Value Chain Engineering

For buyers, effective supply chain management should make operations more agile and less costly. BSI has literally “written the book” on methods and techniques to reduce cost and improve quality simultaneously by acting on the end-to-end supply chain.
For suppliers, value chain design should result in delighted customers, marketing flexibility, and enhanced innovation and speed to market. Classic operations improvement can reduce cost without sacrificing service, reduce inventory without sacrificing service levels, and reduce fixed cost by planning and scheduling work to avoid bottlenecks, today’s supply chain leaders are tailoring their supply chain management processes and systems to their business strategies, and achieving dramatic results. Suppliers seeking to develop an effective supply chain strategy turn to Boston Strategies International for supply chain strategy, capital investment evaluation, and market entry & exit strategies.

SUPPLY CHAIN STRATEGY (FOR BUYERS)

Procurement professionals are responsible for some of the most strategic liabilities at their companies. Yet oftentimes little science or methodology is applied when structuring contracts with major suppliers. Boston Strategies International has built proprietary and proven optimization models for crafting the optimal supply chain strategy – models such as:

  • Oil and Gas Market Outlook Model (OGMOM), a detailed econometric model for many categories of purchased equipment and service
  • Profit Margin Model (PMM), an econometric model with heuristic and enhanced predictive algorithms, which is used to estimate profit margins and pricing behavior based on historical norms and the economic climate
  • Multi-Tiered Simulation Model, which is used to predict the long-run outcome of a supply chain strategy
  • Supplier Optimization Model (SOM), which is used to ascertain the most cost-effective contract term, supplier split, and regional supply base
  • Decision Analysis and Real Options Tools, simulation and probabilistic models based on “decision tree” logic, which are used to choose between supply base options that require upfront investment and varying rates of return

With a combination of analytics and hands-on consulting, BSI uses its vast experience in supply chain management to help you tap the benefits from a wide range of supply chain improvement techniques (see The Guide for Supply Chain Management for more detail), such as:

  • Strategic sourcing
  • Outsourcing
  • Waste reduction (“Lean”)
  • Standardization and simplification of specifications
  • Transportation optimization
  • Supplier kaizen
  • Consignment and vendor managed inventory
  • Design for manufacturability
  • Design for supply chain
  • Electronic data interchange and paperless work flow
  • Just-in-time
  • Make-to-order
  • Collaborative inventory management
  • Demand planning (shifting demand and capacity to better match each other)
  • Value engineering
  • Customer knowledge management
  • Design for configurability
  • Continuous market feedback
  • Concurrent product development
  • Product life-cycle management
  • Lifetime services
  • Early supplier and customer involvement

VALUE CHAIN STRATEGY (FOR SUPPLIERS)

BSI’s strategic planning engagements help suppliers identify and pursue lucrative markets that are aligned with their core strengths. Our process consists of four major steps:

  • Market sizing (segments, size, growth, and outlook)
  • Market profiling (using BSI’s proven 7-point market assessment methodology)
  • Articulation of the current business and marketing strategy
  • Articulation of the current value addition strategy (especially manufacturing, channel and pricing strategies)
  • Assessment of resource fit with target markets (customers, organization, operational capabilities)
  • Development of channel, portfolio, and bundling strategies
  • Evaluation of bundling, integrating, and ‘solutioning’ options, as well as alternative pricing levels and structures
  • Quantitative and financial evaluations of each option (ROI, NPV, etc.)
  • Development of an action plan, with milestones and prerequisites
  • Recommended metrics, targets, and milestones
  • Financial projections
  • Work breakdown structure and action plan

VALUE CHAIN STRATEGY CASE STUDIES

  • Industry: Wind Power
  • Key Challenge: Rapidly changing technologies, suppliers and economics.
  • Why BSI was Selected: Deep experience in exploration and production project management
  • Project Scope: Wind turbines, foundations, electricals, and installation.
  • Project Approach: Master supply chain planning, category sourcing strategies, financial modeling.
  • Operational Benefits: Identification of bottlenecks and plans to mitigate them.
  • Financial Benefits: 13% reduction in projected capital and operating expenses.

