3 Steps to Optimizing Your Supply Chain Network Design
There can be many reasons to optimize your supply chain network design: expansion of your business to new markets or countries, launching a new product line, or a change of suppliers.
Sometimes supply chain networks grow into complex Rube Goldberg Machines. Warehouses, routes, and processes are added. The whole system still works, but it’s far from optimal. A periodic review of the effectiveness of your supply chain network can increase its efficiency and save companies time and money.
So how to go about optimizing your supply chain design?
Step 1: Align Supply Chain Strategy with Network Design
Companies focused on customer intimacy aim to deliver exceptional service, which might involve using smaller warehouses close to customers or maintaining higher stock levels to ensure product availability.
In contrast, companies prioritizing operational excellence design their networks for efficiency and cost-effectiveness. This may result in longer lead times, fewer warehouses, and minimal stock levels, but it ensures a lean supply chain.
An operational excellence strategy focuses on low costs and a lower service level, while a customer intimacy strategy prioritizes high service levels at higher costs. Companies must decide where to position themselves on this spectrum, balancing cost and service level.
There’s often a back-and-forth between strategy and design: the chosen strategy influences the design, and vice versa. Decisions must be made on both sides.
Step 2: Visualize Your Current Supply Chain State
To see how changes affect your supply chain, it’s important to first understand its current state. Once you have a clear picture, you can make changes and assess their impact on cost and service levels. Instead of testing changes in the real world, you simulate them to analyze the results.
At Ahlers Logistics, we create a digital twin of your supply chain. This means we use your supply chain data to build a digital copy. We can also add external data, like weather or traffic, to see how changes would affect your network. By creating different scenarios, we use your digital twin to run tests and evaluate the outcomes.
Some of the scenarios that you could run are:
- What if we switch to a model with a centralized warehouse?
- What if we change to a model with de-centralized warehouses?
- What if demand doubles?
- What if we introduce a new product?
- What if demand drops by fifty percent?
- What if a client moves?
- What if a specific customer wants a focus on sustainability?
Each scenario has many possible outcomes, making it impossible to analyze without advanced technology and data analytics. Using algorithms, AI, and optimization, we run scenarios and find the best outcome for each. By testing different scenarios, you can choose the best supply chain network design for your needs.
Check out our case story to see how Ahlers’ digital supply chain model helped Arteco, a manufacturer of antifreeze coolants and heat transfer fluids, analyze and simulate the impact of contingency scenarios on costs, operations, and customer service.
Step 3: Optimize and Continuously Improve Your Supply Chain
Once you’ve chosen your new supply chain design, you can further optimize it by adjusting areas like inventory, procurement, and transportation. Using your digital twin, you can instantly see the impact of changes, like adjusting inventory or transportation routes, on your supply chain. The model shows how these tweaks affect costs and service levels, helping you make the right decision based on your strategy. You can continuously improve your supply chain by testing new scenarios with your digital twin.
Typically, our advanced digital tools lead to a 10% improvement when optimizing supply chains for the first time.
For more information on supply chain network design and how Ahlers can help you save costs, boost service levels, and optimize your supply chain, reach out to one of our specialists. They’ll be happy to help!