The Importance of Considering Inventory Optimisation in Distribution Network DesignThe Importance of Considering Inventory Optimisation in Distribution Network Design
Distribution Network Design is receiving increased recognition as a key element in supply chain success. Adapting to shifts in business strategy and growth requires a distribution system that is fast, cost-effective and can deliver customer promise. However, the myriad of options in distribution network design make it easy to miss critical details that could add operating and capital costs or negatively impact service levels.
What are the three types of distribution networks?
Distribution networks comprise the post-manufacturing part of a supply chain and include all stages that deliver final products into the hands of consumers. As a result, they are typically highly complex. To ensure that the system operates efficiently, companies must plan out needs for equipment, workers, information technology systems and transportation fleets. They also need to decide whether to use a hub-and-spoke network, a decentralized network or some combination of both.
A major pitfall that logistics professionals can fall into is overlooking the importance of inventory optimisation in Tailored Distribution Solutions network design. While this is often an afterthought, the more warehouses a company plans to operate in its distribution network, the greater the reliance on inventory management – which is why it is crucial that it is considered during the planning process.
During the planning stage, it is important to understand your business strategy and capacity requirements in terms of product demand, customer experience, response times, product variety and availability, and delivery format. These factors help to determine the optimal location and size of warehousing in a distribution network as well as how much demand can be met by using 3PL providers to fulfil deliveries or by sourcing from direct-to-consumer channels.
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