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Manufacturing Supply Chain Optimisation

Logistics considerations

The full range of supply chain trade offs that we typically address with our range of supply chain tools and services are illustrated by the following analysis as seen from the perspective of the logistics function:

Logistics

 
Logistics Trade Offs Trade offs between customer service and the range of operational costs incurred to deliver that service are the fundamental measures of success for logistics and supply chain managers.
Storage Network Design of the right distribution centre network requires the right tools to evaluate the costs of storage with the required capacities to meet the network throughput for distribution centre optimisation.
Transport Network Similarly, the right tools are necessary to evaluate the transport links between the distribution centres and outlying depots in the network for transport optimisation.
Inventory Deployment Inventory needs to be deployed across the logistics network to deliver the required levels of customer service whilst minimising the working capital requirements.  This includes the ability to test alternative stocking point / non stocking point strategies.
Load Balancing Product flows through the network will exhibit peak / trough behaviour over different time periods and the logistics manager is interested in implementing traffic smoothing strategies to prevent having to design the network for peak periods only.
In House vs Third Party Logistics Logistics network analysis tools will enable logistics managers to evaluate both in house and third party networks or for third party logistics (3PL) operators to evaluate the network on the company's behalf.
Peak Network Capacity Different network structures and transport schedules may be required to operate the network at peak times e.g. during peak Christmas trading or peak summer activity dependent on the nature of the products involved.
Depot Boundaries The optimal allocation of customers and their trading volumes to the right depots by road travel distance and time (whilst allowing for any capacity constraints) is essential to create a least cost logistics network.
Postponement By postponing the stage at which generic products are converted to specific e.g. coloured products, the total amount of stock required can be minimised.  This is a fundamental part of the overall inventory deployment strategy.  

Manufacturing

 
Plant Utilisation Production managers will generally want to maximise the utilisation of their plants through longer production runs.  The effects of production run lengths on overall costs to serve need to be understood.
Plant Location The locations of plants will have a significant effect on the costs of moving  products to the customer base.
Increasing Capacity As plant capacity is increased the effects on the downstream warehouse space and stock levels will need to be understood.
Batch Size / Frequency In order to achieve optimal plant utilisation, alternative product batch sizes and frequencies of batch production will be considered.
Changeovers Whilst the aim is to minimise changeover time between product batches, changeover time will still have an effect on the balance between downtime cost and production flexibility.
RM, WIP & FG Stock Management Inventories of raw materials, work in progress and finished goods will vary according to the different production policies considered above.  

General Management

 
Merger / Acquisition Impacts When carrying out due diligence activities in advance of mergers and acquisitions the effects of the additional network volumes will need to be investigated.
Merged Network Costs The impact on operational costs of the merged network will also need to be evaluated.
Combined Network Synergies When combining one or more networks, network synergies may be optimised by choosing the best sites from each network to combine in the best way to address the new total required throughput and storage capacity.  

Sales

 
Capacity to Sell The capacity of an existing network to accommodate new business is important to the sales team.  Knowing where this capacity exists is not always clear.
Type of Business to Sell Once available capacity is known and for what type of product that is best suited, appropriate new business can be targeted.
Cost of New Business When quoting for new business it is vitally important to know the full cost of handling those volumes through the network.
Territory Boundaries Sale territories may be aligned with operational logistics boundaries.  Either way logistics planning tools can help plan territory boundaries to balance the network.  

Procurement

 
Inventory vs Service The classic cost vs service balance is that between customer service levels required and the levels of safety stock and cycle stock necessary to deliver that service.  At a network level it is important to understand the cost and service implications of where that inventory is held across the network.
Supplier Direct vs Stock By comparing the total order to delivery cost of discounted goods shipped direct from suppliers with the cost of handling products through the company's own network the least cost solution can be identified by product group.
Range & Diversity vs Costs Increasing product range and diversity will have a corresponding effect on inventory levels, safety stock levels and warehouse space requirements.
Factory Gate Pricing Using in house transport to collect supplier deliveries from their factory gates and negotiating a lower (factory gate) price can be cheaper provided all the collection costs have been accounted for.
Shared Inbound Logistics Consolidation centres may be used to address issues of inbound congestion e.g. into retail stores but the costs of any double handling needs to be taken into account.  

Finance

 
Logistics Cost Savings When cross company cost savings are being sought, it is important to be able to identify and quantify cost reduction opportunities from the logistics network.
Logistics Cost Drivers Supply chain and logistics managers will need the ability to evaluate the costs of running their logistics network and the impact of making any structural changes to it on an ongoing basis. 
3PL vs In House Logistics In order to evaluate the desirability of outsourcing logistics operations it is essential to understand the full costs of running the in house logistics network.  

Customer Service

 
Customer SLA's Changes in customer Service Level Agreements will have a knock on effect on the costs of delivering any particular required level of service.
Market Leading Service The provision of market leading service offerings require that radically different logistics network structures can be evaluated.
Where to Locate Call Centres Call centres may or may not be co-located with sales and operations functions and their corresponding territories.  The costs of call centres and the transactional costs of alternative order taking mechanisms need to be evaluated in the context of overall fulfilment costs.