Jarvis Abbott Even though a product may have high quality, a lack of organization can cause the product to miss its target audience by being delivered late. There are many reasons why products are not delivered on time, including but not limited to, high transportation costs, short supply of items in stock, and delayed delivery. These issues are indicative of how products are transported.
Supply network design can help businesses resolve these issues by defining the relationships among suppliers, manufacturing plants, distribution centers/warehouses, and customers. A primary objective when creating such a network is to find the proper balance of costs, delivery times, and reliability.
Start with the Customer
Every strong supply network begins with a clear view of customer needs.
Businesses that sell fresh foods may require quick shipping and temperature-controlled storage. Companies that sell furniture are typically focused on the safety of the product being shipped and low-cost shipping methods. Both of these considerations will help determine the locations for your facilities and the way your products will be transported.
Before making changes, businesses should ask:
- Where are their main customers?
- How quickly do orders need to arrive?
- Which products need special storage?
- What service levels can the budget support?
These answers guide the design process.
The Decisions That Shape the Network
Where Should Facilities Be Located?
The geographic location of factories and warehouses will affect the delivery times and overall operating expenses. When a facility is located close to the customer base, it should provide faster delivery service. Conversely, when a facility is located near suppliers, it can result in reduced transportation costs for the raw materials or goods coming into the facility.
How Much Stock Should Each Site Hold?
The stock must be located where people want it. High amounts of inventory increase the cost of storing it. Low amounts of inventory can result in missed opportunities for sales and delayed delivery of products.
Which Transport Routes Make Sense?
Freight by road, rail, air and sea vary in price and travel time. Choosing the best option for your products depends upon how far they need to go, what type of product it is, and when you would like them delivered.
Use Data to Compare Options
In order for asupply network design to be designed well, it must rely on data and facts rather than guessing. To determine the most effective design for their business, companies can analyze past sales performance, where customers are located, what freight costs will be, and how long it takes suppliers to deliver goods.
Planning tools can be used to run what-if analysis. For example, a business can use planning software to evaluate whether it would make more sense to operate from one central location (one large warehouse) versus operating from multiple locations (several smaller regional sites). The planning tool will provide data showing the impact of both decisions on cost, speed of delivery, and customer service.
Prepare for Disruption
The network should operate properly under ordinary conditions, and it will continue to be functional even after problems occur. A number of different elements could impact how well the network performs including delays by suppliers, changes in the cost of fuel and rapid changes in what customers want from the network.
Businesses can reduce risk by:
- Keeping backup suppliers for key materials.
- Planning alternative transport routes.
- Reviewing stock levels and demand forecasts.
- Updating network plans as business needs change.
Companies must consider several factors when developing a successful supply chain network. These factors include: – Where do we locate our facilities? – What types of inventory should we maintain? – What method of transportation is most appropriate for moving our products? – Who are our key suppliers? An efficient supply chain network will allow companies to satisfy today’s customer requirements while managing costs and risks associated with their operations.
