Supply Chain Network Planning & Optimisation

Deploying assets and positioning inventory well in a supply chain network are critical to delivering the right service at the right cost.

Challenges

Supply chains often evolve incrementally in response to individual stimuli and can become awkward collections of sites, sources and inventory. While stock might be somewhere in the network, it may not be in the right place, of the right characteristics, or easily accessible to the point of consumption. A single product might originate at multiple sources and flow through many more on the way to the customer. Storage, handling and transport costs could vary hugely across the network and manufacturing or purchase costs and taxes could be significantly different. 

Making sense of this and unravelling flow, storage and cost can be a daunting prospect.

Opportunities

There is often a substantial cost saving to be realised by planning and optimising flow paths and inventory levels across a network. Our expert distribution network design consultants can assist with identifying savings such as:
• Reduced inventory holding and associated costs (carrying cost, obsolescence and damaged/dated)
• Lower transportation cost (improved load utilisation, lowest cost per kg travelled, fewer kilometres travelled)
• Lower storage and handling (cost of moving products into, within and out from warehouses)
• Fewer facilities and associated overhead, capital and rental costs.

Approach

GRA uses a range of network planning techniques and a number of tools to determine the optimum location of facilities and inventory. Our techniques trade off cost elements such as transport into, within and from the network, transport modes, storage and handling costs, inventory holding costs, facility fixed and facility set-up/close-down costs. We base our analysis on our client’s own data and supplement that with knowledge of routes, costs and best practice where necessary.

We can determine network optimisation (what the network footprint should be and which products should be held where within it) and inventory optimisation (what level of inventory to hold where to meet target service levels. 

We consider product categorisation (for example ABC) and perform sensitivity analysis to give an indication of what impact changes in any of the inputs may have on the optimisation models, for example what would the network look like were the customer delivery promise to change from three days to same day delivery. We consider the timing of changes in network structure to determine the overall cost view of models over time.

We can create implementation plans to guide the change from current to future network models.

Outcomes

The following are outcomes of this approach:

  • It produces network design that is closely matched to a business and its customers’ needs
  • It provides comparison of current to a number of alternate supply chain designs
  • It gives insight into the trade-offs between network design choices and informs the approach to implementation.
Benefits

The benefits of this approach include:

  • Alignment of supply chain networks to business and customer needs
  • A clear view of the costs associated with network changes and the time-phased benefits of the changes.
  • Inventory planning parameters (optimised order quantities, safety stock settings) that meet the service levels
  • Good visibility network cost drivers and a clear understanding of the sensitivity of the network costs to each of the drivers
  • Improved customer service while reducing inventory holdings (typically inventory reductions of 5-10% are possible).

– BACK TO CONSULTING

Testimonials

"We saved $14 million in six months... here are the graphs. We're used to being promised these kinds of numbers; we're just not used to having them delivered."

– Wing Commander, Royal Australian Airforce (RAAF)

Typical results

  • 20-40% inventory investment reduction
  • increased service levels ranging up to 99.9%
  • 10%-15% reduction in supply chain operating costs
  • 5%-20% spend management savings
  • the ability to fund business initiatives from operating cash flow (OCF) improvements
  • improved return on capital employed (ROCE)
  • a minimum 3:1 ROI (10:1 to 30:1 typical)