Distribution Network Design

August 10, 2017 BY Charles Fallon

Distribution Network Design

Without stepping back to look at your entire supply chain, it’s easy to let it slip out of control, leak money and handicap your market position. It’s important to periodically review your distribution network design to determine the right infrastructure mix. In this quick case study, learn some of the key questions to consider during a network study.

The Situation – A foodservice distributor with 3 distribution centres acquires a smaller distributor with 2 distribution centres in the same geographic market. It hires LIDD to help develop a long-term distribution network design that integrates both operations and provides the necessary infrastructure to sustain growth and improve service levels.

Issues & Decisions – The ultimate goal in optimizing a distribution network design is to find the least-cost solution that meets a company’s service level goals. “Least-cost” considers the total cost of distribution, including capital and operating costs in transportation, warehousing and carrying inventory.

Some of the questions you may ask when undertaking these studies:

  • Are our customers served by the right distribution centre or should we re-balance our service regions?
  • Should we re-engineer and/or expand existing warehouses? If so, when and how?
  • Should any facilities be re-located and/or consolidated?
  • Do any facilities change their role in my supply chain?
  • Can I make fleet improvements by introducing outbound cross-docking or inbound consolidation programs?

The Results – A 10 year distribution network design was developed after studying a series of available alternatives including consolidating facilities, relocating to new, greenfield distribution centres, shifting service areas to better balance the network and expanding/re-purposing existing facilities. We developed an implementation plan that, as leases expired, reduced the total number of distribution centres from five to three.

Download LIDD’s eBook Infrastructure: Supply Chain’s Missing Link to read more about why choices in infrastructure such as buildings, equipment and software are fundamental to your distribution network design.