E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s1

Optimization-it’s role in enterprise

profitability

Optimization-it’s role in enterprise

profitability

Simon BraggEuropean Research Director

ARC Advisory Group

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s2

Quality

Evolution Of Management Initiatives

Focus

Time2000+80s

Business ProcessRe-engineering

Department

Corporation

Business Partners

ERP Implementation

Supply ChainMgmt

E-BusinessInitiatives

Collaboration

90s

Company

Suppliers

Coercion

Command

Co-operationManagement By

Challenge is to manage, organize & control, ever greater numbers of people, who are increasingly distant

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s3

Management Initiatives Command

Issue Quality BPR ERP

PainVariable

Product/serviceRight Sizing

Organizational incompetence

Metric Six SigmaAdministrative

CostEarnings per

ShareChange SOP’s Back Office Corporate

IT Soln Automation PackagesEnterprise Software

GuruDeming, ISO

9000Hammer &

ChampyAndersens, SAP

Slogan Right First TimeDon’t

automate, obliterate

Staple yourself to an order

HeroGuys in white

coatsChange agents

Board level sponsor

Period 1990 1992 1995Optimisation not a key management issue

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s4

Management Initiatives Coerce

Issue ERP Supply Chain E-Biz

PainOrganizational incompetence

Stock outs, lead time

Dot com threat

MetricEarnings per

ShareOn time in full Market Cap

Change Corporate PlanningProcurement &

Ordering

IT SolnEnterprise Software

Packaged optimisers

Java

GuruAndersens,

SAPSupply Chain

CouncilNegroponte

SloganStaple yourself

to an orderSupply Chains

competeInternet changes

everything

HeroBoard level

sponsorOps Research VC’s Geeks

Period 1995 1998 1999

In SCM, Optimization becomes management issue

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s5

Management Initiatives Co-operation

Issue E-Biz Collaboration

Optimize

Pain Dot com Threat Outsourcing GlobalisationMetric Market Cap GAAP Profits Profits

ChangeProcurement &

OrderingBusiness Partners

Slick processes

IT Soln JavaStandards using XML

Component Standards

Guru Financial Analyst RosettaNet?To be

announced

SloganInternet changes

everythingWe’re

partnersMore from Less

Hero VC’s & GeeksIndustry consortia

Ops Research?

Period 1999 2001 ?2004+

In SCM, Optimization becomes management issue

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s6

Evolution/adoption optimisation?

1

4

7

10

1970 1980 1990 2000 2010

Operator decision

Heuristics

Optimize

Log (computing power)

Computing power enables optimisation

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s7

Enablers for management initiatives?

Integration

Focus

Time2000+80s

Process Design

90s

Optimization

Clean Data

Sensible Processes

Enables Optimization

The technology enablers for optimization to occur are in place.

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s8

Appropriate techniques

Improvement Strategy depends on the issue

External Internal

Change The

Process

Optimize The

Process

Focus

Forecasting/Data Mining

Optimization

Collaboration Simulation

Action

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s9

Mathematical Programming Applications

Manufacturing/Distribution Product Design Product Launch Planning/Scheduling

Services

Asset Liability Mgt Lease Arrangements Risk/Return

All Sectors Pricing Location of sites Product Mix

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s10

The Supermarket or the Bazaar?

Production Planning and Information

ABC

ABC

Price ListCTP Engine

Applies: Airlines, Hotels, Car Rental, Process industry, where high proportion of fixed assets

Suppliers

Design

Support

CustomersEnterprise

Applications

Competitors

No Application

supports Pricing

Higher price= greater profits

Lower price = greater volume

~4% increase in revenue

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s11

Optimization: Next Steps?

1

4

7

10

1970 1980 1990 2000 2010

Operator decision

Heuristics

Optimize

Robust Optimization

Log (computing power)

The computing power will soon arrive to enable more sophisticated optimizations

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s12

Conclusions

The enabling technologies are in place

The number of potential applications are just limited by your imagination

Optimization could unleash the next wave of value creation

E n t e r p r i s e a n d A u t o m a t i o n A d v i s o r y S e r v i c e s f o r I n d u s t r y E x e c u t i v e s13

Thank You

sbragg@arcweb.com

Presentation available

at www.arcweb.com