Expansion, new GTM strategy, M&A – there are many different triggers for a supply chain network to require redesign. However, implementing a new network is always challenging.

Supply chain networks often develop organically over time as a business grows, expanding to reach new regions or adapting to requirements of different categories in an incremental way. At some stage however, it is common for the supply chain network to become suboptimal for the reality the organization faces, and incapable of delivering against the pillars of the supply chain strategy.  In recent years different forces, such as new customer behaviours, exposure to disruptions and stricter regulations have placed increasing pressure on Supply Chains, demanding new levels of performance from their networks.

These market conditions and a number of changes within the organization can trigger the need for a network redesign:

1. Geographical expansion: stretching the existing model to enter a new country or region can increase cost, lead time, and minimum order level to uncompetitive levels, particularly in cases where there are tax implications.
2. Change in GTM strategy: any adjustment in GTM requires changes in fulfilment and service level requirements, which may not be possible to meet from existing site locations, transport or labor agreements.
3. Increasing consumer expectations: consumer demands now reach beyond cost and service level, to include attributes such as sustainability of the supply chain or agility to adapt to changing needs throughout the consumer journey
4. Changes in regulation: tax schemes, incentives and import duties may re-prioritize countries or regions for sourcing, site location and distribution
5. Exposure to vulnerabilities: Globalization has driven Supply Chain reconfiguration with many players in many geographies, increasing potential vulnerabilities to disruptions
6. Significant volume growth: capacity may be reached within the current network, and/or sales hit a critical mass in which a full redesign could bring relevant cost savings
7. Increased footprint from M&A: following a merger the integrated organization may have new or overlapping capabilities, assets, sites, production and storage capacity, which needs to be re-evaluated to optimize.
8. Omni-channel strategies: adding new channels can require the development of new processes and capabilities, such as last mile delivery and “click-and-collect” pickup points.

Redesigning a network can be extremely challenging because it has impacts on all areas of the business, from the customer service level to tax and logistic costs. From our experience in different industries at local, regional and global levels, we have seen organizations face the same difficulties:

• Capturing the different perspectives of internal stakeholders regarding the business case that triggered the network redesign and ensuring alignment throughout the whole process, given the impacts of the different scenarios being analyzed.
• Managing the complexity when integrating the large volume of data required from multiple areas, BU’s, systems, files, etc. that might not be complete and will need complementary analysis and the definition of various assumptions
• Modelling the company’s operation, defining and analyzing alternative scenarios, and finding the optimal solution based on different perspectives, requiring specialized technical knowledge.

Network redesigns involve long-term decisions and investments, with limited reversibility. This condition can cause stakeholders to hesitate if there is not an external perspective providing analysis based on experience.

Integration supports our clients in all these different contexts, redesigning their network hand in hand, evaluating the different viable scenarios and building a comprehensive implementation roadmap.

Integration has supported many companies redesigning and implementing their network. Our methodology helps you to:

• Pin-point issues in your network which are incompatible with your strategy
• Identify gaps versus benchmarks in your industry, and comparable industries
• Design the optimal network for your business needs, considering your existing network and capabilities, bringing different scenarios where relevant
• Define the quantity of operations, and ideal location, size, and purpose in different scenarios
• Analyze financial implications of different scenarios to support strategic trade-offs
• Evaluate qualitative aspects of the different scenarios and its potential risks
• Bring a clear business case for the recommended solution for your reality
• Prepare a feasible implementation plan, to guarantee a smooth transition and minimize customer impacts, outlining fundamental assumptions which, if changed, would trigger further network adjustments

While designing and implementing a new supply chain network is not easy, an optimized network enables you to realize your strategy and improve competitiveness:

• Drive growth: prepare your business to profitably deliver higher volumes
• Reduce complexity: especially after M&A activity, improve ease of management
• Improve agility: to meet with new or changing customer demands
• Optimize CAPEX: across different regions for each product category
• Improve resilience: reduce/solve vulnerabilities, relieve bottlenecks and prepare crisis mitigations and contingencies to reduce impact of system shocks
• Embed sustainability: reduce greenhouse gas emissions through environmentally efficient distribution lanes, to meet regulation requirements and consumer expectations
• Reduce logistics costs: eliminate inefficiencies, streamline taxes, and improve visibility to support future strategic decisions
• Develop omnichannel capabilities: enable new channels to compete in today’s landscape

Our network design methodology balances a strategic perspective with analytical rigor to develop a model which is technically sound and aligned with your team’s needs

Our methodology is comprehensive, allowing us to model a number of scenarios from the baseline of today’s reality to an ideal unrestricted view, with an infinite number of variations in between based on your constraints.

We approach network design projects through six main steps:

1. Business & Network Understanding: Understand the current context, characteristics, and dynamics of the business and operations, interviewing key stakeholders and analyzing company data, in order to evaluate the current network and set the baseline for evaluation.

2. Network Modelling: Develop the network model, defining all the assumptions together with our customers, a simulation tool (optimization, dynamic or static simulation) that fully incorporates costs, product flows, and other business assumptions such as future trends on demand, channels and market characteristics. Besides, we make sure to transfer the knowledge of the model developed to our customers allowing them to test different scenarios after the project, if necessary.

3. Scenario and Sensitivity Analysis: Define, simulate and evaluate potential alternative network configuration scenarios, from greenfield to real-life restrictions, to select the preferred ones based on the company’s context, guaranteeing constant alignment with key stakeholders about what is being tested. Also, stressing the main variables and assumptions to analyse its impacts on the final recommendation and to evaluate the robustness of each scenario.

4. Business Recommendation: Define the best network design/configuration through the evaluation of the sensitivity analysis results and the financials (CAPEX vs. cash flow) of the preferred scenarios, after presenting to and discussing with our clients the different options and trade-offs they will have to face with each alternative.

5. Implementation Roadmap: Define the network implementation roadmap and perform the risk analysis by interviewing the key stakeholders that will be impacted with the changes proposed for the recommended solution.

6. Assumptions documentation: Provide detailed documentation of each assumption used to get to the final recommendation, which is a key aspect of the methodology as assumptions change throughout the years and so we do not only document them, but we also make sure that the owner of each assumption is comfortable with its definition and how to adjust it in the model. It must be clear which variables resulted in the recommended scenario and who inside the company is responsible for this assumption.