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Growth has both positive and negative implications. New opportunities will be created, but there are some challenges to overcome. For instance, a warehouse that was sufficient for a few customers will likely find itself unable to accommodate the increased volume of orders if those orders double. Also, as you expand into different geographic locations, your shipping costs are likely to increase. Therefore, the challenges associated with growth demonstrate the importance of developing a supply chain network design.
A good network planning will allow a business to transport products effectively and at an affordable price. A good network planning will provide a company with the ability to adapt to changes.
When Should You Rethink Your Network?
A supply chain which was functional in the prior year may not be sufficient to satisfy your present requirements. There are some indicators that indicate it is now necessary to examine your supply chain.
| Business challenge | What it may reveal |
|---|---|
| Rising delivery costs | Warehouses may be too far from customers |
| Frequent late orders | Current routes or capacity may be inadequate |
| Excess stock in some locations | Inventory may be poorly distributed |
| Growing customer demand | More storage or new facilities may be needed |
| Supplier delays | The network may rely too heavily on one source |
The problems stated above can reduce a business’s earnings and cause customers to lose confidence in the company. Taking immediate action on these problems will help to prevent them from developing into bigger problems.
A Practical Approach to Network Planning
Effective supply chain network design begins with an understanding of how products flow within the company.
Map the Current Network
Record the movement of products from the suppliers, to the factories, then on to the warehouses and distribution centers and lastly to the major customers.
Measure Performance
You can use the data regarding delivery times, shipping costs, inventory levels and warehouse space to determine where there may be issues.
Compare Different Scenarios
Consider alternatives to opening a new distribution center, moving your inventory closer to your customers and/or changing your transport routes. Evaluate the costs associated with all three options and assess how they will affect customer service levels.
Test Before You Invest
Utilize the ability to forecast consumer needs and utilize planning software to analyze potential variations. This can help decrease the likelihood of making expensive mistakes.
Balance Cost with Customer Service
In some instances, the most cost-effective network may not necessarily be the best option. While a single central warehouse can lower the cost of storing items, it will most likely create longer delivery times for customers located farther away.
A network that includes multiple regional facilities can provide faster service than a single facility network, however, a multi-facility network will likely need to employ more people and maintain larger inventories. Which option is best for a company depends on many factors, including what customers want, how valuable products are, when customers order products, and the company’s long-term objectives.
Build Flexibility into the Plan
The market changes constantly, and so does the supply chain network design. Therefore, the way we design our supply chain networks needs to provide us with flexibility when there are changes in customer demand, problems with suppliers, or transportation delays.
Businesses can become more resilient by using back-up suppliers, alternate routes and adjustable warehouse space.
Make Every Connection Count
A good network is able to do so much more than transport goods. It can help organizations control their expenses, satisfy their customer’s expectations about delivery times, and provide organizations with the ability to grow. By performing regular assessments of the network, an organization will be able to ensure that its network remains relevant to its business’s evolving requirements.
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