Supply Chain Logistics: Redesigning the Supply Chain for Velocity
Industrial Products Manufacturer/Distributor $80mm Sales Revenue
A
manufacturer and distributor of NEMA products for both the commercial
and industrial markets was facing a
considerable dilemma. Nationwide customers were demanding short
delivery times, high product quality, competitive cost, specialized
products, and high reliability of promise dates. The company wasn’t
sure if it should continue to offer one of the product lines, and if it
continued to offer this product, it needed to know how many warehouses
would be required and where they should be positioned to service
customers within a 1-2 day delivery time. The company also wanted to
maintain inventory levels throughout the network at reasonably low
levels, accomplishing high inventory turnover rates. The objectives of
the assignment were:
A research of the market and
a customer survey discovered that customers perceived the product line in
question as perfectly complementary to the company’s main product lines, and
that there was a substantial market for this product. Further analysis revealed that the manufacturing
plant was well positioned in the mid-west, capable of reaching most parts of
the mid-west within 1-2 days.
When rationalizing the supply chain network in detail, we discovered that channel separation was occurring as a
result of the company not being responsive to the demands of the market. Wrong mixes of inventory prevailed throughout
the network of 32 stocking locations.
We designed a nationwide distribution network to service the continental United States, using the manufacturing plant location as a main feeder to a network of 3 strategically located distribution centers. By combining this with a 3rd party logistics service, the company was able to reach most parts of the United States within 1-2 days.
We redesigned the manufacturing plant to produce parts within a day’s time from a previous 8-week lead-time. We determined that, through the use of flexible manufacturing cells, combined with a new 3-node distribution network, and a 3rd party logistics provider, the company can manufacture specialized products for customers within a day, and deliver the order within 1-2 days following manufacture. Results of the effort were 89% reduction in lead time, 30% reduced inventory, and $1mm reduced cost.