Logistics Network Design

Logistics Network Design: A Case StudyLogistics Network Design

Due to multiple acquisitions, the customer’s logistics network design was overlapping and the number of distribution centers had grown to 64 locations. The more warehouses within the network meant that more inventory was in the total system, more fixed cost, and less opportunity to consolidate their inbound and outbound shipments of the warehouses.

Even though several regional optimizations had been performed, it was evident that costs needed to be reduced and inventory availability needed to be increased through a full logistics network design and implementation. In addition, the customer service level needed to be improved because customers had been requesting:

1) More inventory availability

2) 24/7 flexibility

3) Same day/next day delivery

Based on this voice of customer, the organization knew they need a logistics network design where the warehouses were within a four hour distance of customers.

Upon realization of the multiple areas for opportunity within its network, the organization determined that partnering with LeanCor would enable them to focus on their core competencies while the analysis was being completed. Once the plan for the optimized logistics network design was developed, they would have a detailed road map to bring the plan to reality.

LeanCor focused on the current logistics network design including the SKU's and product offerings in the sixty-four locations, and locations served from those facilities. Customer order frequencies, volumes, and geographic locations were analyzed to design an optimal outbound transportation strategy. The team began the project with a current state assessment of the outbound transportation and distribution network data, followed by the future state outbound transportation and distribution analysis. Comparison of the current state to the future state total logistics costs allowed the team to calculate the return on investment and provide a detailed breakdown of methods to achieve savings (through mile reduction, inventory carrying costs, warehouse fixed costs, etc.). A summary of the non cost related benefits was also provided to capture the impact to their customers and to the organization. Upon completion of the analysis, a road map for future state implementation was developed and risk analysis was conducted to ensure the plan was a success. As a result of this project, the customer was able to continue to focus on its core competencies while its optimal outbound logistics network design was achieved.

Logistics Network Design: The Results

LeanCor ensured that the customer achieved its goal to reduce the number of distribution points by decreasing its number of warehouses by 13. This goal was achieved with no reduction in service to its customers. LeanCor exceeded that goal by providing the customer with an optimized network with an annual total logistics cost reduction of $1.8M, utilizing only 51 warehouses at same service level.

In total, the results of the logistics network design included:

  • Total logistics cost reduced by $1.8M (exceeded goal of $1M)
  • Reduction in distribution points within the network
  • Number of warehouses reduced from 64 to 51 (exceeded goal of 55)
  • Less warehousing with same service level
  • Average cost per unit reduced by 10.6%
  • Reduced inventory and inventory costs
  • Reduced fleet costs
  • Improved inventory availability

“LeanCor was instrumental in helping [us] optimize our distribution network. Their optimization analysis concluded that we can improve the service level our valued customers have come to expect, while enabling us to reduce our overall logistics cost. LeanCor’s analysis was produced on-time and on-budget and fully met our expectations.” - Vice President of Logistics, Customer Testimonial

To learn more about how LeanCor's hands-on consulting services can help meet your business goals, visit: LeanCor.com.

Posted by LeanCor Supply Chain Group

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LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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