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Solution Brief: Logistics Network Design

SimFlex is a suite of value chain planning tools enabling companies to design, test and deploy robust and lean solutions supporting strategic, and recurring operational business decisions. SimFlex solutions provide significant cost savings and increased sales through optimal value chain design, efficient asset utilization, improved service levels and greater agility.


Logistics Network Design#

SimFlex Logistics Network Design solution enables companies to analyze and determine the most cost optimal logistics network that meets serviceability requirements. Logistics Network Design relates to the establishment of supply, warehousing and distribution footprint. It encapsulates procurement, value-add, postponement activities and inventory control policies. SimFlex seeks to minimize logistics cost while offering the right level of flexibility to meet service level requirements. Numerous factors like number and location of sites, the volume allocated to each, activities carried out at each site, the frequency of shipments, and the transport mode(s) employed are considered. Trade offs are determined between cost and service, lead times and inventory and other business performance metrics.

Solution Capabilities#

Analyze the 'current state' or 'as-is' scenario performance:

SimFlex enables companies to model and analyze the current logistics network performance. Through dashboards / scorecards the users can analyze key operating metrics, including costs, asset utilization, inventories, and customer service levels. 'Current State' analyses discovers major gaps and helps determine and prioritize improvement initiatives and frame potential scenarios.

Optimize and analyze what-if network scenarios and trade-offs:

Logistics Network Design optimization considers the inbound material flows from upstream supply chain and the outbound flows to the end consumption point. Using optimization with or without constraints the user can determine the lowest cost network with maximum possible service levels. Users can then exploit both optimization and simulation to run various what-if scenarios and analyze the impact of each across multiple dimensions.


All this can be done using a common data model and scorecards, eliminating the need to make model changes, or create a new model for a different planning approach. Additionally, simulation can be used to validate the optimal solution, as it incorporates real-world variability and supply chain dynamics.

Solution robustness through sensitivity analysis:

SimFlex offers sensitivity analysis capabilities, to test the robustness of a potential solution against events like demand spikes or downturns, cost escalations, oil prices, currency exchange rates, taxes and duties and unexpected events. Such analyses allows companies to understand the risks of a potential solution and determine mitigation tactics.

SimFlex Differentiation#

Comprehensive set of optimization and simulation technologies:

SimFlex combines multiple problem solving methods employing simulation and optimization technologies.



This provides superior diagnostics for sound decision-making for a wide-range of business decisions. Moreover, different technologies operate on a common data model, thus avoiding model or software application changes.

Modeling capabilities:

SimFlex Logistics Network Design solution provides in-depth logistics modeling capabilities, with multiple transport modes, volumetric weight, transport mode splits, multiple order fulfillment models (BTS, BTO, CTO) and delivery strategies, storage and shipping capacities, fixed / variable / activity-based costing. SimFlex is capable of modeling real-world phenomena like product life-cycles, fluctuating demand and forecast inaccuracies, price erosion, fuel prices, surcharge trends, lead time variations, tax, duties and currency exchange rate fluctuations. SimFlex can also be used to find the centre of gravity. Modeling simple or complex logistics networks is done through a feature-rich and user-friendly graphical user-interface. In addition, data from external sources can be easily imported through a powerful data exchange module.

Analytical capabilities:

Analyzer is the Business Intelligence (BI) component of SimFlex, containing customizable reports and scorecards and offering advanced, in-depth analysis capabilities. Thousands of variables and logistics metrics covering cost, finance, inventories, capacity utilization, and customer service can be analyzed and compared at an aggregate or granular level. SimFlex also offers the ability to test how 'green' a supply chain is. The environmental impact associated with the transportation of goods can be calculated to quantify the 'Green House Gas' emissions.

Key Features#

Some of the key features of SimFlex Logistics Network Design solution are:

  • Multi-product and multi-level bill of materials
  • Multiple transport modes with advanced costing capabilities
  • Volumetric weight calculation and pricing
  • Activity-based costing
  • Trends and distributions



  • Comprehensive transportation network with schedules and consolidation rules
  • In-depth production, inventory and capacity modeling
  • Plant and supplier product allocation splits
  • In-facility and in-transit inventories
  • Complete internal and external service level metrics
  • Comprehensive worldwide geo-database
  • Custom user-defined metrics, if required
  • Standard or user-defined automated reporting

Benefits#

Optimizing and designing a logistics network using SimFlex has typically resulted in a 5% to 10% reduction in logistics costs driven by reductions in more efficient use of transport modes, optimal allocation of facilities-products-customers, reduced inventories and/or network consolidation efficiencies. Typically there is a trade-off between cost and service, but in some cases an optimized network offers both cost savings and increased service levels of up to 15% and reduction in inventory of more than 30%.

Summary#

Logistics Network Design and optimization is a critical facet of supply chain planning. Not only does a logistics network lock in 20-30% of supply chain costs, it can also have a significant impact on a company's success or failure in the marketplace. A logistics network must be designed to support the overall business objectives and successfully balance the myriad of trade-offs in the supply chain. Moving further away from the end market typically brings cost savings, but the increased lead times should not be detrimental to customer service levels. Similarly, product availability must be ensured to avoid lost sales, but with as little inventory as possible.

SimFlex considers all the necessary criteria and can quantify any potential logistics network from multiple perspectives to determine an optimized supply, manufacturing and delivery strategy that finds the perfect balance between cost, time, inventory and service.




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