Supply Chain, Logistics and Distribution Network Design & Modelling Consultants
Is the Design or Model of your Logistics, Supply Chain or Distribution Network hurting your Profits?Ask Yourself:
- Do you have the most appropriate distribution network for your products and customers?
- Is it configured to provide the best service at the lowest cost?
- If not? Why not?
Why do you need to model your Supply Chain, Logistics or Distribution Network Design?
The business requirements of a network will change over time. This can be due to mergers and acquisitions, entering new markets, expanding product ranges or indeed changes to the regulatory environment.
Logistics Bureau's consultants have conducted 100's of network studies for a vast range of customers, across a variety of industries and in many countries.
This experience shows us that for companies that have never undertaken such a study or that have undergone or plan to undergo significant change in their Supply Chain, there is a high degree of risk that:
- Network costs could be 10-15% higher than expected norms.
- Service lead times may be adversely impacted.
- Excessive product damage could be occuring.
- Inventory investment is abnormally high.
- Product availability is a major issue.
Read on to learn more about our approach and see some articles on the topic, or if you would like help in understanding the topic, or just someone to bounce some ideas off, feel free to contact some of our key staff directly, whose details are shown below.
Network Modeling Approach
Our consultants can determine the optimal Supply Chain or Distribution network to satisfy customer demand at specified service levels and at the lowest cost. Specialist Supply Chain network modeling software is used to allow cost and service optimisation of the network to be established. Networks can be modeled from factory to the consumer, taking into account all the key cost and service drivers such as:
- Customer location
- Order size and frequency
- Transport costs
- Transport vehicle types
- Transport modes
- Warehouse (Distribution Centre) size, location, resources, costs...
- Service level requirements
- Factory and supplier locations
- Ports of entry for imported products
- and many more key variables
We have also developed a fast track network test, that uses market based warehouse and transport costs, read more below.
These types of projects are normally carried out as a result of significant business growth, acquisition, or a need to reduce supply chain complexity and costs.
A recent internal review of our work in this area over the last 12 years (100+ projects), indicated that businesses undertaking these projects saved between 4% and 14% of distribution costs.
We have undertaken these projects across a range of Geographies, from Global, SE Asia Regional, Indonesia, Australia, New Zealand, Thailand, and many others.
Of our 30 professional staff, we currently have 9 who are trained and skilled in this type of network modeling project work.
Distribution networks, or indeed whole Supply Chains can easily be modeled.
Features and Benefits include:
- Reduced distribution costs
- Improved understanding of customer service needs and options
- Improved understanding of service costs
- Appropriate balance of storage, inventory and transport costs
- Graphical mapping of customer demand and density
- Access to leading distribution network modeling tools and methods
- Also, this type of work is often linked with customer profitability analysis, product profitability analysis and Cost To Serve (CTS) audits
You can see some of the simple but useful graphic outputs at Mapping Products
Behind these graphic outputs lies a comprehensive cost, resource and demand database and optimisation engines, that provide a rigorous cost/benefit analysis.
We have used these models as part of major consultancy projects in industries such as retail, beverages, FMCG, building products, pharma, automotive and many others.
But of course, having the right software tool is only part of the mix!Test Your Network
Logistics Bureau's consultants have developed a 'fast track' network modeling approach for those companies that merely want to quickly test a range of distribution network options at a high level, or do not have the ability to gather detailed cost data on their own networks at this time.
Based on 100+ similar network studies, our specialist consultants are able to apply market based costs for your warehousing and transport operations. You only need to supply customer locations and demand data to allow a range of network options to be quickly modeled. This approach:
- Provides a range of high level network options for comparative decision making.
- Provides models in a fraction of the time and cost of more detailed approaches.
For a more detailed network modeling approach, where greater accuracy is required, we suggest taking the full network modeling approach above.
Warehouse Design and Process Improvement
For more information about these services, feel free to make direct contact with the following Logistics Bureau staff:
ARTICLE BY ROB O'BYRNE - MANAGING DIRECTOR LOGISTICS BUREAU
Location, Location, Location…..Is it really that important?
We are constantly told by Real Estate companies that the three most important elements of any real estate purchase are location, location, location. But does this really hold true for industrial real estate and in particular distribution centres (DCs) and warehouses? I would like to argue….not quite!
If we look objectively at a company’s needs for DCs, we should start with the premise that we don’t need any. In an ideal World, where demand is consistent and supply reliable, then by adopting a Just In Time (JIT) approach, products can flow directly from supply to customer. Sadly that ideal World does not exist, due to fluctuations in customer demand, inconsistent supply and all manner of glitches that can occur in a Supply Chain. For these reasons, we need to hold product at DCs within our Supply Chains to act as a buffer so that we can ride out these variations in supply and demand and meet our customer service requirements.
I am often approached by businesses seeking assistance in designing or selecting the location for a new DC. Frequently this is due to existing facilities reaching capacity. It should be said at this point, that there are a whole range of measures and changes that can be adopted within the Supply Chain to reduce the DC capacity requirement, or indeed to better utilise the existing DC capacity, before embarking on adding more facilities to the network.
But assuming that a new facility is required; is the location really that important and what drives location decisions? Given the rise in popularity of distribution parks, hubs and even logistics cities (such as in Dubai) then perhaps the location decisions have already been made?
It is worthwhile to take a step back and examine, objectively, some of the key cost relationships in a network of Distribution Centres.
As the number of Inventory Points in a network increases, so the costs are impacted as follows:
- The cost of storage rises, due to the increase in facility numbers and fixed costs.
- The inventory holding cost (cost of capital) increases as more inventory is required. (Due to increased safety stock requirements with more locations)
- The primary transport, or linehaul cost increases, as more tonne/kms are being travelled.
- The customer delivery cost (secondary transport) reduces, as with more facilities, the distance to the customer reduces.
- DC systems costs increase, as more licences, interfaces and hardware may be required.
So the objective within any distribution network is to find the optimum number of facilities that will reduce the total cost curve, whilst still maintaining appropriate levels of customer service.
So what about the location of these facilities? What drives the optimum location? Well it is certainly not location, location, location as in the residential or retail property market. Again, taking an objective view of DC locations, we need to understand what drives, or should drive businesses to select certain locations over others. In fact the cost driver that frequently has the least impact on the total cost of selecting a given location, is land and building cost. This is due to the fact that inbound and outbound transport, as well as labour costs are a far higher proportion of the total costs of a distribution network.
So the location decision process might go something like this. We have established a need for 6 DCs in the network. We have established that one of these of a certain size, is required to be located in city X.
Given the choice of a number of locations in city X that all meet the required location characteristics, the specific choice of one location over another is often not that important. This is because land and building cost will often have a much lower impact on the overall cost than those costs driven by the supply and demand profile.
As an example, I was recently involved in the DC location decision for a large company that operates a fleet of some 400 delivery vehicles from one site alone. They needed to move to a new purpose built larger facility. The choice of a range of potential facility locations had a massive impact on delivery transport costs. Imagine moving to a location that was 30 minutes further away from the centre of gravity of demand? A fleet of 400 trucks would now be driving an extra hour per day. That could actually increase fleet costs by at least $3.6 m pa.
So when selecting the location of Logistics facilities, are the three most important elements location, location and location? No. Well not in terms of a specific location.
But given a range of locations that all meet the needs of the business, such as access to customers and resupply, access to highways, ports and the like, then the costs of land and building of one location compared to another can start to be important.
Perhaps the three key elements should not read location, location, location, but lowest overall cost, best overall service and access to the right infrastructure?