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Supply Chain Consulting: Look To Your Distribution Network for Cost-Savings



A great opportunity for cost-savings and increased operational efficiency is to evaluate your distribution network. Especially if you have multiple warehouses, DC’s, or “nodes” in your distribution network, it’s important to ensure that it functions as cost-optimally as possible.

Understanding Distribution Networks in Supply Chain Management

Distribution networks play a crucial role in supply chain management, as they enable the efficient and effective movement of goods from manufacturers to customers. A distribution network is a complex system that involves multiple stakeholders, including suppliers, manufacturers, distributors, and retailers. It requires careful planning, coordination, and execution to ensure that products are delivered to the right place, at the right time, and in the right condition.

Effective distribution network management involves several key activities, including inventory management, transportation management, and warehouse management. Inventory management involves managing the flow of goods into and out of warehouses, while transportation management involves coordinating the movement of goods between different locations. Warehouse management involves managing the storage and handling of goods within warehouses.

Distribution networks can be classified into different types, including centralized, decentralized, and hybrid networks. Centralized networks involve a single distribution center that serves multiple locations, while decentralized networks involve multiple distribution centers that serve specific regions. Hybrid networks combine elements of both centralized and decentralized networks.

Excessive costs come in the form of reduced operational efficiency:

  • Inefficient processes that increase the need for manual labor

  • Ineffective processes to track and manage inventory, resulting in losses, obsolescence, and write-offs

  • Inefficient processes or problematic training that result in product damages

  • Failure to execute RFPs that ensure most cost-effective partners

  • Over-handling in the form of moving product between production facilities or storage locations

  • Excessive distances from DCs to end-users

Implementing continuous improvement strategies can help address these inefficiencies.

Leveraging Supply Chain Consulting Firms for Expertise

Supply chain consulting firms can provide valuable expertise to organizations looking to optimize their distribution networks. These firms have extensive experience in designing and implementing distribution networks that are tailored to the specific needs of each organization. They can help organizations identify areas for improvement, develop strategies for optimization, and implement changes that can lead to significant cost savings and improved customer satisfaction.

Supply chain consulting firms can also provide expertise in areas such as inventory management, transportation management, and warehouse management. They can help organizations develop and implement effective inventory management strategies, optimize transportation routes and schedules, and improve warehouse operations.

In addition to providing expertise, supply chain consulting firms can also provide access to advanced technologies and tools that can help organizations optimize their distribution networks. These technologies and tools can include supply chain management software, transportation management systems, and warehouse management systems.

Strategies for Optimizing Distribution Networks

There are several strategies that organizations can use to optimize their distribution networks. One strategy is to implement a centralized distribution network, which can help to reduce costs and improve efficiency. Another strategy is to use third-party logistics providers, which can provide access to specialized expertise and resources.

Organizations can also use data analytics to optimize their distribution networks. By analyzing data on inventory levels, transportation routes, and warehouse operations, organizations can identify areas for improvement and develop strategies for optimization.

Another strategy is to implement a just-in-time (JIT) inventory system, which involves ordering and receiving inventory just in time to meet customer demand. This can help to reduce inventory costs and improve customer satisfaction.

Measuring Distribution Network Performance

Measuring distribution network performance is critical to identifying areas for improvement and optimizing operations. There are several key performance indicators (KPIs) that organizations can use to measure distribution network performance, including inventory turnover, transportation costs, and warehouse productivity.

Inventory turnover measures the number of times that inventory is sold and replaced within a given period. Transportation costs measure the cost of moving goods from one location to another. Warehouse productivity measures the efficiency of warehouse operations, including the time it takes to receive, store, and ship goods.

Organizations can also use metrics such as order fulfillment rates, shipping accuracy, and delivery times to measure distribution network performance. By tracking these metrics, organizations can identify areas for improvement and develop strategies for optimization.

Distribution Network Technology and Innovation

Distribution network technology and innovation are critical to optimizing distribution network operations. There are several technologies that organizations can use to improve distribution network efficiency, including supply chain management software, transportation management systems, and warehouse management systems.

Supply chain management software can help organizations to manage inventory, track shipments, and optimize transportation routes. Transportation management systems can help organizations to optimize transportation routes and schedules, and reduce transportation costs. Warehouse management systems can help organizations to manage warehouse operations, including receiving, storing, and shipping goods.

In addition to these technologies, organizations can also use emerging technologies such as artificial intelligence (AI), blockchain, and the Internet of Things (IoT) to optimize distribution network operations. AI can be used to analyze data and optimize distribution network operations, while blockchain can be used to improve supply chain visibility and security. IoT can be used to track shipments and optimize transportation routes.

By leveraging these technologies and innovations, organizations can optimize their distribution networks and improve customer satisfaction, reduce costs, and gain a competitive advantage.

There are tools available to run a supply chain management network analysis, provided you are able to access data such as volumes, costs, locations, shipment lanes, customer demand projections, to name a few.

If the number of nodes (locations) and arcs (shipping lanes) in a network are relatively small, this analysis can also be done with Excel spreadsheets and other digital tools.

If you reach the decision to change your distribution network in order to capture savings and value, there are some key considerations to factor into the project plan.  We recommend assigning a project manager with bandwidth to ensure ownership and completion of tasks, and potentially augment the execution resourcing for your organization.

Considerations for the project plan include inventory management:

  • Defining and documenting key warehouse, inventory management, and shipping processes in order to ensure new locations can accomplish requirements and that training is effective. This includes integrating digital capabilities to enhance operational efficiency and supply chain resilience.

  • Coordinating the physical movement of all inventory in a way that minimizes disruption to daily shipping. Emphasizing the importance of a resilient supply chain in the planning process ensures adaptability and sustainability.

  • Parallel inventory planning to eliminate stockout risks as product moves

  • Cut-Over planning and testing to eliminate disruptions to customer shipments

  • Implications of quality and regulatory requirements

  • System integration monitoring (or dual data maintenance) between old and new systems, if applicable

  • Onboarding new employees to absorb the additional transactional work

  • Process and RACI design and documentation

At Waypost Advisors, we offer project management resources with experience in activities such as warehouse consolidations that can help drive delivery of your project on-time and in-budget.

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