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ASCM Insights

Episode 4: It’s Time to Modernize Supply Chain Design


Bob Trebilcock: Welcome to The Rebound where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now to today's episode.

Bob: Welcome to today's episode of The Rebound. It's time to modernize supply chain design. I'm Bob Trebilcock.

Abe Eshkenazi: I am Abe Eshkenazi.

Bob: Joining us today is Milena Janjevic. Milena is a research scientist at the Mega City Logistics Lab at MIT, where she and her colleagues have been focused on new approaches to supply chain design, as well as new digital tools to enable the process. With that, why don't we jump right in? Milena welcome to The Rebound. Why don't you start by telling us why MIT is interested in supply chain design, for instance, what's changed the last two decades since the original design tools came to the market?

Milena Janjevic: Hello, thank you for having me. As you said, I work at MIT and I basically work at the Center for Transportation and Logistics. This is a research center. We do all the usual things like research project classification, but we are special in the way that we are collaborating with a number of companies. We have dozens of industry partners that are working with us and through discussions with these industry partners, what we've seen recently is that there is indeed this growing interest into finding new approaches in the area of supply chain design.

We see a few things there. For example, we see that companies are more and more interested in having a more customer-central supply chain and basically using their supply chain not only to fulfill the customer demand but actually to drive demand to drive performance, to drive revenue. When we look at, for example, models that have been traditionally used in the area of supply chain and network design, what we typically see is that, well, we have this very high focus on efficiency on cost, and that is not capturing this new reality of the business.

Another revolution that we see is the speed of the development in the market, and so traditionally again, we would have supply chain design being revisited maybe every few years, and that made sense because if you operate in a stable environment, you can make these strategic decisions every once in a while, and then just adjust on an operational level. Today with the speed of the developments, with the uncertainties that you have on both the supply side and the demand side, this is no longer possible. We have to find new ways in integrating basically supply chain design into companies.

All of those things are of course, true, I'd say before the COVID, but since this whole crisis happened, we've basically seen them all of the different elements that are becoming even more important and even more of burning issues for the companies that we're working with. The immediate response that we've seen in the current crisis was mainly on operational level, but we've also seen that companies are now thinking about a way to basically rethink the way that they're designing the supply chains in order to incorporate resilience in order to incorporate risk uncertainty, et cetera.

There are a lot of new developments in this area, and that's why we're basically launching this supply chain design initiative and trying to find answers to some of those questions.

Abe: Hey, Milena, this is Abe. Really interesting points that you're bringing out. As you evaluate the information that you're looking at and the different concepts that organizations are applying, what's needed now? Specifically, what are you and your colleagues doing to address the issues that they're facing?

Milena: In terms of what's needed, I think the first thing that is the most important is to basically reevaluate the role of supply chain design in companies. I think in the light of trends that we've mentioned and in light of the recent events, it is really important to recognize that supply chain design is a key element of corporate strategy, and that's true both in normal operating conditions and in times of crisis. In normal operating conditions, the discussion can be around how do we design networks to reach customers in a fast and reliable way and capture more demand? In times of disruption, it's about building resilience and flexibility, but in both cases, it's important to recognize this strategic role of supply chain design.

Then I think the second thing related to that would be to basically assess the way that we are conceptualizing a supply chain design and to see if that basically fits this strategic importance in corporate strategy. When I say conceptualize, we can think about, well, what is supply chain design? What are the decisions that we are trying to make? Is it only, for example, the configuration of the facilities and the flows in the networks, or are we also looking at things like product assortment, go-to-market decision, et cetera, et cetera. The second thing would be, well, of course, what are the objectives that we are trying to reach? Is it only cost or are we integrating sufficiently elements like value creation risks et cetera?

I think those are the two main elements that basically change the way that we're thinking about supply chain design, and that then there is a number of, of course, tools that we can put in place in order to support this new view on supply chain design. At MIT, we are working on the analytical tools that are required to support this new conceptualization of supply chain designs or we're building, simulation models of simulation models, using machine learning network signs, et cetera, but we're also building tools that help companies to basically interact with these models and to make better decisions.

For example, the CAVE lab that is at the CTL is actually specialized in providing these interactive visual interfaces that allow companies to basically interact with the models that we are developing. One last thing that we're doing and I think is maybe one of the most important elements, is that we are looking after decision-making processes around supply chain design. What we see is that, well, if we want to make supply chain design have this important role in corporate strategy, we no longer can only include, let's say, stakeholders from logistics departments and have one model or somewhere defining the optimal configuration of the network.

We have to have a really multi-stakeholder approach where we have people from sales, from marketing, from finance, they're all discussing about what would be the best design that is basically reflecting the overall company strategy. That's not easy to put in place because we have all these different people that are talking different languages sometimes and what we are trying to do is to facilitate this decision-making process and establish basically procedures for the collaboration between those different parts of the company.

