collaborative S&OP, External Collaborative CPFR
Key points: Internal collaboration is the foundation of capabilities, and external collaboration is the ability to expand, for which a unified process needs to be deployed. Whether it is S&OP or CPFR, its name is not important. The key is to understand and apply its core ideas and methodology to build an information collaboration platform. It should be noted that the establishment of the process takes precedence and the IT system needs to be subject to the process.
Technique: Timeline planning
Tool: L/T analysis
Key points: Timeline planning is an auxiliary approach, which is a method that must be considered at the same time when implementing real logistics planning, capital flow planning, and information flow planning. The core is: in the time coordinates, the definition of each transaction definition is clear. It involves real logistics, which is reflected in the time dimension of push-pull combination planning; it involves the flow of funds, which is reflected in the time dimension of cash cycle planning; it involves the information flow, which is reflected in the time dimension of the three-level system of collaborative planning.