Putting the right distribution network in place is critical for performance, especially as complexity and uncertainty increase. Supply chain network design — the process of determining a supply chain's physical configuration and infrastructure — is a powerful, strategic tool that executives can use to optimize a supply chain's functionality.
Network design analysis can help inform critical decisions such as:
- The optimal number and location of plants and warehouses
- The best mix of transportation modes and routes
- Which customer fulfillment strategy to adopt when preparing for e-commerce
- Evaluating supply chain strategies such as localization, offshoring or nearshoring
Supply chain strategies change for myriad reasons, including preparing for growth, entering a new market, or addressing changes in demand. The importance of robust network design strategy, planning and resiliency continues to be strongly felt across the globe as supply chains struggle to keep up with the changing complexity imposed by COVID-19.
What's more, as the pace of change has increased, so has the value of adaptive, flexible supply chains. Whether it is the inexorable growth of e-commerce or the uncertainties of a trade war, companies need network design to help them rapidly retune their supply chain networks to fast-changing market demands.
Supply chain network design can add millions of dollars of cost savings annually. Penske's research has shown that approximately 80 percent of supply chain costs are related to network design decisions. A good design initiative can achieve as much as 10 to 15 percent in supply chain cost savings.
However, network design is not without its challenges, the most common of which are software and data, internal resources and an effective process.
Penske has launched a free executive brief, "Success By Design: Unlock the Power of Supply Chain Network Design," to help shippers evaluate supply chain network strategies. In the brief, which is available to download for free, Penske has outlined a network design checklist with several critical steps in the network design process.
"Network design programs are rooted in real-world problems with actionable solutions," says Amy Ilyes, vice president of logistics engineering for Penske Logistics. "Sometimes businesses approach us because they are experiencing cost pressures or they're acquiring another company so there's redundancy, and the supply chain is an obvious place to start." The brief offers three examples from Penske's portfolio of projects that illustrate how network design yields strategic value.
Thoughtful network design is no longer merely a desirable item on companies' analytical wish lists. It has become an essential strategic tool, and the case for deploying network design as a strategic resource has never been stronger. Executives who employ network design tools can gain valuable insights to make better decisions and execute them more quickly.