Companies looking to "lean out" their supply chains while maintaining, if not increasing, customer service levels are challenged to continuously re-evaluate their supply networks to ensure they are achieving maximum efficiency. Boston-based consumer products company Gillette, for example, has spent the last few years working to optimize its network of warehouses to best serve its retail customers while keeping costs down. Along the way, Gillette learned that the crux step in building an in-house competency in supply network design was building confidence in the company's new planning process.
The Decision to Go In-house
Back in 2002 Gillette (which was acquired last year by Procter & Gamble) made a strategic decision to fundamentally change its approach to warehouse-location decision-making. In the past, the company had relied either on the market knowledge and intuition of its own staff, who could make educated guesses as to where warehouses should be placed, or on pricey external consultants who could do the number-crunching necessary to justify the location of a warehouse in one city or another. Now the company wanted to build an internal competency in supply chain network design.
Gillette's motivations were straightforward, according to Louise Knabe, solutions manager with the Global Warehousing and Transportation Group within the company's Value Chain Center of Expertise, a corporate-wide best practices group. "Because the number and location of warehouses directly affect both cost and customer service, Gillette wanted a process to ensure it was making the best decisions for the company and its customers," says Knabe, who joined the company in September 2002 with a charge to lead the new network design competency.
Selecting the Right Tool
Knabe's first assignment at Gillette was to select a software tool to support the design process. With a background in operations research and master's degree focused on optimization, Knabe spent eight years working in the software industry, specifically on optimization applications for the transportation industry. So she was quite familiar with the various solution packages available in the marketplace. Knabe worked with an advisory board within Gillette to review the company's options, and ultimately tapped an application called SAILS, from a solution provider called INSIGHT Inc., based in Manassas, Va.
SAILS, which is INSIGHT's flagship product, is intended to help companies design optimal supply chain networks, including facility location and size, capacity planning and budgeting, and distribution methods and policies, among other capabilities. Essentially, an analyst plugs data describing a company's current supply network into the desktop software, and the solution formulates optimal supply chain scenarios. SAILS also allows the end user to model various "what-if" scenarios to alter or augment the supply chain. In this way, SAILS can help an analyst derive cost-benefit figures for the different scenarios, thereby giving executives concrete figures on which to base their supply chain infrastructure decisions.
In selecting among the various network design solutions, Knabe says that Gillette opted to purchase SAILS in part because of the software company's experience in the field — INIGHT was founded in 1978. In addition, the level of customer support that INSIGHT could offer was critical, since Gillette had no internal resources trained in the software, and Knabe would need to rely on the solution provider's support staff.
Gillette bought the SAILS solution in January 2003 and immediately began working on its first project with the system. However, Knabe says she realized that installing the software on her computer was just the start of the implementation for the new network design process. "The biggest mistake you can make," she says, "is to assume that you can load data into a software system and hit ‘the big red button,' and out will come the answers. Because you'll have no confidence in the answer unless you go through a process of building trust and checking the software."