Dell Technologies Used Palisade’s Predictive Analytics Tools to Optimize Global Supply Chain
@RISK Monte Carlo Simulations Balance Inventory with Overseas Shipments by Air and Sea
ITHACA, N.Y. (November 17, 2021) – Long supply chains for technology companies in the United States combined with the need for timely delivery of products to customers has brought challenges to planning. The global pandemic added even more complexity to meet demand for timely delivery.
Dell Technologies adopted a hybrid replenishment strategy using both ocean and air shipping to ensure inventory and service levels while reducing logistics costs. The supply chain strategy team evaluated the static initial inventory policy to identify an optimal solution that would minimize total fulfillment cost.
Francisco Erize, a supply chain digital automation product owner at Dell Technologies, has more than 15 years of experience at Dell in operations research and business improvement. Erize is focused on supply chain technical solutions to improve demand forecasting and strategic supply planning.
“Safety stock” inventory provides a buffer that enables the company to achieve a desired service level despite uncertain demand. Weeks before the final replenishment decision is made to match the target inventory, replenishment planners have the option to place long lead time orders.
The lower cost, slow replenishment mode can be ocean or rail depending on the geographic region. For example, for North America this long lead time is the seven weeks from China. The objective of placing these early inventory replenishment orders is to save freight costs by avoiding the need to replenish by air, however this decision carries the risk of increasing the inventory level beyond the required target.
“The hybrid replenishment strategy does not currently have a closed solution in the operation research field to identify optimal safety stock targets while minimizing total fulfillment costs,” Erize said. “While we are working with an academic research team to achieve a closed solution, we have created an empirical solution based on Monte Carlo simulation models for inventory replenishment using @RISK.”
Erize said conventional, inventory models would not solve his needs, and he rejected the option to purchase proprietary, pre-packaged inventory simulations. “I wanted to build a simulation that I could test and be confident in the results,” he said.
He developed and tested optimal replenishment models using actual historical results before framing a policy that achieved less than 10 percent deviation from actual results. “@RISK is so easy to develop models,” he said. “By using @RISK, I was able to pressure test and insert boundary conditions to identify mistakes in the model. This is the best way to find practical solutions. The improvements have been dramatic with the amount of money we saved.”
About Palisade Company:
With more than 150,000 users globally, Palisade Company provides the world’s largest comprehensive risk and decision analysis software platform. Combining over 35 years of expertise and partnerships with over 90% of the Global Fortune 100 across a multitude of verticals, Palisade Company is uniquely positioned to offer a full suite of analytics tools that includes:
- @RISK for Monte Carlo simulation of data
- PrecisionTree for decision trees
- TopRank for “what if” sensitivity analysis
- NeuralTools for predictive neural networks
- StatTools for statistical analysis & forecasting
- Evolver for sophisticated optimization
- RISKOptimizer for Monte Carlo simulation & optimization
Headquartered in Ithaca, NY, Palisade Company helps companies optimize their decision making in many industries that range from finance to oil and mineral exploration, real estate to heavy manufacturing and pharmaceuticals to aerospace, as well as top business schools around the world. For more information on Palisade Company, call 800-432-7475 or visit www.palisade.com
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Palisade is a software developer and solution provider that produces decision support tools for professionals in many industry sectors. The company was founded in 1984, and at present more than 150,000 people use Palisade’s software in fields that range from finance to oil and mineral exploration, real estate to heavy manufacturing and pharmaceuticals to aerospace. Its software is used by more than 90 percent of Fortune Global 500 companies. Sample clients include Procter & Gamble, Petrobras, PEMEX, Lockheed Martin, Mitsubishi, Merck, Unilever, Fluor, Thales, Raytheon and PwC, as well as top business schools around the world.