To stay competitive, continuous cost optimization is a crucial lever. Especially in supply chain management, consolidation and routing optimization offer opportunities for more cost-effective network design. Supply chain network design supports businesses to get transparency, identify existing optimization potential and leverage it effectively.
In addition to cost reduction, supply chain network design as a strategic planning approach offers a variety of additional advantages – such as the sustainable improvement of service levels. This benefit is especially relevant for e-commerce networks and spare parts networks in the machinery manufacturing and automotive industries. In these networks, the lead time and reliability of delivery represent a significant competitive advantage.
Additionally, the right network design improves supply chain flexibility and resilience. A supply chain network that is optimally aligned to new organizational structures, for instance in the case of company mergers or expansions, contributes to successful change processes. In addition to defining an optimal network, the creation of an implementation roadmap is an important aspect of a network design process. The roadmap serves as a solid basis for the implementation phase to get the best results.
Authors
Tobias Ziaja
4flow management
Michael Kagel
Senior Expert
4flow software
Six steps for successful network design
Supply chain network design follows a clearly defined process consisting of six steps:
Project setup
Project goals and scope are defined
Data preparation
The necessary data are collected, analyzed and processed in a quantity structure for planning
Target vision for supply chain
With all stakeholders, overarching design principles are defined and strategic objectives are set as a basis for the network design
As-is network transparency
The as-is network is modeled to create transparency on the current situation
Future target network
The network scenarios are defined and evaluated from end-to-end to determine the optimal network structure
Transformation roadmap
Financial aspects, necessary steps and potential risks are evaluated and compiled in a detailed roadmap, which is aligned with all relevant stakeholders
A cross-industry solution
Numerous use cases show that supply chain network design can have a significant impact in multiple industries. In retail, for instance, an optimized network can help reduce costs and optimize a business’s competitiveness. At the same time, sustainability aspects can be included in the design of the supply chain network.
Machinery manufacturing and automotive businesses can also benefit – for example from an optimized distribution network for spare parts. This way, businesses in these industries can achieve greater market coverage and higher customer service levels.
In-house, external or hybrid?
Networks can be designed by an in-house team with software support or by an external service provider. Alternatively, businesses can consider a hybrid option, in which the network design process is handled in-house with additional outside expertise. The optimal solution is different for each business and depends on the project scope, length and resources available in the team.