With direct-to-customer and e-fulfillment representing 10% of all sales volume, and expectations that those methods will expand to 20% in the next few years, logistics managers must tap into expertise across their companies, not just supply chain. That’s the premise of supply chain consultant Jim Tompkins’ new white paper, Supply Chain Network Planning Transformed.
“Most network studies are conducted by the supply chain group, which typically has little to do with setting business, marketing or sales strategy,” he contends. “However, if these teams were part of the network planning group along with supply chain, then the focus could be changed from, ‘How do we cut costs and deliver product?’ to ‘How do we grow our business profitably?’”
Tompkins believes that answering the following questions can help improve network planning:
• What are the correct costs of operations given the right application of technology?
• What are the real costs of transportation given the correct transportation solutions?
• What are the right levels of inventory and locations of inventory given the correct inventory strategies?
• What are the real costs of the required real estate in any given location, and not just the costs of “average” space?
• What are the incentives available by locating in certain locations?
• What are the correct energy costs for the various locations being considered?
• What are the tax implications of being located at the various locations being considered?
• What are the cost impacts (fuel charges, etc.) or volume fluctuations (M&A or growth) on the plan for the network?
“If your prime motivation is to use your network to drive business, then you may get very different answers than if your main objective is to optimize the network,” he concludes. “As network modeling packages become easier to use and company systems are more frequently linked together, it becomes increasingly viable to utilize these tools to answer tactical questions.”