LFA Distrubution Network Design
LFA Distribution Network Design
Distribution network design options must be compared according to their impact on customer service and the cost to provide this level 0f service. LFA Distribution Network Design helps to determine the optimal network that will provide the customer with the right goods, in the right quantity, at the right place, at the right time and meet the marketing strategy of the company.
Distribution as a Part of Supply Chain
Distribution refers to the steps taken to move a product from the production stage to a customer stage in the supply chain. Distribution is a key driver of the overall profitability of a company because it directly impacts both the supply chain costs and customer experience.
Good distribution system serves the effectiveness of realizing marketing strategy. This strategy is aimed at reaching certain levels of customer service. Some companies stock the products on the warehouses close to customers to supply when necessary, other prefer to ship directly from the factory when the customer places an `order`.
LFA Distribution Network Design helps to determine the optimal network that will provide the customer with the right goods, in the right quantity, at the right place, at the right time and meet the marketing strategy of the company.
Factors influencing Distribution Network Design
The balance between the level of customer care and the distribution costs to meet this level determines the corporate distribution strategy.
Elements of customer service: response time, product variety, product availability, customer experience, `order` visibility, returnability.
Distribution network costs: inventories, transportation, facilities and handling, information.
Distribution Network Design
The objective of strategic distribution network planning is to determine a plan that indicates the most economic way to ship and receive product while maintaining or increasing customer service requirements, or simply put, to maximize profits and optimize service. Strategic distribution network planning typically answers the following:
How many distribution centers should exist?
Where should the distribution center(s) be located?
How much inventory should be stocked at each distribution center?
What customers should be serviced by each distribution center?
How should the customer `order` from the distribution center?
How should the distribution centers `order` from vendors?
How frequently should shipments be made to each customer?
What should the service levels be?
What transportation methods should be utilized?
How to measure the balance between logistic costs and customer service correlation?
Strategic: develop the corporate supply chain model; position the logistics in corporate structure; supply chain design; providing distribution management with IT support.
Tactic: design the reference model for regional distribution network; work out procedures and documents circulation; organize the planning system; determine the transport strategies; determine inventory policies; Dynamic Distribution Network Re-design; distribution center design.
Operational: design, build or modernize the warehouses, implement the procedures and documents circulation; implement the KPI system; implement the Warehouse Managing System; implement the Transport Managing System, etc.
The LFA Distribution Network design steps
1. Logistics audit of the distribution network
Historical and current data collecting and analyzing
Customer service levels analysis
Development plan assumptions
Existing distribution network formalizing
Develop recommendations for existing system of distribution
2. Develop network model
Review modeling assumptions
Develop/configure model to match existing network
Define network alternatives
3. Optimal model defining and implementing
Analysis, evaluation of alternatives and defining the optimal model
Developing general plan for implementation
Evaluating the effectiveness of implemented model
4. Dynamic Distribution Network Re-design