At Bisham Consulting we undertake many Network Design studies every year. In this short article we highlight the benefits of these studies and detail the key aspects involved in taking a successful approach to these types of projects.
Adapting to Changing Business Needs:
Business supply chains are continually changing; be it due to transformations in customer profile, evolving demand patterns, sourcing changes or relocation of manufacturing footprint. Hence, maintaining a fully optimised logistics network is a major challenge. An added difficulty is actually defining what optimisation for your business actually means. What is the right balance between operational costs, capital investment and service levels that maximises the overall business result, rather than just reducing logistics costs in isolation.
The Value of Network Design
Whatever market sector your business is in, and whatever the scope and profile of your supply chain, a network design review will often offer one of the best business returns from logistics initiatives. It is a powerful approach to creating a baseline model of your existing supply chain, (flows, costs, performance), which is calibrated to your business’s P+L accounts. From this foundation, modelling tools can be used to check the optimised locations of facilities and associated activities, streamlining existing flows, based on the use of automated planning algorithms and changes to existing supply chain strategy and policy. To this, can be overlaid local issues relating to skills and labour availability, labour rates, property or land prices, cross border trade implications and tax regimes.
In essence, network design review outputs will tell you;
• How efficient the existing network is.
• How the existing network needs to change and how practically this can be delivered.
• What potential cost reduction/service level improvements are achievable.
Taking a Successful Approach
- Define clear scope, objectives and outputs before you start. These need to be consistent with the quality of supply chain data that is actually available to work with.
- Set your high-level strategy first – otherwise 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. Is information up to date and reliable, or are data gaps likely to compromise the end result? The availability of good quality modelling data usually represents the biggest single project risk. Sufficient time needs to be taken prior to any modelling to ensure that the supply chain data is accurate and of sufficient granularity to meet the project objectives.
- Undertake sensitivity analysis of outputs, this will enable a degree of future-proofing which is essential for building confidence in the end results.
- Complete the project in a short timescale, maintaining project momentum throughout. Do not allow the project to drag on, as lengthy timescales increase the risk that the impact of continual background business changes compromise the relevance of the final result.
- Conduct such reviews on a frequency appropriate to the rate of change in your business. You should also run a network design study when significant changes to the business occur. E.g. acquisition, new market entry, new product or new business strategy.
This may seem a lot to consider, but approaching such a project in a carefully considered way, from the start, is essential to maximising return on a potentially very rewarding investment. We, at Bisham are always happy to provide an initial consultation under no obligation, to discuss whether a Network Review is something your business would benefit from and how a project should be structured.
Martin Fleming, Director, Bisham Consulting