Logistics network optimization can save money on warehousing, transportation and inventory. But don’t bank on it if your optimization doesn’t also consider strategic factors.

That’s one conclusion of a new white paper from USCO Logistics of Naugatuck, Conn.
Many companies mistakenly conduct optimization studies that are almost exclusively data-driven. “Their assumption is that you just plug in the relevant data on size, weight, volumes, ship-to points and other factors and output the ideal network design. However, in focusing too much on the modeling exercise itself, companies can miss the strategic and practical context for the analysis,” said Ashutosh Dekhne, USCO Logistics’ supply chain engineer and the white paper’s author.
Consider the company that conducted a “successful” supply chain network modeling exercise and revamped its entire distribution network. Just three months after implementation, however, it purchased another company with distribution center locations that overlapped its own. The result: redundant distribution centers and inventory duplication.
“By considering the strong likelihood of an imminent acquisition, the company could have better positioned itself by either delaying the optimization implementation or considering potential harmonization of the two supply chains,” Dekhne said.
Dekhne suggests a six-step approach that weighs the strategic and practical, in conjunction with data analysis, to deliver optimal results. The process is detailed in the new USCO white paper.
For the complete white paper visit the USCO Logistics web site at www.usco.com/wp_network_optimization.cfm.