Supply chain optimization

In today's fast-changing business environment, companies must constantly adapt their supply chain policies. E-business, advanced manufacturing and shorter product lives increase the pressure on companies to optimize their supply chains.

The Business Optimization group focuses its supply chain activities on two main areas.

The Dynamic Inventory Optimization Solution (DIOS) is an IBM software tool that can be used to assess inventory reduction opportunities by determining the optimal inventory at the SKU level. DIOS can consider many factors, such as service levels, demand variation, supplier lead-times, lot sizes and minimum order quanitites, as well as minimum and maximum stock levels, and can be used to identify opportunities for quick hits to reduce inventory or improve service levels. DIOS uses a unique combination of scientific approaches to manage inventory at the strategic, tactical and operational levels, while at the same time predicting service levels. It applies patented algorithms and classification schemes to calculate optimal safety stock levels, reorder points, and batch sizes for each product — even in cases with extreme demand fluctuations. The solution is a service to clients that involves using existing data from a client's current system and identifying where inventory is too high or too low. It then recommends detailed stocking level adjustments and inventory policies on SKU level. DIOS comes with a certified SAP XI Interface for exchanging data with SAP R/3.

 DIOS optimization goals

 DIOS value proposition

An important aspect of supply chains is the flow of materials from the point of origin to the point of consumption. The recent emphasis on productivity gains and customer satisfaction has led to rapidly evolving business environments characterized by time-compressed supply chains. It has also highlighted the importance of designing or redesigning the production and distribution networks. In order to meet customer requirements in the most efficient and cost-effective way, a number of issues have to be addressed, such as transportation modes, production technologies, in-process inventories, capacities, etc. We apply advanced optimization tools to determine the optimal allocation of resources and flow of materials in order to meet customer requirements at minimum costs.

In a study for the pharmaceutical industry, we integrated the production distribution network with a risk analysis in order to address new regulatory changes in the industry (see also Operational risk). The optimization model was adjusted to accommodate penalties for low quality and non-compliance and examined various remediation options by restructuring its supply chain assets. The goal was to determine the optimal sequence of remediation actions a company needed to take in order to minimize its exposure to business risk while maximizing profit.

In today's increasingly complex business environment, we frequently encounter uncertainty with regard to input parameters and robustness of solutions. We have an on-going research program for developing methodologies to address these problems.