Improving your Infrastructure Plan with Real Estate Data

February 9th, 2008 12:44 am Category: Network Design, Supply Chain Improvement, by: Editor

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Businesses that adapt well to changing economic conditions begin by continually reviewing and updating the core infrastructure – manufacturing, warehousing and distribution assets – that enables their supply chain. If your company is experiencing strong growth, you may discover that your infrastructure is inadequate to meet your growing customer demands. If your company is impacted by the current economic slowdown, you may find that you have too much infrastructure. If you are like many companies operating globally, you will probably find that in some parts of the globe your infrastructure is inadequate, while in other parts of the globe you have excess infrastructure that is going unused and increasing your costs unnecessarily.

Before

After

Supply chain infrastructure planning is a business process used by the most profitable companies to ensure their supply chain infrastructure of manufacturing, warehousing and distribution assets is the right size, in the right location, and being used to deliver the right products. This relatively easy to implement and cost effective process relies on five key steps:

1) Clearly define your objectives. The most critical step of the infrastructure planning process is to identify your primary objectives. A partial list of critical decisions you might consider is:

  • How many warehouses do I need and where should they be located?
  • Which warehouses should supply product to which customers?
  • What modes of transportation should be used to balance cost and customer service objectives?
  • Where should I be increasing production capacity, and where should I be decreasing it?
  • Which manufacturing plants should be making product for which customers/warehouses?

Identify your objectives as those decisions that are most important to the bottom line and those that you can do something about.

2) Gather supporting data. In order to make intelligent decisions, you need solid data to support those decisions. This step is usually the most time consuming part of the process. However, new resources such as the Crestar Alliance’s global real estate data enable you to quickly and easily acquire more reliable data. These data sources allow you to identify real locations with real costs and operating constraints so that you know your decision making is based on current costs and availabilities. Often companies use cost estimates and assume they can find the specialized warehouse operations they need wherever they want, only to be disappointed when they try to implement the planning decision made by a central business group.

3) Model and analyze your supply chain network. Today’s technology can help you make better decisions as there are many vendors offering supply chain network optimization tools. Whether you implement software yourself, or rely on experienced supply chain optimization expertise to assist with the analysis, make sure the software you select fully addresses the decisions you need to make and can represent your unique business and logistics network.

There is no silver bullet to optimizing your network. Using supply chain optimization tools to make better decisions for your business requires good old-fashioned analysis. Relying on people to leverage the benefits of technology is the path to success. A good supply chain analyst will be both an expert about your business and an expert with the supporting technology. They will need to review many “what if” scenarios with the business management to finalize the supply chain network design.

4) Implement. You’ve explored your options and determined the best supply infrastructure to support your business operations. Now you need to execute. If your initial analysis was based on broad estimates and over-simplifying assumptions you may have problems finding the infrastructure on the ground that you need to implement your plan. However, if you used real costs and operating capabilities, for real locations you will be able to implement faster, with less cost
and with confidence.

5) Refine. The supply chain network analysis and design process is not a static process. Successful ideas are implemented and cost savings are realized. And then things change: a large new customer is added at a new location, more production capacity is added, demand takes a nosedive, or raw material prices swing dramatically. Thus, like all good planning processes, the supply chain network analysis and design process must be on going. This process should be revisited regularly (annually or quarterly) and/or when major shifts happen within the business.

How do you measure the success of this business process? Firstly, it must generate bottom line savings in your supply chain operations. Secondly, the business process must embed itself firmly in the corporate culture. Treating supply chain infrastructure analysis as a one-time effort limits your business from fully reaping the fruits of your labor.

Those businesses that integrate the supply chain infrastructure planning process into their corporate culture will reap the benefits of efficient and focused logistics operations year after year.

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