.How to ‘right-size’ your logistics network is one of the critical questions logistics network planning consultants are asked by clients. It is not usually a straight forward question to answer.
The fact that a business has a logistics network at all suggests that the organisation has grown to a certain point where it is big enough to need a ‘network’, or if the business has not yet become multi-site but is now considering going that way it suggests that it is at least on an upward trajectory.
How to structure a logistics network is sometimes just as hard a question to answer for larger, well established companies as it is for smaller, challenger organisations. Just because you’re a ‘conglomerate’ it does not mean that the path to network enlightenment is clear.
Companies big, and small have similar questions to ask themselves to ensure they make the right choices for laying down supply chain and logistics footprint:
- What is happening to our markets and our customer dynamic?
- What is happening to the geographical mix of our customer base?
- What are we doing or planning commercially that will impact how we service our customers?
- How are inventories changing over time?
- Is our product changing shape?
- What do customer order patterns look like now versus the past, and what will happen to them in the future?
- What changes are happening on the supply-side?
- What is happening to labour and land supply?
- What is happening to transport and delivery costs?
- What development is happening in new technology, automation and AI?
There are a lot of big questions on that list, and of course, all have subsets and many other questions and calculations that need to be made coming off the back of them. However, if you are not asking yourselves these questions, then the chances are you are likely to make the chance of getting your logistics network right less likely.
For too long, the standard approach to evaluating a logistics networks was to build a data set of current volumetrics, apply a nebulous predicted growth factor, and run the answers through an heuristic modelling tool. For some bigger organisations with relatively stable routes to market, more often than not this type of approach will do you just fine. But for modern
organisations experiencing significant shifts in consumer demand and response patterns, that approach no longer works.
As much effort must be placed in establishing the commercial objectives of the logistics network as developing the current state volumetrics model. That does not mean that the volumetric model is not still important, it clearly is, but just not as important as it once was to the process.
Finding the right balance in your logistics network is about making sure you have the right facilities in the right place to service your customers at the right time at an acceptable cost. We use the term acceptable cost rather than lowest cost, as right sizing your logistics network is about more than simply keeping your cost base low. It is about meeting your commercial aspirations and business objectives; Sometimes this means sacrificing an element of cost efficiency to enable your organisation to meet those commercial objectives.
