May 4, 2018
The speed and reliability of your distribution network is essential to your company’s success. But for most companies, logistics and transportation are, at best, a supporting line of business and, at worst, a distraction. For many businesses, their supply chain grew organically along with the growth of the business and isn't built to scale, especially for ecommerce. When business growth forces rapid supply chain growth, there are almost always opportunities to decrease your overall spend and improve service levels and your bottom line.
Every day, businesses use their supply chain network as the differentiator for success. Amazon, Walmart, and other leading enterprises win by ensuring that their product is close to the customer, optimized for the best shipping time, and held in the correct quantity. But how can other omnichannel shippers achieve this level of global supply chain excellence required to stand-out to the customer? To scale, an optimized distribution network is required to meet customer expectations and business growth targets. Stagnant, stiff supply chains make adapting to real-world events like changing customer demand caused by the e-commerce boom or COVID-19 difficult.
It is essential to balance the cost of the distribution network with responsive customer service. A quick review of internal processes and distribution strategy can eliminate touch points and wasted movement. Internal managers know where the supply chain bottleneck occurs and can develop alternatives and solve problems. But beware of the natural inclination to get lean by reducing inventory as a way to reduce logistics costs. Inventory must be managed in a careful way that reduces inventory holding cost while still enabling you to meet customer demand. The key is to align network costs with service level expectations while remaining customer-centric.
In many instances, supply chain and distribution network optimization is where a company starts to look towards utilizing a third-party logistics company to streamline the majority of their supply chain functions. It’s crucial to eliminate any area of expense in your logistics network that doesn’t add value to your product or improve your customer experience—such as speed of delivery. You will find that efficiency equals savings, and an optimized distribution network equates to a cost reduction. An initial look at your distribution network starts with obtaining accurate data. Start with analytics on your last mile shipping data, inventory balances, product velocity, distribution center placement and begin to develop out the trends that are occurring with your supply chain.
Investment in data-gathering and modeling tools can bring savings in areas like transportation costs or lead time; invest in visibility tools to start better understanding the movement of your goods. These tools provide insight into supplier quality and manufacturing status and allow you to keep tabs on shipments in transit or inventory counts across distribution centers. It’s inexpensive compared to the savings potential, and can immediately reap a better customer experience, growing your customer base in turn. Accurate data collection are critical if your goal is to maintain a competitive advantage, meet customer expectations and have a responsive and dynamic network. Data integrity is crucial; data driven decision making is tactical and analytical and must be based upon accurate input.
Supply chain experts or 3PL providers can find the most cost efficient ways to ship and distribute your product. Not every supplier considers efficiency first, but a supply chain partner with distribution network design capabilities will. Have unnecessary redundancies been created in the distribution system? Is your inventory concentrated in the right locations? Is it close to your customer? Are you paying unnecessary transportation costs? Improved route planning and load balancing may be all your company needs. Maybe you need to consolidate shipments and pool distribution?
Improved supply chain performance creates stability, yet allows the supply chain to be responsive. Revenue growth, cost reduction, and improved customer satisfaction are a byproduct of network optimization. Evolution in the industry is a given, just as network optimization is a fact of the future. Evaluating your supply chain and making improvements will give you a competitive advantage, but evaluations must be consistently repeated for an effective network design. Compare your supply chain to the best in class of your industry. You will find that businesses who deliver the best customer experience have the most optimized supply chain solutions.