Today’s Chief Supply Chain Officer (CSCO) is beset by pressures on all fronts, not the least of which is how to address new B2B and B2C direct to consumer flows. Aberdeen recently introduced a Prescriptive Model for Optimization that both defines and describes what leading companies are doing to reengineer inventory and fulfillment flows from source to end consumer. This framework requires a move from current state descriptive analytics to analytical optimization that applies prescriptive and predictive intelligence during both planning and execution phases.

Aberdeen will has published a series of reports and interconnected blogs to help the office of the CSCO (below).

Prescriptive Optimization – Four Part Series:

  1. Strategic Sourcing and Segmentation: Prescriptive Control Tower Approach-APRIL
  2. Best Practices for Closing the Loop on Multinational Transportation: Procure-to-Pay- JUNE
  3. Prescriptive Optimization: Linking Costs and Events for Improved P&L- AUGUST
  4. CSCO View on Optimization: A Prescriptive Model for Global Trade-OCTOBER

Each report builds on the “prescriptive” framework to illustrate how each element of process flow from source to final delivery can be reengineered or optimized.

This blog is an overview of the first report in the series

Strategic Sourcing and Segmentation: Prescriptive Control Tower Approach For each report we will apply a Prescriptive Model of Optimization involving 3 major analytical modeling phases.

  1. Descriptive , which uses business intelligence and data mining to ask: “What has happened?”
  2. Predictive, which uses statistical models and forecasts to ask: “What could happen?”
  3. Prescriptive, which uses optimization and embedded decision rules and simulation to ask: “What should we do?”

Each report will link back to the prior report in the series (see initial report) and leave the reader with a keener understanding of the tradeoffs in cost and service available for each customer/product and segment of their end-to-end supply chain.

Key Takeaways and Recommendations

Up to 85% of Chief Supply Chain Officers indicate that they have logistics operations that cross country borders. 63% of the Best-in-Class incorporate global trade functionality components in multinational shipments but only 18% of Laggards have that capability.
This represents a call to action.

 

Best-in-Class Capabilities in Strategic Sourcing

The Best-in-Class class, those raked in the top20%) have advantages in the following key areas compared to all others;

  • 89% of total spend under management control vs. 51% for All Others. 35% can segment cost and service for their products and customers vs only 12% of all others (NOTE: this 4 part series will disclose best practices and highlight successful approaches).
  • Organizational Supply Chain Intelligence. Through organization models, comparisons, optimization, and simulation the Best-in-Class turn the volume of raw data mined in the descriptive and predictive stages into business and supply chain intelligence and are able to dynamically interact with suppliers and trading partners.
  • Prescriptive Event-driven customer and product synchronization– Their sourcing strategy involves a segmented, control tower approach, a high degree of operational readiness, and “prescriptive” event-driven customer and product synchronization of end-to-end activities; internationally, domestically, and combined. The Best-in-Class, the top 20% of companies, are 3.5 times more likely to model and optimize by product, source, and customer than low performers.

One key goal of strategic sourcing or inbound optimization is tying costs/rate and events together. This allows companies to segment costs and activities across each combination of customer, product, and logistics flows. These and other distinct findings are embodied in the full report .

Join into the conversation as we highlight each report in a series of blog posts and give us your feedback