More companies eye network optimization
By Staff -- Modern Materials Handling, 3/30/2006
Supply chain consulting and integration services firm ESYNC (Booth 940) is seeing more client engagements focused on logistics network optimization, driven partly by rising transportation costs, said John M. Hill, principal with the firm, at a press conference.
Network optimization takes a strategic view of where to best locate sites in a supply chain and what optimal inventory levels to hold in the network. "With higher transportation costs, including the price of fuel and driver scarcity issues, more companies are looking to optimize their networks," Hill said.In the past 12 months, ESYNC has conducted three network optimization projects that typically included transportation and customer demographic analyses and often included the use of inventory optimization software to arrive at optimal inventory levels to hold in the network. In some cases, the projects recommend the relocation of manufacturing or DC facilities.The benefits can include dramatic inventory reductions in a company's logistics network, according to Hill. A 20 to 40% reduction in total inventory in the supply chain is possible, he said. In the past year, ESYNC has conducted logistics network optimization projects with London Drugs, a Canadian retail chain, and Selkirk, a Texas-based manufacturer of registers, grilles, chimney, and gas venting products. While there are software packages that perform inventory optimization, the tools still require human input in terms of which scenarios to test further using a tool's "what-if?" capabilities, he said. "These [inventory optimization] software tools are great, but if they aren't in the hands of a practiced logistician, you probably won't come up with optimal solutions," Hill said.
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