Network optimization
The Value
Research conducted by AMR indicates that ROI from network optimization can run as high as 300 percent. Furthermore, adjustments in an organization's distribution network can lead to improvements in asset utilization, COGS and working capital. Quick adjustments in the network are relatively easy to implement and can provide immediate cost relief while other strategic modifications can secure long-term benefits.
The Process
Optimizing a supply chain network to take advantage of economies of scale, proximity to demand, regional regulations, labor availability and proficiencies, and transportation requirements will ultimately minimize supply chain costs. Quick, short-term savings can be achieved through product distribution strategies eliminating redundant service coverage and consolidating manufacturing capabilities. Short-term optimization addresses issues regarding:
Distributing the right products from the right facilities
Optimizing product distribution flow
Eliminating potential redundancies in service coverage
Determining whether orders should be accepted immediately or later (yield management)
Optimizing the network further requires an analysis of manufacturing and distribution throughout the supply chain and can answer longer-term questions pertaining to:
Location of strategic suppliers
Cost efficiency of manufacturing facilities located overseas
Determining the need for one or more distribution facilities
The ultimate objective is to position and establish facilities in the most cost- effective manner without disrupting established corporate strategy, goals and brand image