All the functions in a company are usually aimed at a single goal – to make more money by selling more products at a higher price than what the products cost. However, this goal is often forgotten because the way they operate is so myopic and siloed.
Each portion of the business has its own metrics and, all too often, narrowly pursues them to the detriment of the company. Supply chain strives for increasing demand forecast accuracy or reducing lead-times. Storage and processing aims to maximize its capacity utilization. Procurement wants to reduce the cost of raw materials.
Unfortunately, much optimization is done in excel and focused on solving a simple set of decision variables within a single functional silo. None of the models are integrated despite the fact that these critical planning decisions are most certainly inter-related in the real-world. After enough practice it is easy enough for an Excel expert to get one optimization model working but maintaining the model over time with all the changing variables becomes too costly. Any high level optimization requires a compilation of output from various spreadsheets and applications across the enterprise....
Each portion of the business has its own metrics and, all too often, narrowly pursues them to the detriment of the company. Supply chain strives for increasing demand forecast accuracy or reducing lead-times. Storage and processing aims to maximize its capacity utilization. Procurement wants to reduce the cost of raw materials.
Unfortunately, much optimization is done in excel and focused on solving a simple set of decision variables within a single functional silo. None of the models are integrated despite the fact that these critical planning decisions are most certainly inter-related in the real-world. After enough practice it is easy enough for an Excel expert to get one optimization model working but maintaining the model over time with all the changing variables becomes too costly. Any high level optimization requires a compilation of output from various spreadsheets and applications across the enterprise....
Below, you'll find a video by McMananaman that discusses the same topic in detail.
