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Supply Chain Modelling - for Manufacturers

Supplier: Lexian

Lexian Solutions and Barloworld Optimus offers strategic network design, optimization software and consulting services to leading manufacturing organisations in the entire major consumer markets across the globe with their Australian and New Zealand markets been covered by Lexian Solutions.

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The flexibility of the CAST modelling software and its ease of use ensure a seamless application across all manufacturing industry sectors and geographies, where there is supply chain complexity. This normally includes multi-tiered manufacturing, warehousing and multi-mode transportation options.

In particular, leading global consumer goods manufacturers such as Colgate Palmolive, Coca-Cola Germany, Unilever and SAB Miller, not only use the CAST software to identify the optimal warehousing, transportation and inventory mix within their country supply chains, but also to optimize their manufacturing, production and sourcing capabilities.

We have manufacturing clients using CAST to evaluate the cost benefits of moving manufacturing from the US & Western Europe to low cost manufacturing bases in Asia and Eastern Europe.

Whilst they may benefit from lower manufacturing costs, such a strategy inevitably generates longer, more variable lead-times into the country of consumption and has significant implications on resulting inventory levels in the network.

To remain competitive, companies must now not only consider the domestic supply chain of warehouses and carriers but also the choice of entry port, along with the associated infrastructure capacities, handling charges and international shipping rates.

The extension of the global supply chain means that manufacturers must also look at the opportunities for freight and container consolidation within the country of origin and the choice of exit port. Globalisation brings greater opportunities, but also greater complexity thereby raising the need for planning tools and software that can take into consideration all of these micro and macro elements.

Current Considerations – Developing Markets

Increasingly, manufacturers are not only looking at developing markets as a source for low cost manufacturing, but also as rich, domestic consumer markets with increasing disposable income.

Subsequently, there is significant demand for the services that we can offer to establish the optimal supply chain configuration in dramatically changing markets such as China, India, Russia and Brazil. As the local logistics infrastructure improves and matures in these countries, the opportunities for centralization of the supply chain infrastructure (as has already happened across the US & Europe) increases.

The Proof Is In The Saving!

A study for a high-tech consumer product manufacturer in China looked to optimize an existing 50+ Distribution Centre (DC) configuration for the country. This high DC configuration was largely driven by a 4 hour service commitment.

Assessment of the historical situation revealed that this service was sometimes missed due to the right SKUs (Stock Keeping Units) rarely being available in the local DC. We recommended centralization of the slow moving SKU’s from all DC’s to two central DC’s and the adoption of a next day delivery service. This analysis identified a potential 80% reduction in the network safety stock level for the proposed centralized SKUs.

A CAST study for a leading chemical company aimed to review and rationalise their global caustic soda supply chain. The current supply chain of international caustic soda production plants, storage terminals and multi-mode transportation legs was accurately modelled at an operating cost of US$135 per annum.

Through a series of optimization scenarios, CAST outlined significant opportunities for storage terminal rationalization, optimal production sourcing and demand allocation as well as the optimal selection of competitive transport modes and carriers by lane. The study identified a potential total of US$30 million savings, of which US$ 7 million had been realised within 12 months of completion of the study.

A CAST study for a manufacturer in the US evaluated the benefits of stocking Asia sourced products, (currently held exclusively in a California DC), in their Texas DC in order to assess the opportunity for freight consolidation, by merging it with the product sourced from Mexico, held exclusively in their Texas DC (and vice versa).

Working at the shipment level, CAST combined the Mexican and Asian sourced shipments together from either DC to achieve a more efficient drop size and reduce the number of outbound deliveries, where historically they had gone into the same customer location on the same delivery day but from different DC locations.

The reduction in outbound deliveries, the associated increase in LTL (Less than full Truck Load) shipment sizes and the move up from LTL size shipments to FTL (Full Truck Load) shipments, resulted in an 8% overall reduction in supply chain costs, when balanced against the increased inbound costs to the DC’s required to ship all products from both DC’s.

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