The success of logistics network optimization does not lie in fabricating a neat-looking concept, presenting an ideal solution, or using complex equations. Rather, the success ultimately depends on whether they can persuade C-level investment decision makers. Such persuasion requires in-depth collaboration between the consultants who are responsible for logical thinking and analysis and the workers in the field who have first-hand knowledge of the current status of their companies.
This white paper examines an actual logistics network consulting project and takes a look at how a logistics project is carried out and what factors need to be considered for its successful completion.
Why VOC and Data Analysis Matter
A logistics consulting project normally takes three months to complete, which is not a long period given the difficulty of the work required for the project. This includes understanding the overall workings of the company and developing insights into the nature of the current issues. For this reason, in logistics consulting projects, consultants establish plausible hypotheses first and then assess them later. This logical thought process guided by the hypotheses helps increase the efficiency of the projects.
Developing hypotheses begins with carefully listening to the voice of the customer (VoC), which may tell consultants where the client is headed. Then, the hypotheses are assessed and proved by analyzing the logistics data and other related data collected by a company. Through this process, consultants select the most reasonable solution. In sum, in the early stages of a consulting project, consultants interview customers to establish hypotheses, prove them by securing and analyzing the data.
Listening to the VoC and performing data analysis are two of the key roles a logistics company tasked with a consulting project should play. They represent the process through which consultants prepare the findings with which to move the key men’s hearts, that is, reasonable and viable plans to optimize customer logistics networks.
Selecting Candidate Hubs and Developing Scenarios
The viability of network optimization depends on which hubs are selected as candidates for simulation.
In a recent consulting project for a Korean cold food and beverage brand, my team and I divided Korea into three large areas, taking into account the areas covered by the company.
Developing Network Management Plans Based on Logistics Characteristics of Products
In general, food products that require cold storage have different logistics requirements depending on their temperature range.
As for frozen food products, their sales peak during summer. In a project that I participated in, to accommodate the sales spike during the peak season, additional warehouses were leased between March and September to build up stocks. For this reason, warehouse areas were re-calculated based on an appropriate number of days of inventory between the average and the maximum. And the peak season stocks, which are not reflected in the recalculation, were handled with warehouses leased on a short term.
Calculating Cost Factor and Performing Baseline Modeling
The cost factors can be calculated in different areas: transport cost factor, delivery cost factor, and unloading cost factor. Even when the cost factor data from the client company is available, it is more desirable to perform the calculation based on cleansed basic data rather than using the company’s data as is.
If possible, consultants need to come up with a reasonable total cost that is acceptable to the client company, by considering the appropriate fixed costs and variable costs in the baseline data.
Developing Quantitative and Qualitative Criteria
The top priority considerations of C-level investment decision makers is cost. For this reason, when presenting simulation results, it is better to start with the ideal results based on logistics costs that consider only transport, unloading, and warehousing costs. Then, consultants can present the final solution based on center availability and service quality.
Calculating Total Investment
To simulate network alternatives and to ensure comparison under comparable conditions, the same criteria for floor area and days of inventory need to be established and applied. Even though the total cost under the optimal alternative is directly reflected in the investment requirement in some cases, the final investment cost is often calculated by considering additional floor area.
In this white paper, we’ve discussed how a logistics network optimization consulting project is carried out. Before turning to a consulting firm, a company needs to consider, among other things, that consulting is a failure unless it produces findings that the company can act on. You may have seen companies that, despite spending hundreds of thousands of dollars in consulting services, fail to put the recommended actions into practice. The client company has just wasted the money and is not likely to request similar consulting services again.
Samsung SDS, as a 4PL provider, offers logistics consulting, IT solutions and business process outsourcing (BPO) services. A logistics company that provides only consulting and IT solutions would be ill-equipped to ensure post-project implementation and operation in a responsible manner.
Likewise, a logistics company that only provides implementation and operation services would not be able to ensure the sustainable improvement of a company’s logistics. Samsung SDS provides a complete package of logistics services based on its logistics & SCM consultants, logsitics solutions powered by advanced technologies, extensive global network and proven operation capabilities. If you’re looking for a solution to your company’s logistics innovation, Samsung SDS is the answer for you.
To find out more about Logistics Consulting of Samsung SDS, visit Cellologistics.com and download the white paper.