Our expertise | Distribution strategy and network optimization
The design or optimization of a distribution network is a strategic topic for companies. The first objective is the positioning of product and service offers on its target markets in relation to competitors. It also involves a clear understanding and assessment of the impacts in terms of costs, financial assets(inventories) and service levels.
The purpose of these projects lies in the optimization of product physical flows and inventory levels, from suppliers and/or factories to the final customers, either other companies (BtoB) or final consumers (BtoC).
This objective is not new, but solutions to achieve it have drastically evolved as a result of late changes in the economic environment, in the mix of marketing channels available and in the organization of logistics:
- The globalization of the industrial production and internationalization of trade
- The multiplication of alternatives for distribution channels, particularly with digital commerce
- Strong competitive pressure for many industries in Europe
- An increased level of customer’s expectations in terms of service
- Breakthrough in the mechanization of logistics sites
- The development of projects for shared warehousing and distribution, consolidation, pooling, …
- An increase in land transportation costs
- New objectives related to sustainable development
In most cases, before they can become operational realities, these ambitious projects begin with a logistics master plan, the initiating step that allows for:
- The accounting of current and future structuring elements of the project
- The assessment of opportunities available for the 3C (Cost, Cash, Customers)
- The definition of a target organization and the roadmap to get there
Metis Consulting has an extensive reserve of information for benchmarking logistics and transportation costs (based on relevant units of measures). It allows to quickly identify potential short term benefits. Next, the assessment of what is at stake is conducted through detailed and precise modellings of distribution network activities (product transformation, storage, order preparation, value added logistics tasks, upstream and downstream transportation, returns …).
Metis Consulting operates the latest and the best modelling software for computing costs, assessing service impact and inventory levels.
For worldwide companies, with an extended network of subsidiaries, the Total-Cost-To-Serve (TCS) method provides with complete visibility on distribution costs (customer service and logistics) as well as the actual service levels by distribution channel (modern trade, wholesale, …) and by key account. These studies not only allow for the comparison of the operational performance of each subsidiary in terms of distribution efficiency, but they also provide the subsidiary management with an action plan (operational, commercial and logistics) complete with a list of targeted improvement opportunities.
In an environment of B2C (retail, multichannel or e-commerce pure player), Metis Consulting has developed an innovating methodology called “Logistics masterplan RTC® (Route To Customer)”.This customer/consumer centered approach has for objective to:
- Define all possible combinations of customer buying patterns, the Routes, in terms of:
- Purchasing modes (in stores, on the web, through a call center)
- Where the order preparation takes place (at the suppliers’, in a distribution center, in a store, …)
- Where and how the customer gets the product (available in the store, 1-hour store pick up, click and collect, home delivery, pick up at a third party location …)
- Define the customer promise for each RTC
- And thereby, build a physical distribution network (site location, size of area dedicated to storage and order preparation, delivery modes and organization, …) capable of fulfilling the service objectives as defined
Metis Consulting can also assist its clients in the implementation of these projects, dealing with change management, adaptation/alignment of organizations, implementation support, technical solutions for logistics centers, information systems for logistics (OMS, WMS, TMS), outsourcing or RFQ for transportation .
Examples of tasks
Logistics Master Plan, France (Food retailer)
Optimization of the French distribution network for a retailer (200 000 m² of warehousing space over 14 locations, 450 stores) while limiting the social impacts and implementing new concept stores and e-commerce.
Study and definition of the target network done in 4 months with a strong involvement of the client’s operational team (logistics and transportation) and the sales department (supply chain and marketing).
Clear and realistic recommendations, with for most, the implementation within 24 months : relocation of operations, development of synergies for dry and fresh products, activity transfer to more efficient operations.
Monitoring of distribution network transformation (Distribution B2B)
Assist in the transformation of a large distribution network initially operating around 80 logistics sites and more than 2 000 employees : creation of 15 new target locations et streamlining of 60 other locations (change in organization and logistics processes).
- Monitoring of the business transformation program : planning follow up, resource allocation, review of key items and risks
- Preparation of the tools designed for network transformation: process documentation, job descriptions, requirements in terms of skills, preparation of implementation kits
- Support for WMS selection
Clear and realistic recommendations with, for most, implementation within 24 months : relocation of activities, implementation of the identified synergies, activity transfer to more efficient operations.
Logistics Master Plan and implementation (Energy)
Prepare and conduct the transformation of 102 local storage into 11 regional distribution centers for a large company in the energy industry.
- General and detailed design : logistics master plan, social impact/feasibility analysis, process specification and assistance to project management for the conversion to SAP, specification of business requirements (staffing, skills, …) training programs preparation, support to management
- Assistance during Go live : training, assistance to operational launch for the first 2 distribution centers, return of experience (Retex)
- 50% cost reduction with significant increase in product availability for internal customers
- A project considered as a reference base for the company : benefits achieved within budget and schedule
TCS (Total-Cost-to-Serve) method applied over 26 countries (worldwide leader for consumer products)
How to optimize distribution costs in each European country and adjust / tailor the service offer by customer (and/or customer type)
- Conduct a TCS study by country : detailed analysis of distribution cost by customer, by delivery channel with consideration given to the level of service provided
- Identification of distribution’s excess costs and “outstanding” customers (the one showing discrepancies between cost involved and level of service provided)
- Root analysis, definition of opportunities for improvement and stakes
- Definition of a joint Commercial and Logistics action plan
Implementation of 34 different logistics and commercial action plans, tuned by channel or by customer, with an average reachable saving of 6% (4% on large countries and 13% for smaller countries)
Logistics network RTC (Apparel retailer)
- Network of 1 000 stores in 15 countries, 60 million units/year sold
- Redefine the target logistics network to support the growth abroad and the development of Omni-channel retail for a leading retailer of children apparel
- Improve the use of existing tools, and most particularly, the mechanized product handling system
- Positioning of the value added logistics operations over the whole network, from suppliers to customers
- Identification of the target organization and the solutions to be implemented for storage and B2B/B2C order preparation : what products and where, warehouse sizing and operations
- Analysis of technical solutions to be implemented in the warehouses, and most particularly, mechanized product handling systems
- Cost-benefit analysis
- Roadmap for implementation, steps to be implemented and project plan
- Relocation of the product preparation activities in the product sourcing zones
- Consolidation of order preparation activities on one unique site dedicated to omni-channel retailing
- Recommendation for the implementation of a second mechanized product handling line
- Target design allowing for a 8% decrease in unit processing cost
Industrial and logistics organization, Russia (Consumer Goods)
- A worldwide leading manufacturer of fresh dairy products
- Following on the acquisition of a large company in Russia, define the target organization for the operations (manufacturing and distribution)
- Key figures : 1 500 000 tons/year, 24 industrial sites, 70 distribution centers
- Define the target organization, the roadmap for implementation and a short term action plan in relation with the merging of 2 major organizations
- Work on the standardization of practices, processes and organization
- Take into consideration the strategic plans for growth when building the new midterm target organization
- A target network bringing large savings in operational costs (synergies, critical mass, economies of scale)
- The network as defined is under implementation