Multi-Stage Optimization: Your Supply Chain, Evolved
- Supply Chain Management
Imagine this: You own a popular restaurant on the East Coast—let’s say it’s a Tex-Mex/Thai/New England seafood fusion restaurant—and business is going so well that you want to open a second location…in California.
Now, in order for it to be as successful as the flagship location, the new restaurant will need to have the same quality of ingredients delivered on time with the supply chain efficiency required to keep the establishment profitable. But most of your ingredients and suppliers (not to mention the vendors who provide non-food items like napkins, cleaning products, and other restaurant essentials) are near your East Coast restaurant. Shipping everything to California will be cost prohibitive at best, and a no-go for some of the ingredients that have a short window of freshness.
What you would need in this scenario—and what restaurant, retail, consumer packaged goods, manufacturing, and logistics companies need for hundreds of widely dispersed locations—is the ability to base an award on multiple criteria across all decision points in the supply chain. You would also need to create additional, in-event bids based on multiple business units or specific vendor locations, and receive complete reporting on every touch point along the way. A tool allowing for this would enable you to find the right suppliers, materials, and processes that are most cost-effective, logistically efficient, and use ingredients and materials that meet your restaurant’s values. This unique process is a necessity, especially as the number of locations continues to grow. And it is exactly what is currently available in JAGGAER’s Advanced Sourcing Optimizer (ASO) offering.
Let’s take our hypothetical scenario one step deeper. For example, your restaurant has a signature sauce that you currently make yourself. With this expansion, you need to evaluate the cost effectiveness of sourcing all the ingredients and continue to make this sauce yourself against the possibility of having a third party make the sauce, either using their own base material vendors or using your suppliers—while also factoring in that this sauce would need to be packaged both in the large #10 cans for use in the restaurant kitchens and/or in decorative mason jars for retail sale. And this sourcing, processing, and transportation needs to be balanced against the rest of the supply network.
Enter Multi-Stage Optimization, or MSO. It represents the biggest evolution in ASO since its launch. MSO will help organizations evaluate suppliers’ capacity to meet demand at multiple levels across the supply chain, determine the optimal approach for each transformative decision point, and will incorporate stakeholder preferences and requirements in sourcing strategy and bid analysis at various points throughout the process.
ASO’s built-in flexibility has always allowed our users source all manner of items—from tangibles like consumer packaged goods, business materials and equipment, consumer or manufacturing machinery, pharmaceuticals, and packaging, to intangibles like freight, housekeeping services, advertising, and anything in between—through suppliers and processes that make the most business sense for their company. With MSO, JAGGAER gives sourcing teams even more power by allowing them to control and direct the multiple layers of their full supply chain processes. Do I buy the raw materials and make it myself? Do I purchase the completed good from a third party? Do I have the ability to negotiate better pricing for those base materials, or do the third party producers? And how do all those pieces fit in with available supplier capacities and carrier rates needed to deliver components and final products to each step of the path? MSO allows its users to answer all those questions and more by incorporating with ASO’s ability to define business rules and constraints to feed into the final make vs. buy decisions.
Visibility into upstream materials has become more important in recent years—with an increased focus on green, environmentally friendly materials. However, researching the composition and origin of sourced items is often a manual, time-intensive process.
ASO already gives organizations a robust tool kit, making every stage of the procurement process transparent, cost-effective, efficient, and a fit for the company’s mission and values. MSO takes this to a new level by integrating the multiple steps and the transformations between them into one holistic view and optimization. Whereas sourcing events can be optimized independently, by making sure each event lines up and works together in a way that lends to full supply chain efficiency, MSO not only saves on logistical and management costs, but increases the opportunities for competitive bidding along the way and allows organizations to leverage common pricing across similar items.
The JAGGAER development team has been working closely with its development partners in launching this new Event Type, as several have been using ASO for years to ensure the best results for their sourcing needs. Expanding into the MSO space is giving organizations the ability to direct the production of their proprietary blends, source the base materials needed, and direct the packaging and distribution of those materials while enforcing their quality and specific standards across the entire supply chain.
Large restaurant chains need to assure the quality and sources of their food. They also need to use different suppliers or even slightly differing materials depending on the location of their widely-dispersed restaurants. Some steps in the supply chain might be the same for large numbers of locations, but somewhere along the way that chain will begin to branch off to better accommodate individual or regional subsets: MSO allows companies to optimize each of those individual branches as well as the overall chain, and gives the organization both visibility and control of the way everything flows together. Even if you’re just opening up a second location, significantly distanced from your first—like in our monstrous fusion combination restaurant example at the top—the ability to granularly optimize each step along the way will make your whole enterprise more efficient.
Read more about MSO and how it can help organizations achieve full supply chain efficiency, along with other upgrades in 17.3, here.