Strengthening your supply chain one link at a time.
Many companies are not large enough, or do not have the expertise or resources, to take on a supply chain strategic network study. We have seen a wide variety of client expertise for navigating a strategic study. Some companies have extensive expertise in these strategic studies. Some companies do not have the expertise, or are not sure how to identify whether a study is needed, or how to go about conducting a study. The contents below can help companies make that first step in recognizing there is an opportunity for more efficiency in their supply chain.
What is a strategic supply chain study?
This type of study looks at a wide-ranging end to end coverage of a supply chain network. This could include a production focused network where the start of the supply chain study are raw materials and the respective suppliers through the distribution of product to the end customers. Another potential supply chain network could be more of a distribution network where the suppliers/vendors are the beginning of the network and product flows through warehouse(s) to the end customers.
The key to strategic supply chain study is that the focus is long term, typically a one-year horizon. The type of data used in the study can be shipment data or sales order data. Product flows from origins to destinations, such as inbound to a warehouse or outbound to customers, are generated from the data or provided in higher level assumptions. All transportation costs and warehouse costs are included as inputs into the study. Data is input into a mathematical supply chain model. It is not a simple Excel spreadsheet exercise. The model is sophisticated in calculation but can be simple in design.
Solutions derived from the supply chain model provide great insight and “what if” planning for a company. The solutions are detailed and include cost, locations, and flows that compare the existing state to that of a “what if” scenario. Scenarios are created and compared to the existing current state. Cost and services opportunities are derived. It is powerful information.
Some examples of a strategic supply chain study include
But how can a company with no experience in strategic network design get started with a project of this type. Typically, there are symptoms one can point out that would suggest there is a need through tactical and day to day operational planning. These symptoms can be identified in existing tactical plans and operational plans.
What are those symptoms that would suggest a network study would be beneficial?
If a company is not proficient or is inexperienced in strategic planning of a supply chain network there are symptoms to help identify an opportunity through challenges in tactical and operations planning. These events suggest a network might be out of alignment versus a network that could be more optimal or streamlined. Below are some examples that indicate inefficient symptoms and potential opportunities to look into a network study.
One symptom example of a problem with the network is having numerous offsite warehouses. These warehouses could be for raw materials or finished goods. This is not an uncommon challenge we see in clients. Typically, the additional warehouses are a quick fix to solve a near term storage problem but most likely does not address the underlying challenge. A network study would help identify where actual warehouses should be located as well as identify the size and storage capacity of these warehouses. A plan can then be developed to eliminate the extra warehouse locations and eliminate the typical higher costs of a “temporary” offsite warehouse.
Another example includes transportation and the over use of a mode of transportation. We have seen clients over rely on LTL transportation for delivery to the customer. A network study looking at customers, customer demand and warehouse locations can develop a strategy for moving product through a network that utilizes more truckload transportation in the way of warehouse to warehouse transfers as part of the change in the network. The delivery to customers can then be made in shorter distances using LTL. The end result of a network study is typically a more efficient network where total landed costs are less than the existing network.
A third example are external factors that create supply chain challenges. External factors include transportation rate instabilities (such as ocean rate increases during the pandemic), port closures (pandemic related or labor contract related), global crisis such as war in shipping routes, weather events such as hurricanes and trade restrictions such as tariffs. All of these external events are opportunities for performing an end to end strategic analysis. Having the ability to run multiple scenarios can identify alternatives for product flows, potential warehouse locations and help create true contingency plans.
So, you have symptoms of inefficiencies in your supply chain
It may be realized that something in typical day to day operations are not quite right, or the current tactical planning has embedded inefficiencies. Working with a best in class supply chain consultant like St Onge can help provide answers to those symptoms that might seem to be routine to current processes. St Onge has the resources, expertise and experience to quickly understand your network, work with whatever data can be provided, and provide insights and alternatives to meet your goals—or help develop your goals. The savings and plans developed from a network study will provide great benefits short term and long term.
—Tom Schaefges, St. Onge Company
