Distribution network design

Once a company has defined its supply chain strategy and (in the case of manufacturers) Go-to-Market strategy, it will need to create or re-align its distribution network to achieve the company’s cost and service objectives.

Two of the three major cost categories (facilities/handling costs and inventory carrying costs) are inversely related to the third category (transport costs) – more distribution centres will increase the first set of costs but (usually) decrease the second. An effective network modelling exercise must be able to demonstrate the effects of various strategies on all three cost categories. Supply chain and finance executives value the ability to model the financial effects of changes to service policy such as order lead time, product complexity and availability. In some industries, order visibility and ease of return play an important role in network design.

Having modeled tens of distribution networks for companies across most industry sectors and geographies, and taking operational responsibility for delivering to promise, Graphene Partners uses best-in-class strategic and tactical modelling software to support the team’s extensive operational experience. Even the best tools are unable to automatically take into account factors such as warehouse or labour costs and availability in a given area. Especially in developing markets with high levels of inward investment, companies often find themselves trapped by rapidly rising salary levels or shortages of skilled staff – Moscow and several Chinese conurbations are recent high-profile examples of this situation.

After an extensive data collection and verification phase, including interviews with the Client’s senior management to confirm strategy and expectations, we first ensure that our model faithfully reproduces the Client’s ‘as is’ network and costs. Having achieved this, we can then deliver – in a relatively short timeframe – a set of ‘to be’ scenarios for discussion and further refinement with the Client, and taking into account overarching factors such as implementation cost or socio-political risk. Each of these scenarios includes the number, geographical position and approximate size of distribution centres, and the total cost of the scenario.