Due to relatively low desktop computing power and the lack of available supply chain-focused modeling software, early 1990s logisticians were forced to use spreadsheets to optimize distribution networks. Beyond Lotus 1-2-3, the next level of sophistication in determining where to locate DCs was a “center-of-gravity” (CoG) analysis. Derived from applied mathematics, the concept of CoG was most likely demonstrated in any introductory high school physics course: If you wanted to balance a baseball bat on your index finger so that the bat remains horizontal, common sense would suggest choosing a point equidistant from the ends. However, this does not achieve balance. Instead, you want to choose the point where the amount of weight is equally distributed to the left and right of your finger, which is much closer to the end of the barrel of the bat. This balancing point is the baseball bat’s “center of gravity,” which can be calculated using algebraic formulas. Applying this concept to logistics, the center of gravity for demand can be calculated using the same applied mathematics, based on the amount of flow (e.g., cases) over a specific distance (e.g., miles). Certainly an improvement over spreadsheet calculations, but does center-of-gravity analysis still hold weight in determining your network design? The answer is a cliché: It depends.
Situations where a center-of-gravity analysis adds value:
The downside of a center-of-gravity (only) solution:
In conclusion, CoG analysis has a much narrower window of applicability than most leaders in supply chain management think, due to its age and past utilization. In fact, our experience over the last 25 years indicates that in the vast majority of supply chains, CoG analysis alone will lead to the WRONG conclusions. It can also lead to a significant missed opportunity to lower your overall supply chain costs. This is further complicated by the fact that a large percentage of supply chain leaders think that a CoG analysis is “essentially” what MILP software is doing. As you can see from the points made above, a CoG approach is very different than MILP, and inferior in most respects.
—Craig Vorse, St. Onge Company
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