Author: Eric Uresti

A roadmap for building a more agile and resilient supply chain

A key issue is the need to determine the optimal supply chain strategy for the organization over a 3-to-15-year period considering factors like:

• Future demand
• Product life cycles and Product obsolescence
• Sustainability Mandates
• Global and national trends
• Competition
• Alignment with financial objectives

Determining answers to these questions requires in-depth analysis and goes beyond traditional network optimization, which is focused solely on transportation and logistics. It requires a holistic analysis to ensure supply chain strategy considers all business functions and corporate objectives. Here are 9 strategic supply chain planning areas to focus on:

1. End-to-End Modeling: To determine the optimal long-term strategy, companies must adopt an end-to-end approach to supply chain modeling. This involves considering all aspects of the supply chain, from supplier contracts to production to distribution, and how they interact. An end-to-end model enables companies to identify bottlenecks, inefficiencies, and opportunities for improvement across the entire value chain, including sustainability and financial impacts.
2. Flow Path Optimization: Flow path is a term used to define how products flow from suppliers to customers. There are many different permutations, including different routes, direct selling, selling through distributors, and distributing from your warehouse infrastructure. River Logic’s Value Chain Optimization Solution (VCO) analyzes all possible product flow options within a single model, considering suppliers, inventories, DCs, and more, to find the optimal flow to meet an objective function as SLA.
3. Product/Customer Mix: Understanding which products and customers contribute most to profitability is crucial. This requires analyzing the true average profit margins and, more importantly, the marginal profitability of each product and customer segment. By identifying high-margin products and high-value customers, companies can allocate resources more effectively and prioritize the areas that drive the most value. Download: Product and Customer Profitability Solutions Datasheet
4. Financial Modeling and Reporting: Rolls up plans into financial statements to constrain or bias the solution towards line items (e.g., working capital constraints, COGS, operating profit) or ratios (e.g., margins, NPV); manages and optimizes the financial aspects of the supply chain (capital required to support growth, portfolio optimization, costing model, sustainability accounting, capacity planning) to achieve corporate goals (margin/profit/SLA).
5. Moving Beyond Standard Costing: Standard costing has been the go-to method for decades, but it’s increasingly seen as inadequate for today’s complex supply chains. It’s a one-size-fits-all approach that fails to capture the nuances of modern business environments. Companies must move beyond standard costing and embrace more sophisticated techniques to model a business for value maximization.
6. Support Resiliency-Based Supply Chain Strategies: Evaluating strategies ensuring supply chain resiliency is necessary in today’s highly volatile world. Resiliency often requires accepting higher costs to reduce risk. This necessitates a thorough understanding of costs and optimally balancing cost, service, and risk. Learn More: Business Continuity Planning in Supply Chain: Lessons from Mike Tyson
7. Account for Sustainability Costs and Objectives: Sustainability costs and objectives must be incorporated into your network design decisions. Not only do they represent real costs not likely captured in your standard cost calculations, but they represent an entirely new set of corporate objectives for which supply chain executives must support. It is no longer sufficient to suggest the placement of a new DC or plant based solely on cost and growth impact, and unfortunately, traditional tools aren’t designed to support this critical need. Watch: Using River Logic to make Sustainability Decisions
8. Supplier Contracts Optimization: Optimize strategies by incorporating features such as contracts, MTOPs (Maximum Takeoff Performance), volume discounts, and ratio constraints. Manages purchasing contracts and inventory aging and facilitates product returns and re-use to optimize resource utilization.
9. Manufacturing Footprint: The manufacturing footprint represents the optimal number and location of manufacturing facilities to meet demand at the lowest cost. This process involves analyzing numerous tradeoffs and constraints. Using River Logic’s Value Chain Optimization solution, you can model your existing manufacturing footprint and run alternative scenarios to determine your optimal footprint. Download: A Step-By-Step Guide to Driving Business Impact With Capacity Planning

Conclusion

Successful strategic supply chain planning requires considering multiple factors, including financial goals, sustainability objectives, and operational efficiency. The nine areas outlined here—such as end-to-end modeling, product/customer mix, and supplier contracts—provide a roadmap for building a more agile and resilient supply chain. Organizations can better align their supply chain strategy with long-term business goals by focusing on these critical aspects. Schedule a meeting with an expert today to explore how River Logic’s Value Chain Optimization solution addresses these areas and supports your strategic planning needs.