Webinar: What value does reallocation research offer?
March 12, 2013
Is a product group's production location still the best site? Could it be produced cheaper elsewhere? Research is needed to determine whether it is necessary to reallocate a product line. Strategic Supply Chain Planner, Tjeerd den Os, found that conducting reallocation research is not so easy at his employer Heineken, the beer brewer.
Image: © Nationale Beeldbank
What did you encounter?
"How easily can you freely shift around the production of diverse product groups? What are the consequences of moving a product from the Netherlands to Spain for example? What impact does improving productivity in the Netherlands have on production in a different country? What are the effects on the integral supply chain costs? These are the kinds of questions I received from Heineken and which I researched.
To conduct this research properly you have to compare costs. You can only do so if the data you possess is reliable and transparent. At Heineken that is not always the case. For example, in the Netherlands products are identified using six numbers, the French system uses ten and the UK uses a combination of numbers and letters. It also appeared that the capacity of a brewery could not be compared one-to-one; in some countries Heineken produces according to variable working hours. The master data you use must be the same."
Reallocation research could be conducted more often
Do companies perform enough research into reallocating their product lines?
"I think it could be done more often. At the moment it usually occurs sporadically. Probably only if a question arises in the organization, for example from new clients or new products. I think a company should examine whether, from a strategic point of view, products are still produced at the best location twice or three times a year. If one decides to produce a product at a certain location when it is introduced, then the situation often remains unchanged for years. Even if the costs and market situation change."
Cost savings can be significant
For which companies is research into reallocation interesting?
"Actually for any company that has several production facilities. It doesn't have to be a large company. For a large company cost savings can be significant because more costs can be saved. But for a small or medium size company it is also important to examine the situation. I noticed that at Heineken the systems and data are fragmented; different software standards are applied in different countries. This means that the data sets drift further and further away from each other. By reflecting on the situation at the beginning it is easier to compare uniform data when the company expands. This can be achieved more quickly in small and medium companies, which proves the usefulness of reallocation research.