For any business, growth is a simple metric used to measure success. For large scale manufacturers, growth often results in scaling the physical aspects of the business, resulting in larger holding facilities, new warehouse locations, more staff and greater decisions.
Now, with growth in sales volumes and an increase in demand, the biggest obstacle to your organisation’s success could be your supply chain network and the ability to expand and scale. Understanding your current supply chain capabilities and its current state is important in deciding whether expanding is necessary without placing too much pressure on your supply chain and creating bottlenecks.
This new placed pressure is not exclusive to supply chains, with pressure also falling upon the shoulders of key stakeholders to make the best possible decision. Decisions around expanding, dealing with new and current infrastructure, as well as logistics are crucial to get right, usually triggering a multitude of questions, each with their own complications.
Scaling your supply chain
In a perfect world, it would be great to simply add a new port here and place a distribution centre in the middle of where there is rapid growth in demand and continue to run as usual. But unfortunately – we don’t live in a perfect world and the basis of our decision making is not as intuitive, or that simple. The complexities around decisions revolve around considering supply dynamics, transportation methods and arrangements, production flows, associated costs and inventory, to list a few.
Finding the optimal combination of factories and distribution centres in the supply chain, whilst trying to satisfy supply and demand at the lowest possible cost, remains the objective when identifying when to scale and expand.
Let’s look at a concrete example of how this can be done.
Australian Manufacturer – A Case Study
In early 2021, Biarri was consulted by an Australian manufacturing company to model the importation, storage and bulk distribution, for one of their new products across Australia. They forecasted the potential to substantially grow their sales volume over the next couple of years with their new product strategy and other business enhancements. The project was to determine if there were opportunities to scale their supply chain network and expand their current port storages, explore the potential of utilising inland storage solutions and whether they should look at new transportation methods.
In order to satisfy their new demand, they required cost effective decisions and solutions that explained how, when and where to expand existing infrastructure; whether to introduce new storage facilities; understand where to focus increasing demand for their product and how best to drive the growth of the business over both short and long term.
Utilising our Network Optimisation software, we had to first create a baseline model that ensured that the current approach to modelling the network was sound and the data transformations were accurate. This meant understanding the inputs and outputs of their current network, using the current supply dynamic with supplies being co-shipped from overseas into their four main port storage locations scattered across Australia; right down to using historical data of deliveries to each sales district to understand the current state of demand.
Once the baseline model was built, it was important that it was validated, confirming the model was a fair representation of the current state with major assumptions, data transformations outlined and agreed upon. This step was critical and set a basis for comparisons of future state models and other scenarios which represent alterations to the current state of the network.
Future State Models
Now that the baseline was established, it was important to apply projected demand profiles to the current network to uncover the difficulty of servicing future demands with the current network constraints.
Biarri modelled 3 alternative future state models, each with incremental increased levels of demand, predicted by their growth strategy. The results were conclusive with each resulting in potentially unsustainable levels of both import frequency and delivery freight rates. Due to their limited storage capacity in the network, and high demand forcing a large number of imports with high risk time intervals, Biarri reasonably showed that without reconfiguration to the network this would introduce high levels of risks to the client.
Biarri successfully built a representative model of the clients distribution network for their new product. With the current model, Biarri were able to uncover the strategic capability. This includes investigating options to increase storage, adding ports, various freight rate tiers and co shipping partners, and varying capacities and costs of different storage, along with many other potential constraints and features.
Would you like to know more?
Speak to an expert today and discover more about network optimisation and how to sustainably scale your supply chain network below.