Most companies in a supply chain have tools that help them manage their assets throughout the entire supply chain. Exemplary tools for such assest management are e.g. ERPs, CRMs, SGAs, etc. By default, however, such solutions do not apply any analytical intelligence to schedules.
Integrating artificial intelligence and mathematical optimization capabilities into capacity planning and management allows real optimization to be achieved at every point in the chain. From long-term strategic planning to detailed operational planning, application of analytical and artificial intelligence contributes to greater efficiency in daily operations, higher quaranteed service levels, etc.
Schedules planned and defined along the supply chain must be aligned from start to finish. This ensures continued supply flow, since, as it is a chain, a mismatch in one link will affect subsequent supply chain entities. For example, a delay in production will affect distribution and therefore also associated delivery dates.
Let’s see, in broad terms, where optimization can be applied in supply chain planning and scheduling, and what benefits optimization offers.
Better sales and operations planning
At this point it is important to have comprehensive visibility of the factors that affect sales and operations in order to align them. Having a good planning of the demand using prediction models will help to calculate the optimal dimensioning of the capacity and the allocation of resources in the different processes along the supply chain.
More effective inventory management
Applying optimization in this area ensures that you always have the necessary amount of raw materials, intermediate products or items in stock, and avoids common obstacles that affect profitability, such as high inventory levels, poor yield or excessive waste.
Optimal planning of the sequencing of the production process and its alignment with other schedules ensures that service levels are met at all times at minimum costs.
When applying optimization models, numerous variables must be taken into account, such as: there are employees who may or may not work with certain machines, there are production sequences in such a way that perhaps the product must go through a machine before that for another, each one with its capacity and its execution times. Schedules must be balanced so that the production flow follows its course optimally. This without counting the day-to-day incidents (delays, failures or breakdowns of the machines…) that misalign the initial planning. For this reason it is vitally important to have tools that allow optimal replanning in real time .
Better warehouse planning and operation
Applying optimization in the planning of warehouse operations manages to reduce times and costs in the different tasks (unloading trucks, merchandise location, picking, packing, loading, etc.) and in the routes within the warehouse, consequently minimizing the times delivery.
In the distribution centers there are very clear peaks of workload by tasks that must be taken into account when planning. In addition, there is a big difference between the physical effort required by each of the tasks. For example, loading and unloading tasks are much more physically demanding than picking or packing. These types of tasks must be distributed equally, taking into account that some of them cannot be carried out by certain employees and that there are workers with more expertise in certain areas than in others, so their execution time is less than that of others. employees.
Resource efficient transportation and logistics
Transportation planning (fleet and cargo) should maximize the use of available resources to reduce costs. On the other hand, planned transport routes should seek to minimize mileage and fuel use to reduce costs and emissions, avoid empty journeys, and locate optimal stopping places taking into account current regulations (max. hours or kilometers of driving per day, mandatory breaks, etc.).
A different and very interesting example is what is called “relay transport” in which the transfer of goods is carried out in sections. A first driver takes the trailer from point A to point B, a stop point strategically chosen to make the change of tractor unit and driver. This other carrier takes the trailer from point B to point C, where a third driver picks up the trailer to take it to its final destination D. In this way, the merchandise is in constant movement and does not stop due to the mandatory breaks of the carriers.
This modality greatly conditions the schedules of some carriers with those of others, since they must be at the right time and place to drop off the cargo and pick it up. So good planning is essential .
It must also be taken into account that external agents can affect planning, such as slow traffic. At this point it is important to have the ability to replan in real time, which allows minimizing the negative effects of day-to-day incidents.
Applying optimization in personnel planning improves productivity and employee satisfaction while respecting labor regulations and business rules, requirements and restrictions.
According to data from the INE, only 8% of Spanish companies use advanced analytics to manage their human resources . This means that 92% of companies still plan their employees’ schedules and tasks manually through spreadsheets or platforms without any type of optimization. A task to which those responsible dedicate many hours and which can be inefficient if all the variables and restrictions are not taken into account.
To be optimal, the assignment of schedules and tasks must take into account the abilities and skills of employees necessary to perform certain tasks, labor regulations (break times, maximum weekly hours, overtime, etc.), agreements (years of experience, type of working day, availability, etc.), the opening and closing times of the store, or the turning on and off of the machines, etc.
If we talk about store personnel focused on assisted sales, the sizing of the equipment and the schedules and tasks of the employees are directly related to the flow of visitors to the establishment throughout the day. It is necessary to cover the demand at peak hours in order to serve all potential customers. In addition, in the hours of greatest traffic in the store, the fastest and most decisive workers should be available, as this is what customers look for when there are many people at the point of sale. In this way, the conversion rate is improved. On the other hand, during off-peak hours there should be employees more focused on offering personalized customer service, the customer profile that goes at those hours usually seeks this type of experience. This is how you can increase the value of each customer’s ticket.
Conclusion and final remarks
Most supply chains rely on technological tools to generate their production, distribution and sales plans, but few apply real optimization and align planning throughout the chain to ensure the flow and quality of the supply. service.
Added to the inherent complexity of this type of planning are the peculiarities of each of the areas and the incidents or changes from day to day.
Applying mathematical optimization to generate intelligent planning allows to improve operational efficiency and respond quickly to changes on the day of operations, optimally replanning in real time so as to minimize inefficiencies in the face of the new scenario.
In future articles I will talk in more detail about the resolution of the capacity planning problem in the different areas of the supply chain.
Manuel is a professional with more than 20 years of experience in analytics and consulting. He co-founded decide in 2008, a company born to help manage the complexity of business processes through Artificial Intelligence and Advanced Data Analytics solutions. Oriented and focused on business objectives, Manuel identifies and materializes opportunities that provide companies with increased efficiency and support to make better operational decisions.