May 2013

Building competitive advantage with simulation supported logistics

traffic blur motions in modern city hong kong street

In a recent article SCDigest editorial staff analyzes the role of logistic designing as a source of firm’s competitiveness. Still many companies aren’t utilizing advanced methods in designing their logistic chain and only see the topic “a necessary but not a critical routine”. According to supply chain management experts, these companies are missing an opportunity to minimize costs and maximize effectiveness. The key is to view logistics as a process that can be constantly developed and not a separate function in the company.

Our experience at SimAnalytics is very much in line with the SCDigest authors and similar conclusions have also been made in other outlets. A logistic survey in Finland concluded that 35%-43% of the company competitiveness for large organizations originates from logistics. Further conclusion was that 40%-50% of this competitiveness could be affected by company’s own actions and decisions.  Altogether it’s fair to say that logistics is an important process in building firm’s competitive advantage. Furthermore, it is reasonable to argue that there is great potential in advanced methods in logistic development.

The design of logistics is critical especially during the times of change. Decision makers face questions like “what kind of logistic system the company needs when extending its operations” or “how the company should organize manufacturing and delivery of a new product”. These types of questions are critical in designing firm’s processes, but they cannot be answered only with static data provided even by the latest ERP systems. More advanced tools are needed and luckily also available.

SCDigest: “If the analysis is done on spreadsheets, can you really factor in all the right variables, do you really have an optimal answer in the end, and what is your level of confidence you have telling executives what should be done?”

We see simulation modelling as one of the most exciting methods in advanced business intelligence for logistics. It can offer highly customizable tools to design the supply chain with scientifically rigor approaches. When the simulation model is designed, utilized and interpreted properly the method can provide very detailed analyzes to support successful supply chain design.

A company with proper supply chain design system gains many benefits:

  1. Optimization of existing supply chain ranging from raw material to distribution of products. Also the possibility to deeply understand the firm’s logistic operations is eye-opening.
  2. Performing different scenario analyzes to test the firm’s system in changing business environment.
  3. Speed up the firm’s ability to react to changing business conditions such as costs, demand, etc. Also the risks related to delivery within the logistics chain can be tested.

Do your company a big favor and find out how your supply chain design could benefit from the advanced BI tools available. You’ll be amazed.