Why do we need to launch a Supply Chain Network design analysis?
New suppliers, new customers, new market rules, … There are so many changes in our markets today and impacting the management of our global supply chain(s).
We know that CHANGES are part of Supply Chain Management, and as part of the change management, we need to assess the changes’ impacts.
The supply chain network is sometimes modified in some parts, changed in some locations/regions (upstream or downstream, demand, subcontractors…).
However, sometimes we need to step back on the global supply chain analysis and review its design.
What are the main reasons to change your global Supply Chain Network (and to assess the impacts of a new design)?
We identified below standard types of changes in our Supply chain which need to launch a Supply chain network analysis.
Change of regulation and policies
New product shelf life, border control, administrative process, …
New regulations on product management have impacts on supply chain management. It could directly impact the lead time of your product and the administrative process. It could impact the transportation or packaging rules.
Type of question to ask the team: What is the impact of these new regulations on transportation’s condition (use of refrigerated truck)? How long do we have to keep the material before selling it to the customer?
Customer changes: growth/decrease of volume
An increase or decrease in the demand impact directly the performance of the supply chain. A new regional market or new product line needs to be assessed by the supply chain teams regarding the global flows (information, material, and financial).
You have also to think if you want the same strategy in all regions or regional strategies depending on your customers’ locations. Even when you face the decline of your product, your team should assess these impacts on the supply chain network.
Type of question to ask the team: How to propose quicker the product for this growing market? How to reduce the cost of the supply chain for the end of live products?
Changes of intermediary actors
Change of subcontractor and partner (e.g. 3PL ? 4 PL ?) in the supply chain network impacts directly the management of the supply chain. If you are working with transportation partners their performance and strategies could directly impact the performance of your supply chain network.
Type of question to ask the team: Do we have to change the retailer position? And/or inventory location? Do we have to internally keep this distribution center? …
Cost reduction
Supply chain management is business, and the target for all companies is to make money! Assess the ownership of the process, even just make the analysis of the supply chain management performance for some regions of your company could be powerful to assess the global rentability.
You need to reduce the cost in your entire supply chain, the first thing will be to look at all supply chain processes and the parameters defined (Lead times, MOQ, Lot sizes, article constraints, inventory location…).
Type of question to ask the team: Do we have to keep these activities or subcontract these ones? Why do we have this inventory position? What is the inventory run for each location?
Environmental impact of your supply chain
Our today’s supply chains have not been designed with the environmental impact dimension. But if we look at the customer’s sensibilities it’s one of the drivers for the next year’s market.
Taking the opportunity to design the new supply chain network with considering environmental constraints (type of transport, Carbon consumption, …) could impact the image of the company and be greener than before. For example, if we look into the future the taxes on carbon impact for our companies will increase, or in some countries, subsidies to help reduce the carbon impact of companies are already available.
Type of question to ask the team: Do we know the environmental impact of our Supply Chain? If we change the location of this warehouse, will it be less energy-consuming?
The type of decisions to do after a Supply Chain Network design analysis
Following the analysis of your Supply Chain network, you will be able to find opportunities to improve your Supply Chain, from a profitability and efficiency point of view!
Make or Buy
If you define the process as a core business or profitable then keep it! Make it! If the process is time, money-consuming then look at the sub-contracting possibilities available in your supply chain network.
Distribution/Hub location
Some regions are more attractive than others to set up a Hub.
There are new markets which need distribution center and some other ones which need to be reduced.
Inventory location
Some high runners are not in the same position as it was before. Some products are now massified in a single regional location point (Distribution Center) compared to several before and are more quickly transported. It leads to better inventory costs and OTD performances (thanks to massification).
Items parameters
The demand path of your product has changed but not the settings, then you need to review some of the item’s parameters’ definitions.
Such as:
- Push/Pull
- Safety stock level
- Lot size
- Minimum order quantity
- Product Lead Time
A review of the supply chain design is needed if your supply chain lives! Flexibility and profitability of your supply chain will be key to be sustainable in this volatile world!
Contact us if you are looking for support on your Supply Chain network design improvement.
If you want to go deeper into the topic :
https://www.agilea.us/delivery-performance
https://www.supplychain247.com/paper/what_is_supply_chain_network_design_why_is_it_important