Product Flow Optimization
The process of moving your products from supply through production and eventuallydistributing
them out to customers or stores presents a myriad of choices.The collective set of these choices make up a product’s flow-path through thesupply chain. Modeling these flows can provide you with a total landed cost or
total cost-to-serve for each product. Modeling all the alternative flow options andusing smart algorithms to determine the best choice is called product flow-path optimization.
Case Example: Inbound Consolidation
A consumer goods manufacturer operated five production plants across the eastern half of the country. A modeling analysis showed that there were nearly 400 items from 25 unique suppliers that were sourced across all five production plants. In an effort to reduce the total supply chain costs including sourcing, production, warehousing and transportation, thecompany analyzed the effects of using one or more plants as an inbound consolidation center.The results showed that for 12 suppliers and nearly 300 items, it was more cost effective to purchase product from a single plant to receive higher piece-price discounts, even though there were added handling costs and extra transportation runs. These minor product flowchanges resulted in millions of dollars in yearly cost savings.
Case Example: Port Selection & Rebalancing
A retailer with 260 store locations and a strong e-commerce business was flowing productsinto their market through two ports, one on the east coast and one on the west coast. Fromthe ports, they utilized a combination of rail, LTL and FTL for delivery to four main DCs, 71 hubs, company stores and consumers. Using data including store demand, store sites, DCand hub locations, supplier and port information and average shipment weights and cubes, the company modeled the flow of each product to determine which product should flow through which port and in what quantity. The optimization project recommended a shift of 20 percent product volume to the east coast port which netted annual total supply chain savings of seven percent and simultaneously improved DC, store, hub and consumer delivery