How many DC’s are optimal?
How many distribution centers should be operated? Where should the DC’s be located? How large should each facility be? What inventory should reside in each? Which customers should be serviced from each DC? What port(s) of entry and transportation mode(s) should be leveraged? Even within a specific industry and market channel the answers to these and other questions are different for every company due to their unique circumstances. Companies are likely encumbered by existing sub-optimal infrastructure (or other liabilities) which must be factored into the model. As a result, the question is often not which supply chain network is best, but rather, does the best network provide sufficient service/cost benefit to warrant the costs and risks associated with the change-over?
Like all supply chain engineering initiatives, efficient supply chain network designs are based on finding the balance between inversely related elements such as transportation vs. inventory costs. That being said, a number of model variables (such as fuel, regulatory issues, port congestion, etc.) may be volatile in nature, causing profound shifts in the model results. Predictive testing or “sensitivity analysis” must be performed to test the effect of these elements (severally and holistically) based on the statistical likelihood of occurrence and the associated cost impact. It is common for a number of supply chain network alternatives to have very similar service/cost performance ratios, but one may have a significantly lower level of risk.
OPSdesign Consulting can map your existing supply chain network, service, and cost structure; build computer models of viable alternatives, and perform a comparative analysis to determine the one that best meets your corporate goals and objectives.