Strengthening your supply chain one link at a time. 

Supply Chain Design & Network Optimization Project Types

When performing a supply chain network optimization project, there are many questions companies would like to answer based on the anticipated future of their supply chains.  Whether the driver is their projected growth rate, service level changes, inventory turn rate, or storage or throughput capacity, network optimization leverages data and modeling to support informed business decisions.  Below are some of the reasons that companies turn to network optimization to answer critical business questions.

1. Merger/Acquisition – Either before or after a merger or acquisition, companies use network optimization to understand the optimal distribution network of the combined companies. Network optimization helps to understand questions like: are there redundant facilities in the network?  Should the distribution centers be in a different location altogether based on the combined customer demand, or based on the combined sources of supply, or both?

2. Cross Divisional Synergies – Companies with separate divisions or business units often ask if there are synergies by combining the divisions in the same warehouse(s). For example, could products from multiple divisions be shipped together or could smaller warehouses be combined into a single location?  Utilizing network optimization can help companies understand if opportunities exist and the potential benefits.

3. Capacity Challenges – Many companies have capacity challenges either in distribution or manufacturing. Network optimization can be utilized to address how to best alleviate those challenges.  For example, for distribution capacity issues, network optimization can help with the choices of expanding existing locations vs. locating to a new geography vs. keeping the current facility and adding an additional distribution node to the network.  In manufacturing, network optimization can help determine where to add a new plant or a new line within a network of plants.  Conversely, when there is too much capacity in a supply chain, network optimization can help determine which facility, plant or line to remove or close.

4. Customer Experience – In order to meet customer expectations or experience, companies can use network optimization to determine the appropriate supply chain network to meet those requirements. For example, the number of distribution centers increases as service level (transit time) increases.  Many other “what if” analysis/scenarios can be performed to understand the appropriate supply chain based on varying current or potential future customer expectations.

5. Labor shortages – Labor has been more difficult to find over the last few years than ever before. Network optimization can quantify the cost differences in various network configurations.  For example, maybe a company would like to add additional DCs to limit the number of workers required at a certain DC.  Also, if the minimum cost network puts DCs in locations where labor is more challenging to find, network optimization can quantify the cost differences of moving a DC from one location to another.

6. Sourcing/Manufacturing changes – Companies either considering or changing manufacturing or sourcing from one location to another usually understand the cost differences. Network optimization can help companies understand the total landed cost (product, facility, and transportation).  Network optimization can also help determine if there is capacity available short and long term to handle those changes in sourcing.

7. Carbon Footprint – Companies may want to or may be required by regulations to reduce their carbon footprint. Network optimization can be used to not only minimize cost but also lower emissions and environmental impact based on the number of distribution locations and/or transportation modes.

Network optimization can be utilized to answer a variety of strategic business questions.  Once a model is built, those questions can be answered quickly and sensitivity analysis can be performed varying many of the input parameters considered.  The results of such modeling always allow for more insightful and accurate strategic logistics decisions, regardless of the initial reason for undertaking a network optimization effort.
 
—Brad Barry, St. Onge Company
 
 

Enter your email to subscribe to "Links":

Email*