Here is a view from MIT in favor of transparency and traceability. I am strongly in agreement. You improve what you measure, right? And in supply chain, knowing what’s happening is the key focus on what you can improve.
While Companies Usually Fight Related Regulation, That View Maybe Shortsighted, Says Alexis Bateman
Source: Supply Chain News: Manufacturers Should Embrace Transparency and Traceability, MIT Researcher Says
This is a fascinating McKinsey study promoting the notion of a circular economy, one which focuses on trying to reduce the externalities in economic activity to build a more sustainable economic system. There are many good examples. You can also download the 98 page fiull report from the post.
Adopting circular-economy principles could not only benefit Europe environmentally and socially but could also generate a net economic benefit of €1.8 trillion by 2030. A McKinsey & Company article.
Source: Europe’s circular-economy opportunity | McKinsey & Company
Posted in Leadership, Macroeconomics, Strategy, Sustainability
Beware of using optimization without examining what happens if your assumptions change! Unintended consequences could arise. This article is based on a nice paper by some masters’ students at MIT.
Source: Optimizing a Distribution Network for Today and Tomorrow
The optimization program relies on the assumptions, which are input as data (for example, anticipated demand levels here). The optimization predicts what we call a discrete solution (for example, open this warehouse, close that one). But these changes, in practice, cannot be made easily. It’s costly to keep opening and shutting warehouses; how frequently do we want to do that? So the ‘jumpiness’ of the solutions as assumptions change plays a large role in our decision making, more, actually, than the predicted savings from the optimal solution.
Where the models excel, though is in allowing us to create many scenarios (sets of assumptions), and play them through the model, recording the results we get. Then the decision makers and analysts can examine the range of answers they get to extract a rationale for making their decisions. It’s an art as much as a science. And it’s a lot better than experimenting in real life by closing warehouses or opening them, with far less cost, anxiety, and risk.
That’s why simulations are useful. Out here in Santa Rosa we wouldn’t build a bridge without using a computer to simulate what would happen in various types of earthquakes. Why wouldn’t you do the same with your supply chain?
Posted in Logistics, Strategy, Supply Chains
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