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Case Study: Warehousing and Distribution Optimization - Global Foods

Operations and Logistics Optimization For New Product Launch#

Background#

  • 20% Forecast increase influence on KOI studied. 30% lost sales risk identified
  • Optimal investment plan and distribution strategy proposed, resulting in 15% cost increase and lost sales elimination
  • Avoiding lost sales resulted in additional revenue and 5% profit

GlobalFoods* is a leading foods company producing and distributing variety of products in frozen and refrigirated foods category. GlobalFoods operates globally and, particularly, is a well established player in the European market with warehousing and distribution operations across EU.

Challenges#

GlobalFoods has recently introduced a new product family. The introduction was successful and sales department forecasts a large ramp up within the next year. GlobalFoods needs to identify if the current warehousing capacity and distribution
network would meet the increased demand and find
the optimal investment solution.

Solution#

Given 20% forecast increase, SimFlex identified the influence of this change on the GlobalFoods KOI such as lost sales, proposed the optimal capacity investment and distribution network, and defined the profitability impact of increased sales vs. investment.

Results#

SimFlex identified that increased forecast of 20% while maintaining the warehousing and distribution status quo would result in 30% lost sales. Further, SimFlex found the cost optimal solution for warehousing capacity investment and distribution footprint, and identified the feasible break even point to avoid the lost sales and keep the business profitable. As a conclusion, the new proposal resulted in 15% overall cost increase. However, avoiding lost sales would bring additional revenue that will cover the investment cost and will result in 5% additional profit.

Current Scenario
Optimal Investment Scenario

Blue: product availability with existing forecast

Yellow: product availability with X% increased forecast



*Company name disguised to retain confidentiality