The article discusses optimized network capacity planning, the different stages of network optimization, and focuses on process industries. It also emphasizes the need to replenish customer-facing distribution centers. Supply chains across the globe are constantly required to assess their operational capacity in order to meet customers’ needs efficiently and planning is the big part of it.

Phases of Capacity Planning

Optimized network replenishment capacity management, an umbrella term for deployment transportation planning, is essential for the supply chain’s health, the well-being of staff and customers, and the company’s very existence. Network capacity planning can be divided into three potentially overlapping phases:

1. Strategic Network Optimization involves planning for significant fixed asset investments like new plants, warehouses, or warehouse expansions. These require substantial investments, not just in money but also in management time, and are traditionally made after many months of planning. Implementation takes multiple years.
2. Tactical Network Optimization—With fixed assets in place, what else is needed to create and execute a plan to deliver cost-effectively? For example, the makers of Halloween candy must consider what needs to be in place for the next Halloween many months before the event. And it’s not just inventory but a range of things spanning from warehouse space to cartons.
3. Operational Network Optimization – with planning tools in place, how do we ensure that these plans can be executed cost-effectively while still providing the high customer service prerequisite for doing business today? After all, good companies plan – great companies execute.

Strategic Network Optimization

Warehouses and plants take time to locate and build. Moving facilities is a significant effort. Adding facilities is an even more monumental task.  Most companies study their physical network carefully using tools like Llamasoft to determine the impact of adding or reducing capacity in various locations worldwide. They consider the product flow and optimize it based on total delivered costs. They use the need to achieve stated levels of customer service as a constraint.

Unfortunately, many companies miss the critical point that customers’ required service has never been systematically defined. Instead, there are several anecdotes, and everybody knows that “faster is better.” But, a scientific approach to learning and determining customers’ service needs is worthwhile and can drive strikingly different service standards. For example, a large distributor of electrical products was being pushed by its salesforce that they “had to put a warehouse in Chicago.” When asking Chicago customers, “Who’s your best supplier, and what level of service do they provide?” the answers came back that dependability was much more important than same or next-day delivery. The need to locate a warehouse in Chicago was immediately scrapped.

An item often overlooked in multi-year plans is the capacity of the links between plants, warehouses, and customers – that is, the transportation provided by carriers. Will there be a truck there when they need it? More importantly, how do we ensure that transportation capacity will be available?

Tactical Network Optimization

With the plants and warehouses in place, most people would suggest that the tactical network plan requires the following:

• Supply and demand planning systems to determine what to make and where to deploy it
• People – new staff must be trained, and existing staff must have their skills augmented
• Carriers:  contracts

But more is needed. With a limited opportunity to change the network’s footprint, supply, and demand planning managers must control costs and operate within network capacity. This is a very high-stress job. Mrs. shipment to a customer because inventory could not be deployed is extremely serious. But spending too much money on transportation is equally punished. So planners are between the proverbial rock and a hard place.

Additional Challenges

Planners need more help from supply planning systems, but they don’t get it. For example, a supply planning system will keep pushing inventory to a warehouse, totally oblivious that the warehouse is already at capacity, and incoming vans will be left waiting to be unloaded in the drop lot. This needs to be fixed. 

Fixing the issue requires creating a mechanism for the supply planner to assess and optimize network capacity. Some companies use Excel to manage this. Unfortunately, it’s a very complex problem, and making Excel do the correct calculations is a significant challenge. For example, consider a customer-facing DC that can unload a limited number of vans on any particular day but is supplied from ten different producing plants. Each plant may be a different number of transit days away. Trying to manage the capacity across multiple supplying plants becomes untenable.

Managing cost is another significant challenge. While shipping and receiving labor is a part of network capacity and network cost, the replenishment transportation cost is the most important cost associated with the supply chain. While the traditional assumption is that there is “an infinite number of carriers willing to take our loads,” the reality is that once a contracted carrier has exhausted its finite capability to supply trucks, other carriers must be engaged. These carriers can have undesirable cost or service. Managing network capacity constraints requires an intelligent tool.

Our Solution 

Meet LevelLoad – the intelligent tool that manages space cost while still achieving a very high level of service. LevelLoad is an optimized network replenishment capacity management tool using artificial intelligence (AI) to look ~30 days into the future. It proactively optimizes the flow of product among the nodes in the network. Think of it as a digital twin to the network, but an intelligent, proactive digital twin at that.

Operational Network Optimization

With LevelLoad in place (trained people and an existing network), the operations are ready to face all the volatility and turmoil common in today’s operating environment. In addition to being able to predictively determine how many trucks will be needed on any lane over the following weeks, importantly, it is possible to provide preferred carriers advanced commitments to secure available capacity. The LevelLoad tool works on autopilot and facilitates the following:

• Smoothing volumes between plants and warehouses
• Providing a predictable flow of traffic for the carrier partners
• Proactively smoothing out the ebbs and flows in the distribution center and the shipping plant dock

Without a planning tool, no one would consider reconfiguring a plant and customer-facing distribution network. Still, too many companies need to support their planning and operations teams with an optimized network replenishment capacity management tool (aka LevelLoad) to proactively make plans that can be executed cost-effectively and provide high levels of customer service. LevelLoad is a proven tool that augments existing systems.

Please download the e-book case study on Kimberly-Clark’s success for more information.