spreadsheet models

The Long and Short of Designing a Distribution Network

The Long and Short of Designing a Distribution Network

I’ve noticed a trend in recent years in that when businesses want to check their distribution networks or design a distribution network, they immediately jump into loads and loads of detail. Maybe it’s because the tools are out there to do it now, but I’d like to highlight other approaches that are less time-consuming and resource-hungry. Four Ways to Streamline Your Network Design I’ve been doing network design for all of 25 years. We did it all on spreadsheets in the early days because there were no specialist tools around. Now there are great tools, such as Supply Chain Guru and others. But let’s wind the clock back a bit and look at some of the simple ways that network design can work before focusing on the more complex models. 1. The Back-of-the-Envelope Approach There are some fairly simple back-of-the-envelope approaches that you could take. You could do these on a simple spreadsheet or even a whiteboard. Let’s imagine that you’re operating in Australia, which is rather awkward for distribution because most of the population lives on the east coast and about 7% lives way over on the west coast. People who are new to the country say, why can’t we just have one national warehouse? The problem is, it takes three or four days to traverse from coast to coast. For that reason, companies will usually establish one warehouse on the east coast and another on the west coast, depending, of course, on the service offer. Bring in the Whiteboard How would you do a rough check on a whiteboard? You might look at your existing costs with an east coast warehouse and then, very simply, you could compare the added cost for a west coast warehouse. You might ask the following questions: What’s the total amount of product we may have to move across the country?What’s the transport rate to move it?What’s the extra line haul or trunking cost? We need to factor all of that in when comparing what it costs to serve customers directly from the east coast. So you have to look at the line haul cost against the added cost of setting up a warehouse in the west. That’s a simple back-of-the-envelope approach. You don’t need to do a months-long study with specialist tools to work that one out. 2. Spreadsheet Models Some 20 years ago, we used to build some very complex...

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