What is a Network Analysis?

Supply chains aren’t just created in one day and then operate unchanged forever. Like all elements of a business, they grow organically, over time. Through the years, customers change, and along with them come new distribution needs. Those alterations no doubt impact delivery requirements…and this is just on the outbound (feeding customer demand) side of the equation. Inbound transportation (feeding production) adds further management complexity.

Along with this organic growth come additional expenses. So how do you know if your supply chain is efficient? Could costs be reduced? Could performance be improved? These are the questions that plague in-house transportation departments. Answers are difficult to arrive at.

It’s been said that one cannot objectively examine a system they are a part of. That’s the reason many companies turn to a 3PL with expertise in transportation management to perform a network analysis. In this objective review, a 3PL company will look at:

• Customer requirements. How do you balance inventories against customer service needs and distribution costs?
• Shipping locations. Where should distribution centers (DC) be located? How many DCs should the company have? Which customers should be served by each DC?
• Storage needs. Are there gains from plant-direct shipping? Should the company contract for warehousing services or operate its own DCs?
• Volume. Which product lines should be produced at each plant and how much? Which suppliers should be used?
• Transportation Modes. Can intermodal or rail be used to reduce costs? Does a pool distribution model make sense? What combination of LTL and TL is most efficient while still meeting transit and volume requirements?
• Data and processes. Are you utilizing industry best practice? Do you have the right talent systems, and processes for performance? Do you have models? Should you be refreshing models with new data?

The goal of a network analysis is to eliminate unneeded movement, which will deliver long-term cost savings. This is done through reducing touches and paid transportation mileage. Uncovering these opportunities requires a 3PL that possesses not only many years of experience, but also the tools to compile and evaluate data.

However, by choosing an experienced 3PL to provide this service, companies can see significant benefits. Logistics savings often range from 8 to 12 percent.

To learn more about this topic and supply chain management, read a column written by WOW Logistics President and CEO Howard Kamerer for the April 18 issue of Cheese Market News. The column can be found here.