The Next Step
The Cloud provides an agile and cost-effective approach to decision making in transportation and logistics.
By Ted Francisco
When I began helping my clients with their business issues related to transportation and logistics, most people were trying to use old tattered paper notebooks or spreadsheets to try to plan their network design. That was three decades ago and before we developed the technology that we use today. It has been an enjoyable and educational journey. Whether driven by cost reduction, a merger or acquisition, or by new business strategies, rethinking your distribution network has become more important than ever before.
Solutions used to be expensive, time consuming and only a few people in the entire organization could utilize the technology, after the consultants left the building, for improved decision-making. Today, that is no longer true if you select the correct team to work with on your supply chain analytics journey. We have gathered feedback from an extensive exposure to our network of clients and prospects. Business executives confirm what we see in the marketplace when they tell us that poor data quality and lack of skilled resources are some key reasons why companies are reluctant to kick off a supply chain network design study. Paper and spreadsheets are still the most commonly used tools but clearly both have some severe limitations. Most people we talk with say they look for solutions that are highly configurable and therefore offer rapid deployment.
Businesses should consider the following key drivers when selecting enabling technology and initiating a network design study. Certainly, improved decision-making and real cost savings are extremely important. Some additional key considerations include ideas such as when should a company add more distribution centers in order to reduce inbound and outbound miles, when should they consider smaller, more agile distribution centers located closer to customers, and intermodal logistics centers. The adoption of new business strategies is another important key driver, improving customer service levels and starting a new sales/ distribution channel are two key examples. Recent mergers and acquisitions also trigger the fact that it is time for a full network design study.
The ROI story is very compelling, typical savings for a business are usually 15 percent or more depending on the size of the business and length of time since you performed your last network study. A properly designed network will improve delivery times and will serve customers quicker. I strongly advise businesses to involve their senior management and key business stakeholders early in the decision-making process and be sure to include input from all major functional areas of the business.
Take an end-to-end supply chain approach and focus on optimizing the total cost of your entire supply chain. The goal is to at least maintain customer service levels or hopefully improve customer service levels while reducing your costs. I recommend selecting a solution where you don’t have to rely on external consultants that are expensive and can cause projects to drag on for over 12 months. Select a solution that easily integrates with your existing ERP and ask the solution experts to clearly demonstrate the integration process.
The distribution network needs to re-align with shifts in your business – carefully think through your current state and where you are today, then leverage prescriptive analytics in order to tell you “what should we do?” Listing your constraints under which the current network operates is also very important for designing a network that will really deliver for the business. I have always called this constraint based optimization. Some key constraints include: distribution throughput and storage capacity, potential for expansion at current DC locations, material handling requirements, budget constraints on investments, expiration of leases, any WMS constraints for distribution of SKUs, customer service requirements, limitations on transportation carriers, fleet capacities, and any labor constraints or limitations at your operating sites. Work with a solution provider that allows you to configure and deploy quickly in order to give you the chance to model potential strategic network scenarios quickly for better decision-making and begin to see the impact of specific changes on operating costs, service levels and transit times.
I have mentioned that it is very important to examine the end-to-end supply chain of your business and one key component of that is your total distribution network cost which includes: transportation costs, labor costs, systems costs, inventory costs, full facility costs and any migration costs. An updated and re-aligned distribution network can provide a key to unlocking strategic competitive advantage for your company and business. Working with the correct solution provider can really improve flexibility to be able to adjust to rapid changes in business strategy, growth and customer preferences.
I have gained a lot of knowledge over many years of helping clients and I enjoy sharing that knowledge and expertise. I recommend a low risk cloud-based subscription that is cost effective, easy to configure and deploy and will provide intelligent insights that your business can start to utilize immediately.
Ted Francisco brings more than 30 years of professional experience working both in industry and with leading global consultancies to the AIMMS team. His focus is on retail, CPG and logistics with an emphasis on logistics/supply chain management and providing software solutions to Fortune 1000 clients. Prior to joining AIMMS, he held leadership positions with large global consulting firms where he helped clients with big data/ analytics, strategy, technology, process and labor optimization issues. Connect with him on LinkedIn: https://www.linkedin.com/in/ted-francisco-778b4716/.