Distribution network design is now receiving the attention it deserves from supply chain leaders, and with good reason. In fact, here are 10 good reasons.
10 Reasons to Review Your Distribution Network Design
Overhauling a distribution network is a major undertaking and companies generally prefer to maintain the status quo if they can get away with it. But if the warning signs are there, you will be playing into the hands of your competitors if you fail to review your network design.
Signs That Your Distribution Network Design Needs a Review
1) Your Distribution Network has Never been Designed
Many networks have evolved over time and have never consciously been designed. In these cases, there is no way of telling if they are optimised to serve the business and its customers. Research by my Logistics Bureau team shows that companies reviewing their distribution networks for the first time typically find ways to save ten percent or more on network costs.
2) Your Company has Seen Merger/Acquisition Activity
Mergers and acquisitions impact heavily on the distribution networks of the parties involved. A thorough review of existing and new networks is needed to ensure optimisation.
3) Your Company is Divesting/Downsizing
Whatever your reason for divesting or downsizing, the smooth running of your distribution network will be affected, especially if assets linked to distribution are concerned.
4) Your Product Range is Changing
Changes in your range can affect the balance of your distribution network, with new products likely to have characteristics demanding alternative storage or transportation arrangements.
5) You Experience Customer Growth or Contraction
A distribution network design review is essential if you gain or lose a large customer, as alignment will be affected.
6) There are Changes in the Regulatory Environment
New legislation can impact your network balance, especially as regulatory authorities increasingly focus on environmental issues. Even though the changes may not affect your business, they could affect your customers, and therefore your outbound supply chain.
7) Your Business is Experiencing Increasing Costs and Shrinking Margins
If you find operating costs start rising for no apparent reason, it could be due to the misalignment of your distribution network. Go to the effort of carrying out a network review—the problem could lie with increases in inventory-carrying or transport costs.
8) You Are Carrying Too Much Inventory
Too much inventory? Too little cash? Those are sure signs that your distribution network needs an overhaul. A reduction in the number of warehouses could make all the difference.
9) Your Customer Service Levels are Falling
If your customer satisfaction and DIFOT service levels are falling, it is an indication that your distribution network is losing momentum. Late deliveries, backorders, and order-fill failures could be signs that your distribution network is buckling under pressure.
10) Your Network is Inflexible
E-commerce is radically affecting distribution networks and unless your company adapts to “anytime, anywhere” consumerism, it will be left in the dust. If you haven’t already done so, you will need to build an agile, adaptable network to meet the modern customer’s demands.
Acting on the Warning Signs
If any of these warning signs are becoming apparent in your distribution network, the good news is that you don’t have to resort to spreadsheets to carry out a review. These days, experts in network analysis will do the job for you.
A moderate investment can highlight adjustments needed to transform your network.