Strengthening your supply chain one link at a time.

Network Optimization, Dot-to-Dot

At one point in time, we’ve all completed a dot-to-dot. The end result is a rough outline of an image or shape that you most likely colored in to make more realistic. A Network Optimization connects the dots between your facilities with a goal of optimizing total cost and to maintain or improve delivery service levels.

Some information to be considered when creating the dots for your overall network picture:

• Facility location. Where are the sources of your supply, both raw material and finished goods? Where are you now? For new locations, determine your radius and look for tax incentive and workforce availability.
• Facility use. Plant, warehouse, distribution, micro fulfillment, cross-dock or mixed use.
• Facility costs and size. Labor, utilities, taxes, maintenance and maximum storage capacity. Inside the 4 walls operational impacts and technology requirements.
• Number of facilities. When do you need to expand, combine, build new or close locations? How have your mergers and acquisitions affected your network’s overall picture and efficiencies?
• Customer Service levels. What response times, product availability, visibility and overall customer experience are you trying to achieve?
• Inbound and Outbound freight costs. Costs are dependent on the location both to and from. What modes of transportation are currently used?
• Future state scenarios. Take a look at the “what if’s”; what if you have unexpected growth or suffer a down-turn, what criteria needs to be met to invest in 5, 10+ year goals?
• Inventory allocation. What and how much inventory goes where? What are your market demands? How will inventory carry costs be impacted by adding or consolidating facilities?
• Service Territory definition. Who does each location serve and what area does each location serve?
• Route planning optimization. Are your routes optimized? Can you optimize them daily to achieve maximum efficiencies through dynamic routing?  Must the routes be fixed to provide the service your customers require?  Does your current planning, or the route planning need in your new network, maximize the efficient use of your entire fleet.
• When should you consider using a 3PL and for what services?

When was the last time you took a look at your entire network? Have you added new products or recently acquired or merged? The information about your dots or answers about your business are ever changing and should be reviewed on a regular basis. Your overall picture will most likely be a shape shifter but still a snapshot of, hopefully, an optimized network.

Just like the dot-to-dot activity books we filled out as children, the transportation costs are the lines connecting the dots, but there is so much more to understand to color in the rest of your network and allow you the vision to see your fully optimized logistics network.
 
—Kim King, St. Onge Company
 
 

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