Daily, new targets as well as new expectations on how well one should perform to be competitive in a market are set. It is important to align those targets, with realistic anticipations as well as with the company´s strategy. A key factor which can influence a company’s performance is the network, which can be limited to an internal network of only warehouses and factories but can extend also to the network of suppliers and customers. Based on our project experience, we will discuss possible strategic measures which can successfully boost your supply chain performance.

A physical network based on the strategic targets of the company can be optimized either by changing the number of warehouses or improving the geographical positions of the current setup. The above can either adapt the reach of the network or the number of the locations. On the other hand, and with proper inventory management, the storing capacity of each warehouse can be adapted to an optimal point to allow synergies and increase efficiency.

Depending on the strategy that a company follows, it is possible to base a network redesign on costs, service, ecological footprint or on a hybrid model that can have multiple optimization targets. To get a better picture as to which of the above suits you better, we run a simulation and based on the results you can see the benefits and drawbacks of each scenario and make a best-fit decision.

Cost optimization
There are various methods to reduce your overall network costs with logistics costs usually having the biggest impact. After the simulation, you can determine where the optimal locations to place your warehouses are. The locations vary depending on the target of the simulation. For instance, different locations are proposed for transportation cost reductions, compared to locations, aiming to reduce warehousing costs.

Footprint optimization
Social responsibility is a particularly important subject, which is getting more and more attention over the last years. Society is expecting companies to be sustainable and considerate towards the environment. A study has shown that more than 80% of consumers are ready to pay more for sustainable products.[1] Footprint optimization focuses on building a sustainable network with as low emissions as possible, while considering the engagement of the local communities and the availability of ecological means of transport.

Service optimization
Clients are expecting to get the best service. This is unfortunately impossible and therefore after a proper supply chain segmentation, a company can decide on the segments that should get the best service level. According to the segmentation results, a network can be customized to the needs of each segment, while focusing on meeting the target service level.

Hybrid optimization
A hybrid network optimization comes with much higher complexity. It starts with the definition of the right optimization target that balances out service, costs and footprint. Therefore, before designing such a network, it is crucial to align the company’s strategic targets with the goals of the network. If this is not done properly, there is a risk that the network will fail to support daily operations and have negative effects on the supply chain’s performance.

Before taking a step towards changing your network, you should really know where you want to go, why you want to go there and what you expect when getting there. Network optimization & simulation if used correctly is a tool that will help you get competitive, increase your operational efficiency and meet the needs of your clients, because apart from fast deliveries, it is crucial to create a robust network that can also sustain these requirements. We as consultants are here to guide you through this transformation, while setting you up for success.

Source:
[1] PwC, 2024. Consumers willing to pay 9.7% sustainability premium, even as cost-of-living and inflationary concerns weigh: PwC 2024 Voice of the Consumer Survey. [Accessed: 03 May 2024].