Article
Learn the essential elements of an efficient supply chain network strategy. Understand how a digital twin can transform supply chain design and optimise product flow across distribution points. Explore FORTNA’s Insight on building a resilient and agile supply chain for future growth.
While understanding the day-to-day operations within the four walls of a warehouse distribution centre, there is a bigger picture to examine: how product flows through individual distribution points and how the entire supply chain network is designed and utilised.
Building an efficient supply chain network strategy can be challenging. In this FORTNA Insight, we will describe nine essential elements of building this strategy.
A distribution network consists of physical buildings that move products from suppliers and manufacturers through a distribution centre that receives, stores and fulfills customer orders. This can include multiple distribution facilities that transfer items within the network, orders shipped to customers or retail stores and returns processing.
A distribution network strategy is built by focusing on nine elements within an organisation’s supply chain. Prior to building this strategy, it is important to fully understand and conceptualise your current network and product flow. This is accomplished by using a digital twin, a virtual representation of your network that can be manipulated to simulate change and improvement scenarios and their results. A digital twin will include all source, manufacturing and distribution points, customer locations, and all transportation lanes that support the network. Creating a digital twin will require loading an enormous amount of data, typically a year’s worth of order and shipment history, performance and inventory metrics for each facility, as well as existing and potential transportation lanes.
A key output of a supply chain network strategy is the number, location, type and size of facilities in the network. Organisations must strategically locate facilities and adjust their size and throughput capacity to meet customer expectations and be flexible for future growth.
Another important factor to consider for these distribution facilities is what their role and mission are in the supply chain:
As with most organisations, cost control is a primary focus. Understanding capital and operational costs and realised savings after implementation are important factors when evaluating and creating a strategy to optimise your distribution network. Operations will need to understand key service metrics that include time in transit, on time in full (OTIF), and carbon footprint impacts. Other essential costs to consider are:
Risk and continuity are key factors to examine in a supply chain network strategy as they test the flexibility and resilience of the supply chain network. Performing sensitivity analysis around key inputs in the supply chain network model can answer questions about how the network would react to outside forces like natural disasters, geopolitical unrest and economic instability. Some questions to consider in the analysis are:
You can also test a network’s resiliency by modeling; for example, if you were to temporarily or for an extended period of time lose a node to a natural disaster or some other type of downtime event. Running virtual scenarios and models can help an organisation understand its risk and continuity concerns and help prepare for them.
While many of the outputs of a distribution network strategy are quantitative in nature, there is more to it than numbers. It will also include many qualitative factors, such as:
A solid distribution network strategy needs to consider both quantitative and qualitative factors.
Developing an implementation roadmap is the final step in a distribution network strategy. This should include all major activities to move to the future state network and will typically include major activities such as:
Developing a realistic implementation roadmap, a vendor communication plan, as well as a plan to address integration obstacles can lead to a successful and on-time implementation.
Developing a distribution network strategy can be challenging and complicated. Partnering with FORTNA can help simplify the complex while producing data-backed information that can confidently drive business decisions and position your business for growth. The FORTNA team of strategy and operation design experts can take you from the first steps of an optimisation plan to a fully realised strategy.
Published/Updated 10/21/24
