Common Sense Network Design. Presented by: Dale Pickett MonarchFx VP, Engineering

Transcription

1 1 Common Sense Network Design Presented by: Dale Pickett MonarchFx VP, Engineering

2 2 How complex is your need to perform a network analysis? Outbound only Parcel Parcel, LTL, Truckload Inbound and Outbound Parcel, LTL, Truckload Global Parcel, LTL, Truckload, Ocean Effort Reasonable Little more advanced Inbound and Outbound Advanced Model Global Complex

3 What Do We Mean By Dynamic? 3 Characterized by constant change, activity, or progress Requiring periodic refreshment or change Don t set it and forget it!

4 How Do You Get Started Strategy Some thoughts about your strategy for a Full Scale Network Analysis: Focus on total business value and profit maximization, not cost optimization Network structure and capabilities that impact demand A robust analysis of DC, FC, or other warehouse operational configurations (i.e. capacity analysis before network analysis Global does matter going back to suppliers Omnichannel and ecommerce have changed everything Real Estate Incentives Change management is critical 4

5 What questions do you want answered quickly? 5 Improved Service Reduction in transportation cost Reduction in operating costs Effect of Consolidation Profit How do you project for future profit?

6 What kind of model do you really need? 6 Does it: Ensure alignment with the overall business environment and growth strategy Utilize optimization and/or simulation Analyze alternative processes to maximize return on investment and business value Model with the intent to be refreshed as changes occur in supply chain characteristics

7 What has been the effect of ecommerce Needs 7 ecommerce has changed supply chain processes and practices around network design considerably. An important element of winning in today s multi or omnichannel consumer marketplace, is a network design and processes that are agile, flexible, and fast. Are you considering labor availably, product availability, operational clock and technology Growth of ecommerce has changed the nature of distribution networks forever Speed is critical to satisfy consumers

8 8 ecommerce Modeling A simple model can quickly help you understand the impact of being local for transportation. Advantages Time to complete can be days, not weeks Decisions and alternatives performed ad hoc Sales projections can be developed Disadvantages Labor in the model may need to be excluded Greenfield analysis may not be possible Inbound probably has to be excluded but is it really needed Safety stock increase has to be directional estimated

9 Service level 9 Is service level really up to you? Or is it What your customers want from you? So to keep it simple let s ask the key question: What is your service level promises today? 1 Day 2 Day 3 Day 4 Day > 4 Days Lets do an exercise Give me % of Business by region on Map

10 Data Setup 10 Fill in Map NORTH WEST WEST NORTH CENTRAL EAST NORTH CENTRAL NORTH EAST WEST CENTRAL SOUTH WEST SOUTH EAST SOUTH

11 What is the impact of time to sales? Supply chains were once thought of as a static configuration that was reviewed and updated on a 5-year cycle. Given the smaller world, sourcing options, and dynamic nature of your customer base, how nimble your network is today will determine how competitive you will remain in the future. It is important to define YOUR critical elements and strategies to achieving and maintaining a world-class supply-chain network. 11 How does your company project sales when you are closer to the customer? Service Population Count Percent Coverage Cumulative Coverage 1 Day 208 M 66.7% 66.7% 2 Day 104 M 33.3% 100.0% 3 Day.03 M < 0.01% 100.0% Total 312 M 100.0%

12 Keeping it Simple 12 Measure the inputs that will not yield an impact today Recognize if you have a complex model IT structure What can yours handle today SKU category, not SKU Today we are trying to address to our stakeholders the impact of getting closer Answer the 2 Day or Next Day question impact on your business TODAY

13 Our Parcel Model 13

14 14 Tompkins Internal Parcel Model Overview Network design is not a simple question of arithmetic, there is now a real element of art to the process. Our internally developed parcel network tool allows users to quickly and easily optimize and evaluate the transportation cost and service level for a variety of scenarios based on a simple and concise list of customer data. User specifies client inputs: Network origins Unit Volume Average outbound units per package UPS discount (defaults to zero) Package weight distribution (excel file upload) Desired Service Level (Ground, 2 Day or Next Day) Inventory Origin source site Inbound units per case Inbound case dimensions Inbound trailer utilization Optional Scenario Title

15 Assumptions and Capabilities Tool optimizes on Outbound Costs, Inbound Costs and Service Level Lane with minimal total transfer + outbound costs and best service level is selected. Also includes user designated option to optimize outbound costs only, excluding inbound transfer costs. Outbound Only Optimization Total Cost Optimization 15 Inbound analysis is based on a single source, specified in user form. Inbound from multiple sources should be evaluated outside of this tool. Labor and capacity are not included in site optimization

16 16 Tool Examples 16

17 Scenario #1: 2 Site Network 17 Columbus and Chino network Model Inputs: Outbound Assumptions Total Units 9,450,000 Units/Package 2.1 Discount Rate 15% applied to UPS Standard Rate/Package Package Weight Distribution Table (Right) Inbound Assumptions (apply to multi-site scenarios only) Units/Case 16 Case Dimensions (in) 12 x 24 x 18 Truck Utilization 80% Package Weight (lbs.) % of Volume

18 Columbus & Chino Ground Network Comparison Columbus Total Cost - $44.3 Million Columbus & Chino Total Cost $42.2 Million 5.0% Overall Transportation Cost Reduction 9% Increase in Next Day Service 18

19 Columbus and Chino Ground Service Map 19

20 Scenario #2: 4 Site Network 20 Ground Network for Atlanta, Chicago, Elizabeth, NJ, and Seattle Show inbound optimization vs. outbound only Model Inputs: Outbound Assumptions Total Units 9,450,000 Units/Package 2.1 Discount Rate 15% applied to UPS Standard Rate/Package Package Weight Distribution Table (Right) Inbound Assumptions (apply to multi-site scenarios only) Units/Case 16 Case Dimensions (in) 12 x 24 x 18 Truck Utilization 80% Chicago is Inbound source Package Weight (lbs.) % of Volume

21 Scenario #2 Results Optimizing on Outbound only does not consider any inbound cost to the sites. Including inbound costs in the optimization, shifts some lanes back to the original site because it could would be more costly to transfer the inventory to another site rather than ship it directly. (Chicago is inbound source in this scenario) Outbound Only Optimization Total Cost Optimization 21 Site % of Packages Atlanta 30.05% Chicago 25.89% Elizabeth 23.35% Seattle 20.71% Site % of Packages Atlanta 21.83% Chicago 36.31% Elizabeth 21.91% Seattle 19.95%

22 Scenario #3: 3 Site Network 22 Chicago, Atlanta, and San Francisco Ground vs. 2 Day service requirement Model Inputs: Outbound Assumptions Total Units 9,450,000 Units/Package 2.1 Discount Rate 15% applied to UPS Standard Rate/Package Package Weight Distribution Table (Right) Inbound Assumptions (apply to multi-site scenarios only) Units/Case 16 Case Dimensions (in) 12 x 24 x 18 Truck Utilization 80% Chicago is Inbound source

23 Scenario #3: Ground Total Ground Network Cost: $41.96 MM 91% Two Day Service Cost per Package: $

24 Scenario #3: 2 Day 24 Total Ground Network Cost: $49.9MM 100% Two Day Service Cost per Package: $11.08

25 25 Tool Demonstration 25

26 26 Thank you! Please complete the survey.

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