|
Supply Chain Network Design Case Study
By Rajiv Saxena, APL Logistics
Supply Chain Engineering utilizes different optimization tools and techniques to design effective and efficient solutions to a variety of supply chain problems. We discuss below a supply chain network design case study for a major global consumer products company performed by the supply chain solutions team at APL Logistics.
Background Information
: The company under consideration went through a number of acquisitions over a period of time and each of the new acquisitions became an independent division within the parent company. Each of the divisions largely maintained independent supply chain networks and operations despite the fact that they were mostly sourcing from same geographies and selling their products through same retailers. It resulted in a situation with major opportunities for improving the efficiency and effectiveness of supply chain by designing a consolidated and collaborative supply chain network that was shared by different divisions.
Project Scope and Approach
: The network flows covered end-to-end supply chain to serve the US market originating from vendor factories in different geographies to retail customer distribution centers and select stores. The costs considered were transportation (less than truckload, truckload, ocean, and parcel) and warehousing. The study looked at evaluating a number of network scenarios considering different types of business considerations to provide comprehensive decision support. Supply Chain Designer tool from Infor was utilized to perform modeling and optimization of different network scenarios. The study utilized a methodical step-by-step approach to conduct the study. The analysis focused on quantifying cost and service implications of different optimized network scenario solutions.
Study Results
: APL Logistics supply chain solutions team modeled, optimized and analyzed over 40 different network scenarios and evaluated their associated cost and service implications. The green-field scenario without any constraints resulted in a recommendation to establish eight consolidated strategically located distribution centers in the US serving the warehousing and fulfillment requirements of different divisions. This solution resulted in over $42 million in annual logistics cost savings which was roughly 12% of total logistics cost. In addition to the cost savings, this optimized network design also resulted in significant customer service improvements. For example, within one- and two-day service levels improved by 4% and 15% respectively from the baseline service levels. The above figure depicts the optimal network with eight distribution centers.
|
