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08.07.09 River Logic Brings A Holistic View To Supply Chain Management  By James Taylor River Logic's Enterprise Optimizer is what is increasingly known as an "Integrated Business Planning" solution. Enterprise Optimizer is designed to manage cross-functional decisions at strategic, tactical, and policy levels considering all the elements and consequences of those decisions. The models you build allow you to see the financial and operational impact of those decisions and then optimize them. Enterprise Optimizer comes from work done by the University of Massachusetts with mathematicians from the Russian Academy of Science. The group had some background in AI, focused around trying to capture expert know-how to improve operational processes. From this research they moved to financial modeling, and over the last 15 years or so, have modeled over 200 different problems in various industries working with a range of partners. The product that has evolved from this has recently been labeled by Gartner as an Integrated Business Planning (IBP) tool. IBP is defined as a collection of technologies, applications, and processes that connect planning functions across the enterprise to improve organizational alignment and financial performance. The technologies help companies understand, communicate, and manage constraints and consequences across the whole enterprise. The idea is not to just roll up numbers and pass them on but to have a more dynamic model of the connections. Unsurprisingly, they do a fair amount of work with companies adopting the Beyond Budgeting Round Table model. The requirements for IBP include explicit process mapping (how a company creates value); financial modeling (ROI and forward-looking, activity-based cost, P&L ,and marginal opportunity analysis - all considering process constraints); a holistic view (products, customers, resources, supply chain processes, partners, etc.); and extensive optimization and business rules capabilities (objective function, rules, constraints, etc.). Plus collaboration, integration, and monitoring. While Enterprise Optimizer is a horizontal technology, River Logic is focused on delivering EO-based solutions in a couple of areas, especially Consumer Packaged Goods with Healthcare as a secondary market. For example, CPG solutions include strategy modeling (product portfolio, capital planning/network design), policy (inventory policy/product segmentation, sourcing, planning frequency), S&OP (executive, master planning, production planning, etc.), customer profitability, and cost to serve.
The product itself has a simple diagram style interface used to create the business processes that drive value in an organization. These diagrams model the supply chain and show how things like trade promotions impact volume, distribution and financial performance. Tactical planning solutions are constrained by policy, financial, and regulatory constraints from working capital to carbon emissions. The models also report forward-looking costs (akin to ABC costs but projected forward considering the constraints of the business), P&L, balance sheet roll-up, cash flow etc. Enterprise Optimizer models processes and more, but it doesn't execute them - the model is just built and the engine figures out what the constraints and cost-drivers are. The basic approach can be illustrated by considering a simple Purchase-Inventory-Conversion-Inventory-Sales process. The PICIS model is very common in manufacturing organizations - they buy raw materials (Purchase) that creates Inventory which is then manufactured (Conversion) into finished goods (Inventory) that must be sold (Sales). EO lets you easily create a process with a basic set of nodes, one for each step. EO will translate this model into a set of mathematical representations and run analyses against these nodes. Each node has a different representation and the user can specify different kinds of information for each node type. When the model is executed additional information is created on each node - the engine calculates things like opportunity value (e.g., the marginal profit from one more item or an additional customer) or optimal production schedules. Lots of information is defaulted, based on extensive research, so the model can be run quickly once basic information is filled in - users, of course, find it easier to edit a model once they can see what it does. As the user adds more information, the model becomes more constrained and more accurate and the tool is designed to support a highly iterative style of working. Continue reading this article. About the Author: VP of Product Marketing with a passion for the technologies of decision automation. 15 years designing, developing, releasing and marketing advanced enterprise software platforms and development tools. Across the board experience in software development, engineering and product management and product marketing. http://www.edmblog.com |
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