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Case Study
A Fortune 500 medical device
manufacturer had grown throughout
Europe by acquisition of national
players, thereby creating a
distribution network with one
warehouse in each country.
This network design was an accident
of history. It had made sense for
individual national players to have
their own local distribution facilities.
But it didnt necessarily make sense
for the combined company. And with
the advent of the Single European
Market in the 1990s, all remaining
barriers to cross-country shipments
were removed.
Our analysis began by mapping the
existing supply chain network and
removing the country borders from
the map. Instead of irrelevant
country borders, we focused on
customer service requirements,
lead times, and shipping costs. We
showed that demand could be met
with just three strategically-located
regional warehouses, plus a single
European hub for items with a high
value-to-volume ratio. The resulting
increase in freight costs was far
Introduction
Recent years have seen an explosion of interest in
Supply Chain Management (SCM). Movements such
as Re-Engineering and Six Sigma have led managers
to question and redesign the processes through
which they operate their supply chains.
But the biggest savings from SCM are typically
not achieved by changing how the supply chain
is operated; they are obtained by changing its
structure.
Indeed, we find that typically 70% of the cost of a
supply chain is built right into its structure placing
a severe limitation on what even world-class
operating practices can achieve. It is of little help
to have a world-class JIT production system if you
remain uncompetitive because your plant is simply
too big and in the wrong place.
Our Supply Chain Strategy and Network Design
practice helps clients attack the strategic decisions
that drive 70% or more of supply chain cost.
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1
The location at which actual orders (as opposed to forecasts) drive the activities such as assembly and materials movement).
Proven Methodology
Over the course of multiple projects across many
industries we have developed and refined the threestep methodology shown in Figure 2.
Note that we believe that the insight on why
the proposed solution is optimal is often more
important than the solution. Given how fast
conditions change supply chains cannot be static,
and these insights give our customers the ability to
monitor their business and adjust and re-visit their
decisions accordingly. We also help identify the
right level of resilience/responsiveness to changing
supply and demand conditions by incorporating
uncertainty and its associated costs correctly.
Getting Started
To learn more please visit our website at
www.e2eAnalytics.com, or contact us by email
at info@e2eAnalytics.com.
Analyze
Network Economics
t
segmentation
t Establish total cost of
current network(s)
SHORTAGE COSTS
INVENTORY COSTS
FREIGHT COSTS
FIXED MFNG COSTS
VARIABLE MFNG COSTS
Model
Alternative
Network Designs
t Build right model
Intended use?
Optimization, or just
what-if?
Granularity?
t Validate output
t Perform sensitivity analysis
Use Model to
Drive Strategy
t Distill model output for
managerial consumption:
Total costs of alternative
designs
t Develop strategy
t Create implementation plan