Transportation Management Report 2011 - Capgemini

Figure 2: Distribution Network Optimization considerations
• Evaluate scenario results: Each
scenario needs to be judged by its
relationship to total operational
costs and the savings generated
compared to the current situation.
What is important for your
managers in this phase is to analyse
the impact of those scenarios on
other aspects of the organization,
such as human resources, legal
(regulations, taxes), contracts with
3PLs and other logistics providers,
transportation availability, total
investment required, and potential
risks. Considering all these issues
will allow you to select the scenario
that best suits the objectives for
cost and carbon footprint and,
ultimately, satisfies all stakeholders’
needs.
11
5
Participate
in
calibration
4
6
Evaluate
Scenario results
Provide
accurate
information
3
1
Identify
potential
scenarios
Define clear
objectives
2
Define
volume plans
The best results for the project will
be obtained if managers know exactly
what to ask, what information to
consider, and the impact of changes
on the organization as a whole.
In a demand-driven supply
chain, distribution networks
are usually designed to satisfy
commercial conditions such as
client agreements, service levels,
delivery frequency, direct shipments,
and lead times. These conditions
become design parameters. We
recommend organizations also
consider what impact changing
these variables will have on cost
savings. In addition to having general
management sponsorship, we
strongly recommend, involving other
functional areas, such as marketing
and sales in the scenario definition
and evaluation process.
Besides obtaining the most costefficient
network configuration, we
have found that analyzing network
costs can lead to the identification of
specific needs for implementing TMS
software, such as load design, route
planning, or carrier selection. And
it can also identify potential areas
where cost reductions and savings
might be available in the short term,
for instance:
• Optimization of inventory
management
• Lower transportation costs by
consolidation of LTL shipments
• Reduction of lead times
• Lower transportation costs by
changes in rates, frequency, and
elimination of errors and non
value-added services
In summary, there are both internal
and external variables (such as
economic context and market
changes) that could make your
distribution network inflexible
and expensive. A distribution
network optimization project, using
advanced simulation software, can
lead to important cost reductions
for a company and allow them to
incorporate green planning into their
network design. When a company
wants to undertake such a project,
both general and supply chain
management should be clear on the
objectives pursued, the premises and
possible scenarios to be evaluated,
and should participate in the
evaluation of solutions presented by
the software, in order to select the
best network configuration.