- Supply Chain Strategy
- Supply Chain Network Design
- Inventory Management & EOQ
- Route Optimisation
- Distribution Logistics Tendering
- Fulfillment & Warehouse Logistics
- Last Mile Transport Tender
- eSCM & Supply Chain Analytics
Supply Chain Network Design
Supply chain network design is one of the most exciting and complex fields of supply chain management. Its various possibilities arise from site selection; the optimization of transport routes and modes; the dovetailing with production, customers and suppliers; and the many new opportunities offered by digitalisation. A cost-effective network that meets growing customer demands is increasingly determining a company's success in the marketplace. The German automotive industry, Amazon, Zalando, and others are showing the way – strategic supply chain planning of inbound logistics and distribution networks can decide competitions. In this context, we shed light on questions such as:
- Why does supply chain network design sometimes fail?
- What is the right approach?
- What is an example of the right approach and the potential added value?
- What role does digitalisation play?
- What influence do a changing world and today's challenges have?
If you are interested in ways to further improve your supply chain network design, you may find some suggestions or thoughts below that will help you with your project.
Common causes for the failure of supply chain network design
If all COO's and supply chain managers optimise their supply chain network in terms of customer satisfaction and costs, why do we observe such differences between competitors and industries? Lack of incentivisation can only rarely be identified as a driver for these competitive differences in strategic supply chain planning. On the contrary, most COO's and supply chain decision makers directly account for these goals through KPIs or defined milestones in their work contracts or annual goals.
When you think about your vision, what are your goals regarding your supply chain network? Like many other decision makers, do you have in mind a high level of service to customers and production sites, a reduction in costs, or perhaps successfully implemented improvement initiatives?
What are the most common reasons for unrealised potential and unmet goals?
- Prioritised resources: Combining day-to-day operations with a multitude of implementation projects and strategic supply chain planning initiatives often overwhelms the organisation and individual employees - focus and efficiency thus remain unachieved. Sometimes, managing day-to-day operations alone demands everything from one department, preventing any focused improvement of the network
- Complexity: Growing and multifaceted requirements usually have to be reconciled with different goals and dependencies in the supply chain network, ranging from supplier management and inbound logistics to the last mile distribution network. Beyond these variables, there are many others that together can make supply chain network design a complex challenge. The risk of making and being responsible for wrong decisions increases and paralyses many organisations
- Database & Systems: The data, systems, and tools used do not mesh and make it difficult to control or leverage efficiency opportunities along the supply chain network
- Integration and penetration: Coordination with adjacent functions and alignment along a clearly defined supply chain strategy is often not given and initiatives get bogged down in political disputes.
Do you, like many supply chain decision makers, also know these frustrations? As a specialist we support you in optimizing your supply chain network design. Together we ensure a successful implementation and help to sustainably embed strategic supply chain planning in your organisation.
Supply chain network design in 3 steps
Many companies in similar positions of frustration try to turn the tide with actionism, overambitious project plans, and, especially, software implementations. Mostly with limited success. How are the already overburdened resources suddenly supposed to find the capacity to seek and implement the best solutions? There is often a lack of time, know-how, and decision-making power.
As unique as the challenge is, as unique is each solution - successful implementations almost always follow 3 phases, which is why our proven approach is also divided into 3 steps. The key to success throughout all the steps is the close involvement of the organisation. Company-specific knowledge has to be integrated and transferred into working solutions together with the relevant teams in order to implement the improvements sustainably.
Have you ever observed that during a project, when asked, project members could not immediately, fully, and unambiguously state the project’s goals and most critical requirements? If not, try asking! In many cases, this is due to the aforementioned thematic complexity, a lack of project alignment, or a lack of project communication. In order to set up a successful strategic supply chain planning initiative, it is crucial in the first step to jointly record and prioritise the goals and requirements of your supply chain network and to map out the dependencies. Service levels, delivery times, capacities, response times, customer service, and supply chain costs per unit are just a few possible target criteria.
Clearly defined objectives, understood by the team and taken into account at all times, are essential for the successful alignment of the supply chain. Based on an analysis of your supply chain data and supplier contracts, and especially through interviews with the relevant stakeholders, pain points are identified and improvement opportunities are developed. Based on the objectives and the status quo, we jointly define the improvement initiatives and the implementation procedure in the project strategy. The cost-benefit analysis for each initiative helps you to target the initiatives with the highest value contribution.
The next step is to implement the agreed improvement initiatives. Typical project topics are:
- Site selection: Placing, changing, or outsourcing warehouse locations
- Collaboration with freight and transport suppliers
- Transport routes and alternatives
- Governance and risk management
We work closely with your teams in a supporting or leading capacity to jointly develop the best concepts and implementation options and present them to you for an implementation decision. Comprehensible, reliable data and calculations form the basis for decision-making. In supply chain network design projects, an agile project approach and the involvement of all relevant stakeholders ensure that implementable and quickly functioning solutions are achieved.
In the third step of implementation, we help you to ensure that the concepts, improvements, and supplier solutions developed are successfully implemented and traceably incorporated into the key performance indicators and P&Ls. During the initial implementation period, it is especially important to ensure that the initiative is firmly embedded and becomes part of an organisation's automated processes through governance and follow-up. During the implementation process, we take into account the additional workload of your organisation and the need to ensure uninterrupted day-to-day business.
