Nine Key Elements for Developing a Successful Supply Chain Network Strategy

Key elements to a supply chain network strategy

1)  Network layout

A key output of a supply chain network strategy is the number, location, type and size of facilities in the network. Organisations must strategically locate facilities and adjust their size and throughput capacity to meet customer expectations and be flexible for future growth.

Another important factor to consider for these distribution facilities is what their role and mission are in the supply chain:

• Full-service distribution centre (DC)
• Centralised (hub) DC
• Forward stocking DC
• Cross-docking centre
• Import centre
• Mixing centre
• Returns centre

2)  Cost controls

As with most organisations, cost control is a primary focus. Understanding capital and operational costs and realised savings after implementation are important factors when evaluating and creating a strategy to optimise your distribution network. Operations will need to understand key service metrics that include time in transit, on time in full (OTIF), and carbon footprint impacts. Other essential costs to consider are:

• Variable facility costs
• Inbound and outbound transfer freight costs
• Inventory carrying costs
• Leasing or rental fees
• Labour costs and availability
• Maintenance and repair costs

7)  Risk/Continuity

Risk and continuity are key factors to examine in a supply chain network strategy as they test the flexibility and resilience of the supply chain network. Performing sensitivity analysis around key inputs in the supply chain network model can answer questions about how the network would react to outside forces like natural disasters, geopolitical unrest and economic instability. Some questions to consider in the analysis are:

• What if the labour market continues to tighten and the labour pool continues to shrink?
• What if diesel fuel increases by 50% over the next five years?
• What if there is a trucking or port strike that affects shipments?

You can also test a network’s resiliency by modeling; for example, if you were to temporarily or for an extended period of time lose a node to a natural disaster or some other type of downtime event. Running virtual scenarios and models can help an organisation understand its risk and continuity concerns and help prepare for them.

8)  Qualitative factors

While many of the outputs of a distribution network strategy are quantitative in nature, there is more to it than numbers. It will also include many qualitative factors, such as:

• Implementation complexities and challenges
• Availability of internal and external resources to support the project
• IT network structure and software
• Sustainability

A solid distribution network strategy needs to consider both quantitative and qualitative factors.

9)  Implementation roadmap

Developing an implementation roadmap is the final step in a distribution network strategy. This should include all major activities to move to the future state network and will typically include major activities such as:

• Acquiring a greenfield facility or renovating a brownfield site
• Creating an operational design, and processes and a plan for the automation to be used
• Implement distribution software such as a warehouse management system (WMS) or a warehouse execution system (WES)
• Lead times for material handling equipment manufacturing, installation, integration, and testing
• Plan for installation either in a new facility or in an operating facility
• Operational readiness and stress testing for the entire system
• Hiring new employees with skills needed for the new operation

Developing a realistic implementation roadmap, a vendor communication plan, as well as a plan to address integration obstacles can lead to a successful and on-time implementation.