Executives have long known that profitable growth is influenced by the size, function, and location of their manufacturing and distribution facilities. Even the technology for designing supply chain networks has been around since the early 1980s, when such tools were basically spreadsheets linked to inputs on a map.

But today’s business world is altogether different than it was two decades ago. Faced with a more fluid, complex, global, and unpredictable environment, companies must reassess the composition, structure, and mission of their supply chain networks with greater diligence and frequency. And while many business changes legitimately warrant a reassessment of a supply chain network, the need to revisit and redesign that network is particularly critical when an organization encounters one or more of the three triggers discussed below.

1. A merger or acquisition. Supply chain economies are usually the largest source of savings following a merger, acquisition, or sale of a division or business unit. However, most merged companies shortchange themselves by performing their network (re)designs only at a high level, and only during the post-merger integration process. One exception is a European manufacturer that purchased six companies in 10 years. As part of each acquisition, the company conducted a supply chain-network analysis that revealed new opportunities to:

• Curtail redundancy
• Increase delivery density
• Improve service by rationalizing deliveries within and across regions
• Cut travel times and increase truckload utilization
• Rationalize inventories
• Streamline order management and fulfillment
• Combine inbound flows and renegotiate supplier contracts
• Raise economic order quantities.

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2. A new sourcing model. Sourcing goods globally—developing strategies, capabilities, and formal processes for acquiring materials from countries regardless of their location—isn’t new. Nor, unfortunately, is the fact that many companies don’t support their global sourcing efforts with regular network-design analyses. This is a critical disconnect, since a wholesale revamping of sourcing processes and policies affects virtually every aspect of a supply chain network. Global sourcing is a whole new network-design ballgame because of:

• The influence of low-cost labor
• Increased shipment distances
• Barriers associated with multilingual communication and the level of technology sophistication
• Volatility and reliability issues
• Cultural and political barriers relating to local governance
• The strong likelihood of additional links, handoffs, and customs challenges
• Inventory-visibility problems.

Not long ago, a South African retailer concluded that rapid growth, increased order volumes, changing product mixes, and increased sourcing from low-cost countries warranted a reassessment of its distribution-network design. The assessment’s primary goal was to rationalize product flows from local and overseas suppliers, thus maximizing product availability, increasing supply chain flexibility, and minimizing total network costs. Following the study, the retailer chose to consolidate its distribution network around two main warehouses and a system of cross-dock facilities.

Upon its completion, the redesign is expected to yield annual savings of 15 percent. Other anticipated benefits include streamlined freight routings and better planning capabilities throughout the supply chain.

3. A technology introduction or other business change. Most companies deploy advanced tools, such as e-procurement, product life-cycle management, event-based management, and customer-relationship management. But many also overlook new technologies’ dramatic effects on network planning.

Oftentimes, alterations to distribution and transportation networks are just bolted onto existing operations, leaving the underlying infrastructure unchanged. When this happens, new nodes, complexities, and costs are invariably added. The same oversight frequently occurs with business-related changes, such as new markets or channels, or the addition/departure of key customers or competitors. The bottom line? Every time a major tool is introduced or a major business event occurs, there is a potentially significant impact on the company’s supply chain network.

The case of one international electronics manufacturer provides a powerful example of how supply chain-network design can be linked to a major business event. The company had a new product to launch, but it lacked an innovative way to get it directly to consumers. The solution was the industry’s first pan-European online marketing channel. To make it work, the company conducted an in-depth review of its distribution network. Following the study, it established a central warehouse connected to returns operations across Europe. This maximized facility and network flexibility, enabling the manufacturer to respond very quickly to changing supply and demand levels.

In addition to these three triggers, network studies are also warranted following changes in organizational structure, corporate culture, sales volumes, or customer segments. Companies should be prepared for more network-redesign motivators in the near future—from environmental regulations to measures that control time and labor costs.

As companies work to become more responsive to customers and changing business conditions, those with superior network-improvement capabilities will enjoy a sizeable edge that can help them outperform the competition.