Bob: Thanks for that insight, Milena. I know you've been working with some leading companies on network design. Can you tell us a little bit about the problems you're trying to solve? What are they bringing to the MIT lab?

Milena: Sure. I can give you a few examples. One example would be one of the global manufacturers that reached out to us in order to redesign their US distribution network. The starting point of that project is that they knew that being closer to their customers is driving revenue because they were in an industry where this was very important, but they were not able to basically capture this aspect in their current network design studies with the tools that they were currently using.

We basically produced this optimization model that allowed them to optimize their network, but not only minimizing their costs, but also maximizing the profit, and based on that, they were able to redesign the network and open additional warehouses in the areas where they could capture most of the market share. Another example is COVID related. Recently we started working with one company who basically wants to investigate different areas of uncertainty that are linked to the current crisis. They have uncertainties on the demand side because some products may or may not know high spikes in demand and also they have potential disruptions in their supply.

They are working with us in order to basically produce a model where they're able to investigate all of the different scenarios and make these strategic decisions about the configuration of the network.

In both of those cases, we really start by defining the problem with the company, exploring the data, finding opportunities, making these models, and then we integrate that into interactive visual tools where they can basically explore different scenarios and play around, and that are basically a basis for engaging multiple stakeholders in the company. Before COVID we used to have this under form of physical workshops that we have executives from different companies that would come around this digital tabletop and they could use this interactive visual interface. Now we're using this doing the same thing but in a more virtual way which also brings some challenges but also quite a few opportunities in terms of organization.

Abe: Milena, as you're taking a look at the tools that organizations are developing as well as the innovation that they're developing in terms of data gathering, one of the challenges that we often hear from companies is the amount of data that they have. It's just growing exponentially in terms of different data streams whether from customers or vendors. Give me a sense of how organizations are evaluating how to manage that data? What kind of competencies are necessary for them to not only accumulate the data but to make sense out of it? How do you analyze all the information that we're getting right now?

Milena: That's actually a really good point. It is something that we are trying to address with these new interactive visual tools because, as you say, today we live in a world where everything is recorded so we will have every truck send a signal on its position every five seconds and then how do we make sense of that in a way that we can generate some business insights? What we see is that well, data and technology is just one way to support decision-making.

What we are trying to explore is what is the best way in which we can represent that data in a way that this will make sense to multiple decision-makers in a company? What are the right ways of interacting with the data of exporting the data in order to basically be able to enable data-driven decision making because just the data on its own, it's not really going to help us go anywhere? Some of the work that we are doing it's not so much about supply chain design from, let's say, an optimization point of view, it's more about the decision-making processes and how do we combine insights from the data with insights that can come from other sources, for example, a company executive that has an implicit knowledge about something that is currently not captured. How do we combine all of these things in order to have this enhanced human intelligence and enhanced data intelligence rather than just being in a complete information overload?

Abe: Milena, very interesting concepts here. As we know it's never easy for organizations to introduce new ideas or new concepts. What are the hurdles to adopting a new approach to this network design and utilizing so it is part of their decision-making process?

Milena: I think definitely one of the biggest hurdles is going to be the requirement to change the mindset and the way that people think about supply chain design. When you think about this whole idea of having multiple stakeholders, sales, operations, and finance working together for designing networks and then revisiting that frequently and almost aligning it with the S&OP process well that's quite new and that's not really in line with how the traditional roles in the organization are currently defined. I think there's a definitely big change of mindset that has to be done there.

Now, one, I think interesting element with the recent crisis is that we've seen that if there is enough need and enough urgency, companies are actually able to adapt very quickly. We've seen multiple companies that have established this crisis management ourselves or some they call them war rooms and where they were basically having people from representing the customers or presenting the suppliers or presenting the employees and where they were trying to find together ways of adapting their operations and in some cases, their supply chain design in order to respond to the new requirements and the ever-changing requirements that were rising. That really proved that if there is a sense of urgency, we are able to do it.

I think the results are quite promising because we've seen that a lot of companies were able to really find a way that we're working pretty quickly and to adapt. I think that's a source of good potential for the future and we can really think about okay, what can we learn from the way that we have managed this crisis situation? What are some of the best practices and some lessons that we can keep for more sustainable operations?

Abe: Milena, thank you so much. Very relevant information and more importantly some insight into the future and how to make better decisions as we evaluate not only the current disruption but our future for supply chain. Thank you so much.

Milena: Thank you.

Bob: Well, that's all the time we have today. Thanks for joining and we hope you'll be back for our next episode when we'll be joined by Patrick Haex from BCI global to talk about creating visibility in the supply chain both upstream and downstream. We look forward to seeing you then. I'm Bob Treblecock.

Abe: I'm Abe Eshkenazi. Have a great day.

Bob: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit and We hope you'll join us again.