Click here to read the full case study.

  • Industry: Pressure vessels and related fabrications
  • Key Challenge: Seeking higher revenue growth and to avoid commoditization by low-cost suppliers
  • Why BSI was Selected: Experience with the various fabricated structures, quantitative market model, strategy expertise
  • Project Scope: 35 categories of equipment
  • Project Approach: Market sizing and forecasts; filtering categories by criteria, optimizing per synergies
  • Operational Benefits: Improved customer service and internal organizational focus
  • Financial Benefits: Client settled on a plan to invest and increase sales more than tenfold

Click here to read the full case study.

  • Industry: Technical Logistics
  • Key Challenge: Diversifying into the oil and gas industry
  • Why BSI was Selected: Contacts and strategic supply chain vision
  • Project Scope: Engineered equipment, especially rotating equipment
  • Project Approach: Value proposition critique and review, facilitation of one-on-one meetings
  • Operational Benefits: Flexibility to deploy resources into new project and partner opportunities
  • Financial Benefits: 30% higher average profit margin than in the sectors of current activity

Click here to read the full case study.

  • Industry: Industrial Sealing Technologies
  • Key Challenge: Price competition had forced a strategic review of channels, market share, and pricing
  • Why BSI was Selected: Prior experience in the specific industry segment, and proprietary market model
  • Project Scope: Specific types of seals and gaskets
  • Project Approach: Market size modeling, supplier and customer profiling, development of value chain strategies
  • Operational Benefits: Supported an intensified and more clearly focused marketing and sales initiative
  • Financial Benefits: Potential 15% increase in revenue based on a redefinition of the addressable market

Click here to read the full case study.

SELECTED ARTICLES ON VALUE CHAIN STRATEGY AND ENGINEERING

Supply Chain Strategy

Supply chain management should yield far more than cost reduction. It should result in delighted customers, marketing flexibility, and enhanced innovation and speed of doing business across multiple processes. While traditional operations improvement has focused on how to reduce cost without sacrificing service — reducing inventory without sacrificing service levels, reducing fixed cost by planning and scheduling work better without creating backlogs or bottlenecks, and lowering transportation cost through win-lose negotiations with carriers and 3PLs — supply chain leaders have linked their business strategy to supply chain management with dramatic results.

Please click here to view the slide presentation excerpt.

The New Face of Purchasing

The coming decade promises to be a transformative one for the purchasing function. According to a major new study of over 350 global executives, after years of being perceived as a clerical, back-office function, purchasing is set to gain remarkable prominence in the corporate pecking order. Three external and inter-related forces are driving the elevation of purchasing: globalization, cost pressure, and innovation. This white paper identifies four ways in which the procurement function will respond and adapt between now and 2015.Please click here to request the paper written for The Economist by David Jacoby, president of BSI.

How Will Western Manufacturers Survive?

At the current pace of offshoring, Western manufacturing is arguably headed toward extinction. What should leaders of Western manufacturing companies do? Will your company survive? How should you reposition the core competencies and product range? Should you tap a non-home country national to run the company, or establish multiple headquarters? Where should the headquarters be? How can you recruit people who have the right language, culture, and skills to lead the company into the global future? Boston Strategies International’s fifth Annual State of Supply Chain Management Study is focused on answering these critical questions, © 2008.Please click here to download this article.

Please click here to download the slide presentation excerpt.

Customization: The Information Connection
Gathering, managing, and using customer data at the right time is crucial to moving from a Stage II supply chain company to a Stage III supply chain company. It is easy to say but hard to do. David Jacoby, President of Boston Strategies International, wrote it.Click here to read this article.

Watch a 40-second video clip on Customization and Innovation

Note: Click here for numerous articles and papers on Market Intelligence by David Jacoby.
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