Cross-functional optimization recognizes two critical determinates of
profitability that traditional supply chain management tools can't -- enterprise-wide profitability and product sequencing for profitability. Enterprise-wide Profitability The decision to produce a particular product, or quantity of a product, in a particular facility on a particular day affects the downstream cost of distributing and transporting that product. The realizable profit from the production of any product is therefore dependent on the total enterprise-wide costs of the goods sold and the revenue generated at a specific point of sale. Corporate profitability is measurably affected by the total process of production, shipping and handling -- not just the production costs. Cross-functional analyses determines the profitability of the entire enterprise -- production, transportation, and distribution chain -- and selects the most profitable combination of source, transportation mode and distribution channel for each unit sale. Profit Enhancement through Product Sequencing Each product in a multi-product environment competes with all other products for production and logistic resources. The sequencing of production, the length of production runs and other production decisions are frequently made on other than profit contribution basis. Because cross-functional optimization looks at the total profitability and timing of producing, distributing, and transporting products from all potential sources to all potential destinations, and because product change-over costs and downtime are included in the analysis, optimal product sequencing for profitability is automatically determined by using . allows a choice of inventory policies. If your choice is minimal inventory, for example, then product sequencing for profitability can convert your production facility into a just-in-time manufacturing operation. |
Production to Retail Optimization