Re-engineering network design projects

One of the most valuable projects that a logistics and supply chain management professional can undertake is a distribution network redesign using one of the many powerful applications developed over the past two decades. For those manufacturers, distributors and third-party logistics providers (3PLs) that have seen the service and cost improvements that a well executed network design project can yield know well that these projects need our best people, processes and technology.

Some past project teams found themselves spending a small fortune on building models to run on powerful optimization platforms. Consultants used to use the 80/20 convention: 80% data collection and cleaning and loading; 20% running scenarios and fine-tuning results.

If you’ve been running network design projects for as many years as I have, you’ve seen the revolution in how these initiatives are conducted and the improvement in outcomes that are possible today. The projects are much more satisfying if the ratio of data collection vs. time running scenarios is closer to 50/50 or better.

With that in mind, below are five key ingredients for a successful, fast network redesign.

Investigate several network tools and find out what they need to execute.

While it’s suggested that shippers look at desktop vs. Cloud-based solutions, the longer-term value is in the ability to include key variables and the ease of importing data. Today’s Cloud-based tools are every bit as effective as the best desktop network design applications for most logistics projects.

More variables will give you the flexibility to consider more than transportation data such as labor, tax and productivity costs. Ease of importing various types of data—assuming you have the right clean, usable data—will reduce the set up time for iterations of your model.

Know your sources.

With a selected tool in mind, map the needed data to a source, and keep in mind there may be a combination of internal and external sources that will be required. Large firms with multiple 3PL partners and perhaps multiple ERP systems and data centers will need to do some investigating to determine the most reliable data warehouses for modeling purposes. Remember that standard enterprise systems may not see the value of keeping logistics details for long periods of time, so make sure you can get a representative sample over time without extraordinary efforts.

Plan ahead.

Map out data sets for transportation management systems and order management systems to mirror the inputs needed for network tools. Get technical help to make sure that you can load history and costs from existing internal or external systems. Both shippers and 3PLs can leverage their investment in transactional systems like TMS, WMS and OMS to save time and money by quantifying their options in service and cost improvement. This should not be overlooked when selecting a new transaction system.

Bring in the expert team.

Redesign projects can be confidential in nature. Even with that restriction, it’s critical to get the right resources—the right people and systems that can provide quantitative and qualitative input to the modeling work. With the recent improvements in transactional data collection by 3PLs and trading partners, it may be that project leaders have multiple places to source clean, usable data. And remember to get the business folks on board because subject matter experts can fill in gaps in data with experiential data points.

Prepare for future redesigns.

A best practice is to plan for periodic network reassessments to respond to mergers, acquisitions and new market factors. Having data and a ready tool “at your finger tips” is a key to success in logistics and supply chain management. Knowing how to quickly turn that data into actionable, quantitative recommendations is critical to success in your supply chain management career.