Your supply chain network design ensures your organization has defined, created, and optimized the ideal supply chain for your needs. Effective supply chains require intentional network design, and Optilogic’s platform empowers you to create and implement those smart supply chain designs.  

This article from Optilogic explores the benefits of network design in supply chains and the many ways your organization can profit from supply chain design done well.  

The Role of Network Design in Supply Chain  

Supply chain network design is the process of modeling your current and future-state supply chain to understand better the costs and time associated with bringing goods to market with your available resources and locations. The ongoing process evaluates the end-to-end supply chain to balance cost, service, risk, and ESG elements.  

Read: What Is Supply Chain Network Design? 

Network design in supply chain helps you define a “good” supply chain for your organization, empowering you to optimize your processes and achieve –– or surpass –– your KPIs.   

Optilogic’s Cosmic Frog platform provides the tools and power required to execute network design that solves real problems in your supply chain. We highlight the benefits of supply chain network design below. 

Data-Driven Insights that Guide Better Supply Chains

Supply chain network design delivers answers that have historically required significant time and effort to acquire. Regarding supply chain strategy, many companies are limited in the responses they receive from their models because they’re limited in the questions they can ask.  

Without network design, businesses aren’t aware of their supply chain inefficiency. They experience significant redundancy or can’t answer why they’ve made certain decisions regarding their supply chain.  

But when businesses have access to high-performing supply chain network design platforms, they can ask more sophisticated, high-level questions that provide insightful and nuanced answers regarding how their business is run, how it should run, and weaknesses in current processes.  

The most significant benefit of network design in supply chain is the data-backed realization that organizations can be run differently: more efficiently, effectively, and with greater profits.

Understanding the Cost of Business Processes

Organizations incur tangible and intangible costs associated with running their business. Optimizing costs for both types of spend is crucial for your company to see profits.  

Most organizations rarely conduct an analysis of their cost of operations. But through network design, you can understand how to use your resources best to ensure on-time service while optimizing your cost of business processes.   

For example, suppose you want to lower warehousing inventory because you believe that’s where you’ll save. Network design shows how inventory levels affect service, order cycle times, and other factors within your organization that don’t fall into tangible cost categories.  

Optilogic’s supply chain network design shows the interconnectivity of your supply chain, highlighting how each factor impacts others to give you a high-level view of your cost of business processes.  

Get Answers Quickly

Optilogic integrates raw information data into its models faster and easier than any other platform, running much larger, more precise, and more accurate models than ever. The standard and expectation is speed to answer, and Optilogic delivers.  

Utilizing the cloud, you can hyperscale to run hundreds of scenarios simultaneously, exploring virtually unlimited supply chain options while balancing cost, service, and risk. Cosmic Frog network optimization runs 40% faster than competitor solutions, making your network design process even more efficient. 

Reducing Working Capital

Many organizations needlessly overspend on working capital budgets. Network design helps you reduce those costs and funnel your resources where they’re needed.  

For example, reducing one aspect of your costs without balancing your working capital can diminish any potential savings. Effective network design eliminates these preventable losses.  

Choosing to include working capital within your models depends on what each company can see and capture from a working capital perspective. If and when you’re ready to incorporate this element into your model, Optilogic Cosmic Frog platform makes it simple.  

Lower Transportation Costs

Transportation costs comprise the highest overall percentage of costs a supply chain incurs. These costs are typically higher than warehousing, labor, or other areas, and this element often has the greatest flexibility for organizations seeking to optimize supply chain design.  

Transportation costs consume significant resources for your business, but you have ample pathways to reduce these costs through smart supply chain network design.  

Optimize Transportation Routes According to Time and Cost  

As you redefine your entire supply chain network with increased warehousing or decreased distribution locations, you will impact transportation routes because transportation impacts utilization. As you increase utilization, costs go down.  

Network design also impacts the time-to-delivery. Proximity to your customers affects the frequency of their order cycles, impacting your utilization on a truck and your delivery sequences for those customers. Your network design helps you create transportation routes based on cost and time optimization, improving these metrics alongside service.   

Reduce Fixed Costs, Including Facility and Equipment Costs

Any time you have a fixed cost, such as facility and equipment costs, you want to maximize the utilization of that cost. Your model evaluates fixed costs and ensures you run the greatest number of throughput items through these locations to balance cost and equipment.  

Addressing facility and equipment costs can be a helpful factor when structuring your entire network for optimization, reducing spending where possible and saving exponentially over time.  

Lower Variable Costs, Including Labor and 3PL Costs

Labor comprises a very small percentage of costs within the supply chain. Transportation, warehousing, and production all consume a higher percentage of your overall costs. However, labor is still a factor as your structure your network. Optimizing the smaller, less impactful elements of your network ensures you’re saving where you can and dedicating your resource spending most effectively.  

Optimize Service Levels and Delivery Dates to Improve Customer Satisfaction

Volumes and orders change as you move closer to your customers and deliver more frequently. Attaining your target service levels is essential and is how businesses succeed and fail in today’s hyper-competitive market. Service level is the customer-facing result of good supply chain design.   

That service level will impact your order cycles, affecting inventory and truck utilization. These are pivotal elements regarding customer satisfaction and must be considered in your supply chain network design.  

Understand Cost Visibility across Your Network

Various costs drive your supply chain decisions: service, costs associated with volumes or capacities, production, distribution, transportation, and more. Plus, you’ve got ancillary costs to consider: accessorial charges included in transportation and warehousing are highly variable.  

Organizations need visibility to understand these costs and how they impact each other. Cost visibility helps you make the right decision regarding changes within the network and how you want to impact product flow and capacities.   

Understanding cost visibility across your network empowers you to make decisions now that affect your organization in the future, creating long-term stability and profitability.  

Understanding and Optimizing Cost to Serve 

Cost-to-serve analysis provides the data and information management needs to know the costs of serving all customers of every size. Many organizations don’t run cost-to-serve analyses and therefore don’t know what is required to serve their customers.  

Using data from scenario modeling, you can see how various models and outputs can positively impact the cost to serve across your organization. Having access to this data enables you to make supply chain decisions that preserve your resources, increase savings, and ultimately provide better service to your customers.  

Cost-to-serve runs automatically in Cosmic Frog, meaning users can understand the cost to fulfill demand and replenish facilities across the entire supply chain—on every scenario. Check out the benefits of cost-to-serve analysis. 

Create an Optimized Supply Chain Network Design with Optilogic’s Cosmic Frog  

Without strategic, data-driven network design, your supply chain will have weaknesses affecting your attainment of your KPIs.  

Today’s supply chains need to be tougher than ever to withstand the risk inherent in today’s political, environmental, and economic climate. A robust, resilient supply chain begins with intentional network design. If you aren’t considering cost, service, and risk in the supply chain design phase, your supply chain is not engineered for resilience. 

Optilogic Cosmic Frog is the only supply chain design platform that balances financials, service, and risk—in a 100% SaaS-based environment. 

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