Re-Engineering Your Distribution Network
By Bill Elenbark on Mar 25, 2008 in Publish
In February’s Logistics Management, senior Gross & Associates engineer Maida Napolitano wrote a featured article on distribution network modeling, the first in a two-part series titled “Locating Your Distribution Centers: Re-Engineering Your Distribution Network.” In this article, Maida describes the use of network modeling software to optimize a distribution network by reducing transportation and warehousing costs or improving service levels, or both.
This article features interviews with two Gross & Associates staff members who specialize in network modeling, Jack Kuchta and Bill Elenbark, along with two clients who worked with them on an engineering effort to optimize their own networks.
The most common driver for distribution center (DC) network re-engineering, says Kuchta, has been the realization that freight costs have a significant dollar impact on the bottom line. “With today’s rising energy costs, reducing transportation costs across the network has certainly become more pervasive and cannot be ignored,” he says. A network study may simply stem from operational growth resulting in a need for an additional warehouse in a different geographic area.
“Opening more stores in the West Coast, for example, may trigger a need to add a West Coast distribution center (DC),” adds Elenbark. Other reasons for studying your network may include mergers or acquisitions resulting in overlapping or excess warehouse space, new company policies and buying incentives forcing a shift in freight modes, or a need to reduce warehouse costs by investigating other areas with more affordable labor pools.
John Goione, who oversees the distribution of service parts and accessories to BMW’s retail group of car dealers and showrooms, found that transportation costs were just part of his bigger concern. “In 1999, we had two distribution centers, one in the East Coast and another in the West Coast,” recalls Goione. “But continued growth volumes, a hypercompetitive premium luxury automotive market, and rising transportation costs all compelled us to revisit our network.”
Click here to read the entire article. Click here to learn more about distribution network modeling.
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