Cross-functional optimization is an analytical technique which simultaneously
optimizes the use of production, transportation, and distribution resources based
upon their combined potential profit contribution. Optimization occurs across
all functional areas simultaneously. Traditional supply chain management tools focus on sequential processing; that is, first the production schedule is established, then the distribution channel is determined, and finally the available transportation resources are applied to the product needing to be moved and the destination needing the product. This process of sequentially planning for each functional area of operation substantially misses the largest opportunity to optimize profitability; that is, through determining the optimal combination of production facility, distribution network, and transportation mode. In cross-functional optimization every product produced by a manufacturer competes with every other product for production and logistic resources based on the individual products ability to generate a profit when the specific costs of production and distribution, as well as sales revenues, are considered. The production, transportation, and distribution time required for each source capable of satisfying a specific demand are also considered so that only feasible optimal solutions are developed. Using , the production, transportation, and distribution functions are evaluated and optimized as a single, interdependent profit-center. Optimization occurs across all products, all eligible production facilities, and across time. Sub-optimization through sequential processing is eliminated. Cross-functional analysis is appropriate for continuous, batch, and mixed processes. |
Production to Retail Optimization