Logistics network reviews are an under-utilised tool for maintaining efficiency in a company’s supply chains and making sure they remain fit for purpose. Indeed, the logistics network review is more relevant today than ever, in the current complex business environment of uncertain demand, business change and increasingly demanding customer requirements.
“Is our logistics network right for the business?”, This is the question we are most often asked as independent supply chain consultants. Its obviously a loaded question as in nearly all cases, if the question is being asked, there is always some degree of dissatisfaction with the existing setup, behind the query.
Logistics networks can easily become sub-optimal either gradually, as the business profile changes, new customers, new customer requirements and new suppliers arise, as well as sales growth threatening warehouse capacities. There is also the more immediate impact of new products, new channels to market, manufacturing footprint changes, new country entry or acquisition activity.
Many companies tolerate a sub-optimal logistics network for years. Financially logistics costs may only account for 3 – 10% of your total cost base, so is often not viewed as a priority. However, it should not be forgotten that the performance of the logistics network that probably accounts for 80% of your customers’ experience and thus will have a significant impact on revenue growth. So, although the logistics cost savings are welcome, (typically between 8 – 30% are identified); the improvement in performance and customer experience should not be ignored.
So, once a business has decided to review its current logistics network, (infrastructure, processes, IT or existing 3PL partners); this will give them a good understanding of how efficient the existing network is, where it works well and where it doesn’t. It will also show you what good looks like and create a roadmap to getting there. The project outputs will define expected cost savings, capital requirements, implementation budgets & service level enhancements, thus enabling the business to maximise its business results with an appropriate balance between operational logistics costs, capital investment and service levels.
In Bisham we take a data-driven, bottom-up approach, matching data analysis with physical observation, to ensure that our recommendations for improvements are built on a firm understanding of the current business. Our outputs are then not just theoretical but can form the basis of a business case for transformation or improvement.
Based on our consultants having conducted over 100 such reviews over the years, the key learnings in summary are;
- Define clear scope, objectives and outputs before you start. So, proper project management approach
- Set your high-level strategy first – otherwise, the scope becomes too open. Restrict the number of scenarios modelled and work to an agreed and concise timescale.
- Assess the availability and accuracy of supply chain data. The availability of good quality modelling data usually represents the biggest single project risk.
- Undertake sensitivity analysis of outputs, this will enable a degree of future-proofing which is essential for building confidence in the business for the project recommendations.
- Complete the project in a short timescale, maintaining project momentum throughout. This keeps the business engaged and promotes buy-in for the future state recommendations
- Conduct such reviews on a frequency appropriate to the rate of change in your business and when significant changes to the business occur. E.g. acquisition, new market entry, new product or new business strategy
Bisham Consulting is an independent supply chain consultancy with a hands-on, practical and highly commercial approach. We have a 30-year history of successful project delivery in the UK, Europe and around the world and only recommend solutions which we are happy to help our clients implement. Have a look at our website www.bishamconsulting.com to see the full range of our services or contact Caren Tomkins on 0044 1628 487000.