By Tompkins Solutions
Designing an optimal network strategy is an essential element of supply chain management and can have a significant impact on a company’s bottom line. In addition to minimizing costs and increasing service levels to customers, having an efficient, resilient network is critical to remain competitive and overcome disruptions.
While there are obvious drivers for redesigning your distribution network, such as outgrowing your current capacity or adding new facilities, below are five other scenarios that may require companies to reevaluate their network design.
You Were Recently Part of a Merger or Acquisition
Growth through mergers or acquisitions can leave many companies with disparate networks and redundant facilities, processes, products and customers. Conducting a network analysis can help companies integrate and consolidate their supply chains to improve flow, reduce costs and increase service levels.
You’re Experiencing an Increase in Sales or SKU Volumes
In addition to mergers and acquisitions, companies may experience growth in sales and SKUs, especially when introducing new products or brands. The increased space requirements and carrying costs of adding new SKUs can greatly impact a company’s network and profits, especially at a time when many retailers are still dealing with excess inventory. A supply chain network study can help companies determine the right inventory levels and locations to meet customer demand and reduce costs.
Your Lease or 3PL Contracts Are Coming to Term
Companies approaching the end of their lease agreements or third-party logistics (3PL) contracts are also prime candidates for a network analysis. While it may be tempting to stick with short-term commitments due to the dynamic landscape and frequency of disruptions today, many companies may be able to increase cost savings, consistency and capacity by investing in their own distribution network.
You’re Implementing New Distribution & Fulfillment Strategies
In an effort to create flexible, resilient supply chains, many companies are now exploring new fulfillment strategies and sales channels, such as adding new retail locations or implementing ship from store. At the same time, the ongoing rise in online sales is further straining labor and space resources at distribution centers that were originally designed to handle store replenishment. Prior to making any changes to your fulfillment and distribution operations, it is important to conduct a facility and network analysis to ensure your supply chain is capable of accommodating the new strategy.
You Haven’t Evaluated Your Network Design in Over 3-5 Years
Even if you haven’t recently experienced a major business change or disruption, today’s dynamic environment requires companies to reevaluate their network every 3-5 years to ensure their logistics operations are capable of meeting changing demands. New trade laws, regulations, incentives, technological advancements and other external factors can also have a major impact on your logistics operations, and therefore warrant an updated network strategy.
Just like a facility assessment can identify inefficiencies in your warehouse design, a network analysis can help companies uncover any immediate opportunities for improvement while also providing a roadmap for long-term success. Contact us today to learn how our experienced team can help you optimize your distribution network to minimize costs, maximize savings and gain a competitive advantage.