These and other examples show how companies are improving their supply chain network design and embedding this progress for the long term through focused collaboration between internal teams and experts. Leading companies are working hard to evolve their supply chain network design to respond to change and innovation – take advantage of this time to take this step for your business.
Changes and contemporary challenges to supply chain networks
The three most significant challenges to a supply chain network are:
- Responding to rapidly and constantly changing supply and sales markets
- Ensuring information and control sovereignty over an increasingly complex supply chain network often outsourced to partners
- Further optimisation of costs through interaction between procurement (prices & conditions) and supply chain optimisation (capacity utilisation and process efficiency)
Supply chain networks have changed significantly in recent years. Supply and sales chains span the entire globe. Transport routes have become more frequent and more numerous. Means of transport by sea, rail, and air have evolved technologically. Supply chains have increasingly become a coordinated interplay of experts. Freight brokerage exchanges, for example, are working to better utilise container capacities at sea, or customs handling experts are taking care of customs and import administration, especially for special goods. The change brought about by outsourcing, technological innovations, and, above all, digitalisation is in full swing and far from complete. In addition, the next massive challenge is already on our doorstep in the form of climate change.
Companies that are unable to respond quickly to these changes and take advantage of the opportunities offered by digitalisation will lose out to the competition in terms of customer service and cost efficiency, thus forfeiting valuable revenue and margin. Going down this path half-heartedly and starting at a point where the supply chain has increased in complexity and dependency on partners but control and mitigating alternatives have not grown along with it is dangerous – there is a risk of supply chain collapse or a drastic increase in costs. The opposite is true for companies that continuously improve their supply chain network.
For example, we were able to help customers select and roll out suitable route optimisation software to make the management and governance of the outsourced last mile distribution network more efficient. This enabled better utilisation of transport capacities, cost reductions, and, in the next step, the introduction of delivery transparency and scheduling. Total transport costs were reduced by 15% and network management and control improved.
In another case, various digital solutions along the supply chain network were consolidated into one transport management system. This significantly increased transparency, improved capacity utilisation, reduced resource costs by simplifying processes, and massively lowered transport costs by digitally allocating peak demand in the transport market.
Conclusion on supply chain network design
Companies that want to continue to gain competitive advantage through their supply chain network design must be able to respond to changes in demand, requirements, and technology. The 3 most important characteristics are:
- Flexibility and quick adaptability of the supply chain network to customer needs and market circumstances
- Cost-benefit added value considerations & optimisation of the individual components of the network service offering
- Transparency & meaningful analyses as a basis for decision-making as well as for action along the supply chain networks
Successfully implemented improvements of the supply chain network achieve a high ROI through improved customer satisfaction, better utilisation of resources and capacities, and often significant cost savings. Especially in logistics-heavy industries, these improvements significantly contribute to the company's bottom line.
OCM offers you support in the analysis and evaluation as well as the realisation and implementation of your supply chain network design.
Frequent project modules also carried out in this context of strategic supply chain planning – for inbound logistics as well as distribution networks - are:
- Tendering of transport, freight, and 3PL services
- Route and transport optimisation as well as implementation of the corresponding software
- Process optimisation and digitalisation with selection & implementation of supply chain management software such as freight & truck management tools, transport management systems (TMS), parcel & freight tracking systems, and integration of own TMS to carrier information systems
Additional modules can be found in our comprehensive Supply Chain & Logistics product offering.
We combine our proven approach to supply chain network design with the other areas of supply chain operations and digitalisation. We would be happy to present our approach and modules to you or discuss concrete solutions based on your individual challenges.
Our project modules at a glance:
Logistics optimisation & Supply Chain Consulting modules
Logistics & SCM Opportunity Assessment
- Benchmarking & maturity testing
- Identification of opportunities & action plan
Transport Partner Management
- Transport partner strategy & professionalisation
- Securing resources and resource training design
- Competition, effective transport tendering, fact-based negotiation
- Transport cost reduction
Freight & Logistics Tender
- Competitive pricing, quality, and performance assurance
- Individual weight-distance matrix
- Efficient warehouse logistics & layout
- Optimised processes & working capital
- Optimising logistics through synergies
- Finding a fair and stable collaboration model
- Distance and route reduction
- Reduce resource & logistics costs
Supply Chain Network Optimisation
- Optimise delivery times, service levels, & processes
- Reduce working capital
Inventory & Order Management
- Optimal order quantity & stock on hand
- Optimise working capital
- Fleet concept tailored to requirements
- Cost optimisation
Supply Chain & Logistics Strategy
- Sustainable maximum value contribution of the supply chain
- Clear objectives, concrete measures
Digital Logistics Management & Reporting
- Information advantages in speed, scope, & significance
- Efficiency through automation, data integration & process simplification
Interim Supply Chain & Logistics Manager
- Rapid response: candidates within 48h
- Matching of requirements and assessment of suitability using logistics experts
- From dispatcher to logistics manager
Short-term staff shortage? Unexpected need for action?