IT & Operations

Webinar: Network design of the logistical chain delivers large benefits!

June 14, 2013

What is the best way in which to design the logistical chain? During a webinar, Nico Kuipers talks about the two parameters, delivery time and extent of customisation, together with his colleague, Bas Groothedde, of the company Argusi, and about the related influence on the design of a company’s supply chain.

Image: © Nationale Beeldbank

Why would you scrutinise your company’s logistical chain?

‘You could gain advantage by designing the supply chain in a way that differs fundamentally from your competitor. An example of this is the Zara fashion house. Up to a few years ago, it was quite ordinary for the fashion industry to have their collections designed in China. This was done months in advance, and the clothing was shipped to the Netherlands in large containers. New clothing was displayed in the shop, every season. Zara did things differently; they changed their collection every two weeks. They designed their supply chain to accommodate this. They have different stock points and different return points than their competitors.’

The logistical chain is often a mere consequence of the past

Do companies actually do this?

‘There are certainly companies that are extremely conscious of the design of their supply chain. Zara is an example, but so are Unilever, Apple or Hema. Very few companies are, however, involved in this. The logistical chain is often a mere consequence of the past and organic existence. It was not always thought that the supply chain could be designed for the realisation of strategic goals.’

How would a company actually be able to do this?

‘A product with an extremely short delivery time, in combination with a high level of customisation (such as a suit from Suit Supply, for example), requires an entirely different supply chain than a product with less customisation and a short lead time (such as spare parts, for example). The extent of customisation and the promised delivery time are two important aspects in the design of the logistical chain. Changing either one of these two parameters will have a major impact on the supply chain. My colleague, Bas Groothedde, developed a matrix where the extent of customisation is entered on the one axis, and the delivery time, on the other axis. During the webinar we will elaborate on the matrix and on the design of the financial chain.’

"Good question, because it is important to know before you make an investment. The stock cost savings must be weighed against the costs of the chosen solution. Safety stock can be cheaper than predicting with all the factors that influence demand. Take for example the weather, March 2013 was the coldest month in twenty years and that is clearly reflected in our sales figures.
The model indicates that ‘gross sales’ could increase by 4% with the same cost by better allocating the same stock. During a three-month pilot we increased the service level by 3.5% for 350,000 supply points by improving store stock levels. The upstream service level is the next challenge."

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