Supply Chain Design (a.k.a. Network Design, a.k.a. Network Optimization, a.k.a. Network Modeling) is one of the challenges in supply chain management that often gets thought of as a ‘nice to have’ or ‘we will do it when we have time’ activity. And there is no shortage of writings (including ours; see below) describing how to do it, what tools are available, or what the benefits can be. All have merit.
Often though, a primary question from your executives or a client is “When Should We Do It?”.
That is a more difficult question because the person to whom the question is asked, if they have done these projects before, knows that it is a bit of a loaded question. They know there are several elements that are not always at the ready for immediate allocation:
Depending on the complexity of your supply chain and the specific ‘answers’ you seek, SCD projects can take anywhere from weeks to months
- Data availability and quality
The backbone of any SCD project is data that fairly represents the activity occurring in the supply chain. Transport lanes and expense, facility costs (fixed and variable), labor, manufacturing, supplier locations and volumes, customers types and locations, and more. Complexity and desired precision of the outcomes drive the data compilation
- Responsibility and roles
Is this my sole purpose for a period of time or do I still have my regular job to do? Will/can we utilize a consulting partner to do the ‘heavy lifting’? Will we get cooperation from various functional areas of the company?
Do we have an SCD tool license in house, do we need to purchase one, will a consulting partner bring one, or will we be cobbling together databases and spreadsheets?
- Problem statement
Do we have a specific and defined problem we are looking to solve? Or is this open-ended, with potential for dozens of What-Ifs? (these can turn into a free for all)
Experience tells us the usual catalysts for a SCD project of meaningful size and scope fall into one of these categories that present themselves ad hoc (versus being a strategic, regular activity):
- Consideration of opening, closing, or relocating a node point in the network. A DC, warehouse, cross dock, factory or assembly site, port of entry or departure, all fall into this bucket
- Merger, acquisition, or divestiture in a significant segment of the business
- Gain or loss of a major customer, especially one with service needs different from our base
- Evaluation of the supply base, especially in food or life sciences, where chain of custody or vendor screening is critical
“Is there any time we should not be questioning what, where, how, why, and when we do what we do?”
However as we have seen in the last year during the pandemic, (even before that, global economics were changing) there are other reasons for SCD projects. This gets to the strategic value of these exercises and are not solved in a “one and done” mindset.
- Responsiveness of the supply chain
Is the organization positioned to quickly change vendors or channels of distribution to react to, or take advantage of, quickly changing rules of engagement?
- Investigating if, or implementing so, we operate a socially responsible supply chain
Are our vendors and their vendors one’s that we are proud to do business with?
- Contingency planning
Real contingency planning down to the use of different modes & carriers, alternate sourcing on short notice, distribution capacity, and keeping our people safe while meeting commitments to customers and shareholders to the best of our ability.
So what is the answer?
With support from the business and attentiveness from supply chain leaders there is no bad time to do supply chain design. There are always plenty of questions to ask or scenarios to game out.
The better question is “Is there any time we should not be questioning what, where, how, why, and when we do what we do?”
Dennis Heppner is a Principal at JBF Consulting. Dennis’ expertise in transportation, logistics and supply chain operations, and third-party providers spans 25+ years. His experience is broad-based, spanning entire supply chains, including business process redesign, sourcing, distribution network design, transportation management, distribution operations, outsourcing selection, and business strategy for major manufacturers, distributors, retailers including eCommerce, and service organizations.
About JBF Consulting
Since 2003, we’ve been helping shippers of all sizes and across many industries select, implement and squeeze as much value as possible out of their logistics systems. We speak your language — not consultant-speak – and we get to know you. Our leadership team has over 70 years of logistics and TMS implementation experience. Because we operate in a niche — we’re not all things to all people — our team members have a very specialized skill set: logistics operations experience + transportation technology + communication and problem-solving skills + a bunch of other cool stuff.