If you work in the world of supply chain or logistics management, you understand the volatility of both fuel and restraints on rising freight capacity. Whether driven by reducing costs or by new business strategies, rethinking your distribution network optimization has become more important than ever.
The implementation of new business strategies has also been another major driver beyond the capacity crunch and reducing total costs. In the last two years many companies, especially those looking to get into the multi-channel, or omni-channel logistics arenas, are reengineering their logistics network to either enhance customer service or to help launch a new customer channel, such as e-commerce.
Related: Great LinkedIn Group discussion including GREAT info on Omni-Channel vs multi-channel in the supply chain. (Must JOIN group to view.)
Recent network studies have not only been initiated by ongoing mergers or acquisitions, but also by corporate edicts looking for cross-divisional synergistic opportunities. With the latter, while the individual businesses may operate with great autonomy, the corporate parent still wants them to look at opportunities to share distribution and supply chain resources.
Whether driven by reducing costs or by new business strategies, rethinking your distribution network optimization has now become more relevant than ever. With typical cost savings of 15 percent and more, these studies also result in allowing companies to service their customers more quickly. This can make a huge difference with how a company is perceived by its customer.
The ability to get product to market in one to two days or “just-in-time” when the competition can only deliver in three to five days is considered to be a serious weapon. It may be worth it to spend more to conduct this distribution network optimization study to gain more market share and insight into your overall supply chain and logistics departments.
Distribution strategy defines how we move goods to market. Regardless of company size or industry, every company participating in the global supply chain has some form of distribution strategy. To maximize your ability to stay competitive and drive bottom line improvements, consider a distribution network optimization study, either in house, or by a consultation with a professional or services provider.
To back up a bit, we also need to understand what is a distribution network? A distribution network is the system a company uses to get products from the manufacturer to the retailer. A fast and reliable distribution network is essential to a successful business because customers must be able to get products and services when they want them.
Distribution Network Optimization enables an intimate understanding of the trade-offs between the optimal network for operating expenses versus customer service level (turnaround time). Distribution Network Optimization is essentially a balancing act between operating expenses and working capital as opposed to Service Level requirements or Service Level versus Costs.
The Distribution Network Optimization study takes top management involvement, a potential cross-functional team of key employees, a Project Plan and Project Team leader. It could take from three (3) to six (6) months depending on the availability and complexity of the data.
There are drivers to Optimize the Service Level, some are:
Furthermore, you will need to pull in a lot of departments for the distribution network optimization study. There are questions that need answers in Supplier/Sourcing, Procurement channels, Importing, Distribution and Transportation.
For the distribution network optimization study, these are the following areas that need attention/data gathering in this study:
Have you ever conducted a distribution network optimization study? How did you best prepare in order to get to the strategy to execute? How did it go when you executed? We welcome your comments below!
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