Supply Chain Network Design CND
Optimizing the global finished goods distribution network.
Assignment
The client ask is to optimize the global finished goods distribution network, using best practices – reducing lead-time, eliminating cost, solving queues of inventory, and implementing physical material handling where possible. Questions to answer include:
- Would maintaining existing direct ship model from the points of supply into the areas best serve the markets from a cost and lead-time perspective, or will other solutions provide better performance?
- What would be the recommended network and where would (if any) hubs/regional DCs best be located?
- What would the cost and lead-time be? Which flows to route through a hub/RDC, and which not?
The output of work in this project will become input to another project that encompasses the end-to-end Supply Chain activities.
Project summary
The client’s global distribution network has organically grown – not by design. Client serves retail wholesalers and distributor customers typically with weekly shipments. Seasonality is high for the retail and consumer end-markets, in all regions. The e-Com market is upcoming and a growing number of consumers are served direct. Industrial & Professional customers seasonality is low, however these customers require customization and repair services.
Manufacturing is predominantly done in Mexico and more and more in APAC. New products are expected to be smaller sized. Growth expectations are strong with more saturated markets in US and Europe, and high growth expectations for APAC. Competition is fierce, the pressure for cost and service improvement is high.
The above imposes significant changes in requirements, scale, and mix of services and service levels in the distribution network. This drives the need to assess optimization opportunities and re-design the global network.
Our approach
Client project team had collected and cleaned data from the several regional systems and locations. BCI applied the proven 5 key phases for supply chain network design:
- Set-up project team, organize governance, introduce the project and arrange availability on Client team side
- Understand current situation; provided the baseline reporting on the Existing As-Is global cost and lead-time for transportation and warehousing activities. Develop future baseline, including growth expectations.
- Design; BCI provided benchmarking on best practices in same and similar industries, and center-of-gravity analyses per region. Organized scenario workshop working with the information collected, developing alternative set-ups (scenarios) and identifying the scenarios for detailed further assessment.
- Detail and Validate; BCI developed the distribution network assessment model and extended the dataset with BCI data and external datasets where needed for this purpose.
- Document and Plan; BCI and Client team jointly reviewed and selected the recommended approach. BCI performed impact assessment and sensitivity analysis on the recommended scenario, and developed Strategic Roadmap. BCI presented to senior management.
The qualitative and quantitative scenario assessment included following concepts:
1. “Clean-sheet”; unconstrained greenfield network proposal using the latest best practice and supply chain methods with particular focus on methods as employed by advanced practitioners in industries similar to that of Client.
2. “Distribution Center Location”; given the customer delivery locations and their shipping patterns for FTL, LTL, and Parcel in an area, identify how many and where Distribution Centers should be located to minimize cost and lead-time to the customers, in the areas North America, Europe + UK, India, China.
3. “Network hubs”; given the points of supply in North America, China, and Malaysia, and respecting Client policies on trade preferential trade programs (e.g. ASEAN), identify the most efficient distribution network in the areas India, Dubai, Australia, New Zealand, multiple South Asian locations.
Result
BCI identified the low-hanging fruit opportunities to “clean-up” regardless of any network. These were found in all regions.
The scenario assessments resulted in a set of recommendations per region. Below a few are highlighted:
- North America: as little benefits are gained, maintain existing WHS footprint for USA and Mexico. One change though: implement serving Canada market from East-US DC.
- Europe: implement a EU based factory for 80% of European demand. Implement a 2nd DC, outsourced to a 3PL, in Germany.
- India: change the port of entry for serving the India markets to gain significant lead-time, and transport cost savings.
- APAC: for cost optimization: consolidate WHS operations from 5 to 2 in China, run a tender on remaining. Tender New Zealand warehouse and inbound/outbound flows.
- Global hub: no benefits for majority of product, except for the introduction phase of high-value products, combined with air-shipping for replenishment to customers.
The Strategic Roadmap was developed and used by the Client to align with the other projects Roadmaps.
Overall costs savings of 8-12% have been identified and implemented.
“BCI has grown into our preferred partner for network design and supply chain optimization around the globe.”