Manual Supply Chain Modelling in Excel is Outdated

Aperio FMCG ConsultingManual Supply Chain Modelling in Excel is Outdated

What keeps most Supply Chain Directors awake at night is developing the most optimal supply chain model to drive business performance and meet strategic business objectives. This involves balancing the cost to serve with a supply chain model that will ensure positive impact on the organisations’ bottom line.

“Having the ability to model your end-to-end operations, analyse “what-if” scenarios and explore how potential changes affect service, costs, sustainability and risk, is critical today,” says Joe Blau, Associate Consultant at Aperio FMCG Consulting, a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa.

“With the explosion of data and requirements for true business modelling, organisations need to move beyond manual Supply Chain data modelling via excel,” he says.

“Tools have evolved and advancements in cognitive reasoning engines, advanced visualisation, text mining, advances in predictive analytics and big-data pattern recognition are changing the game. While Companies think they can do it in excel, the truth is that excel has its limitations not to mention human errors which have proven to creep in with multiple people and versions of the original data and formulas.”

Business and network modelling tools today allow for actual testing of the various scenarios providing a bigger picture of the impact to the business and the contribution of these scenarios to bottom line. Your business is able to make better decisions as these modelling tools help you decide on whether you need to increase capacity, payoff on capital expenditure, how to structure resources, and the best design and model to use to reach business strategic imperatives. In essence you are able to get the model of the future answering all of your business “what ifs”.

“Typical forecasting often omits the true cost to serve, and businesses need to be able to look at every element of the P&L (profit & loss) from staffing, machinery, maintaining vehicles, pallet costs, consumables, staff losses through the handling process, damage costs, inter branch transfer costs, and the effect on working capital with a centralised vs. national distribution centre,” says Blau.

“A lot of people don’t have true returns management of damaged goods built into their business modelling and forecasting and the result is that the true cost to serve is not accurate.”

He adds that these tools are also flexible allowing you to plug in price increases, or import tariff increases and it will tell you what you need to do and the result on your P&L and balance sheet.

Blau believes that what is stopping organizations from adopting these tools is a fear that they are costly and don’t add value, however there are tools on the market which are affordable, effective and user friendly. “The return on investment is far more than you think. He believes the value is in the models and changing the way you do things to accommodate changing market conditions and controlling supply chain costs.”

He says the result is an understandable 2 page implementation plan and not a 500 page consultant report which is complex and difficult to implement.

He admits that the big challenge is data. The old adage about systems only being as good as the information that they contain applies doubly to modelling and analytics. If the information entered into is not accurate, then you will get an inaccurate model.

Similarly, if employees bypass the supply chain systems and try to manage things manually via spreadsheets, then even the most expensive systems will provide an incomplete picture of what is happening in a company's supply chain.

“Tools today also include data cleaning tools which help in the process of ensuring data is valid,” he says.