Distribution Network Strategy Review
We were engaged by our client, a major supermarket chain, to review expansion plans for their distribution network, designed to accommodate business growth amid shifting trends in the grocery market.
The client is a major retailer with sales exceeding £20bn annually. As a result of changes in its core market, it decided to undertake an end-to-end review of its supply chain practices. The network strategy review was a key workstream within this initiative, working closely with other elements of the programme to deliver overall value to the business. The key changes taking place were a shift towards smaller, convenience type stores; an increase in on-line grocery shopping for home delivery and the increasing influence of discount retailers.
Agreeing the planning base: stakeholder engagement
We engaged stakeholders from around the business to agree the important assumptions that would help to define the distribution network strategy.
This was supported by our analysis and modelling, that was played back to the group at regular workshop sessions. Using this approach helped to gain early stage buy-in to the final results and recommendations.
Stocking policy in the distribution network
We built a model to look at logistics costs from the supplier through to store, on a product by product basis.
This model examined a number of stocking options for each product such as stockless, holding the product regionally or holding it nationally. In each case the most cost effective option was identified.
This helped to define the future requirements for the distribution network, by determining the storage and throughput requirements for regional and national DCs.
Requirement for future DCs
With the help of further modelling, we examined the preferred shape of the future distribution network, defining the optimal number, location and function of DCs. Working closely with stakeholders we built a ‘road map’, taking into account commitments to existing facilities.
The revised plan contained fewer additional DCs and increased DC utilisation (annual cases shipped / ft2). As a result there was a significant reduction in planned capital expenditure.
“The revised plan was an improved fit for the changing shape of the business, and required significantly lower capital expenditure.”
- Major supermarket chain, £20bn+ turnover
- 20+ distribution depots, multiple temperature regimes
- Rapidly changing market conditions
- Review distribution network strategy as part of end-to-end supply chain review
- Determine future DC capacity requirements based on corporate growth plan
- Provide a ‘road map’ to move towards a more optimised DC network, accommodating business growth and market changes
- Reductions in operating cost and inventory
- Reduction in required capital expenditure
- Understanding of the optimal number, location and type of DCs
April 13, 2017
Published by: Go Supply Chain Ltd