Published April 20, 2017
Today more than ever, logistics professionals are at the forefront of designing new transportation and distribution solutions to support ever-changing fulfillment requirements. In today’s competitive B2B and B2C markets, logistics is feeling the pressure of responding to changing demand patterns, shorter lead times, and smaller orders. Responding to today’s customer driven demands requires much more agile solutions vs. traditional logistics networks.
For years, logistics professionals have used “Perfect Order” as an indicator of performance. Perfect order remains a key goal, but is there a perfect logistics network to meet the expectations of digital commerce?
To answer this question, let’s look at the process of network design. Experts define the “optimal” distribution network as one that meets the stated delivery expectations at the lowest cost. Comprehensive designs use sophisticated models. These tools aid in determining the “Sweet Spot” solution (number, location, role, and size of facilities – manufacturing, DCs, cross-docks, etc., transportation modes, inventory deployment, and policies) by balancing the trade-offs between customer service requirements, assets, and costs.
Most models stop short at minimizing costs. However, now logistics professionals are using modeling to plan and optimize networks to maximize profit, speed to customer, sustainability, and / or other strategic goals. Minimizing is no longer sufficient. The secret sauce is designing the perfect network to optimize profitable growth.
|Perfect Order||Perfect Logistics Network|
|Deliver to the right place||Technology enabled multi mode transportation options|
|Deliver the right product||Product availability – demand driven stocking locations|
|Deliver in the right quantity||Efficient and accurate order fulfillment|
|Packaged properly||Sustainable practices|
|Deliver at the right time||Variable speed transportation network|
|At the lowest cost||Ship from the right place|
To develop the perfect network, follow these critical steps:
Define Requirements and Network Alternatives
Identify Current and Future Service Demands
Capture Transportation, Distribution, and Service Costs
Identify Alternative Networks
Determine Value Ranking Criteria
Select Candidate Networks to Model
It is important to engage all stakeholders in the process including: sales and marketing, product development, supply chain, finance, etc. Conducting an accelerated strategic workshop is a great way to get everyone aligned when kicking off such an important initiative.
Develop Alternative Network Solutions
Model all Flows, DC/FCs, and Transportation
Service and Cost Comparisons
At each step in the process ask these key strategic questions. The data is critical, especially when combined with critical thinking of all the implications of each scenario. When reviewing model outputs, it is important to go back to our initial network alternatives and look with fresh eyes at each potential solution. This is the opportunity to consider what has to be true for our solutions to succeed, or what if anything could change in the future that we have not considered. This is where we start to see that while one scenario might carry the lowest total cost, it has limitations that may prohibit future enhancements to delivery schedules, the potential for new client acquisitions, and / or new product launches, or whatever critical factors could affect future growth.
Complete Implementation Action Plan
Investment Strategy and Timing
Systems and Tools
Today’s logistics leaders are not only experts at tactical execution. They answer critical questions such as: how will a more responsive network enable growth? Will network investments lower operating costs? If operating costs increase, will sales volume warrant the investment? This process will insure that you gain the greatest business value given your demand patterns to insure that the network you design aligns with your company’s commercial model for success.