UPSIDE Consulting optimizes the network distribution of their key customer

UPSIDE Consulting was requested by a customer to develop and implement a forward-looking tool helping them to recognize in advance under- and overutilization and supply restrictions in specific regions.

The customer is running 12 production facilities and 3 additional regional warehouses.

Problem: The customers Top Management was not satisfied with their low visibility on possible service restrictions coming from changes in demand or missing capacities in certain regions.

Objectives: The fully implemented project and process shall give to the management an early indication on under-/over-utilization of the installed capacities and therefore possible future restrictions on supply in certain regions. Additionally, it should help to optimize the distribution network considering the technical feasibilities and cost.

Methodology:

• Homogeneous mid-term production planning,
• Demand planning based on statistical models,
• Network optimization based on technical feasibility, storage limits and cost

Approach: In a first stage a blue-print reflecting on the definitions, requirements and solution framework was set up was elaborated between the central network manager and the UPSIDE Consulting advisor. Thereafter it was presented to the Top Management, discussed and after few adjustment rounds confirmed.

It was agreed that in a first stet the tool will be designed in excel, granting a high level of flexibility and possibility of fast adjustment. Once it is confirmed that all requirements and needs are covered a programmed tool shall be searched and implemented.

The tool shall have a historic but as well future dimension. In each direction at least 12 months shall be available.

The main input information were the sales (real and forecasts) per country, having each country a primary serving factory as well as 2 back-up factories (with confirmed capability to produce region specific products) defined, as well as production capacities of each production facility considering the working days, vacations as well as maintenance and repair breaks. Another input information was given in the max. and min. acceptable stock level per location.

For the optimization calculations of the distribution network the transport cost to different key destinations as well as the production cost were used.

Once running the optimization calculations on the level of accumulated product family level the tool proposed the production output and capacity utilization of each production facility. Thereafter the responsible person had the possibility to fine-tune the arithmetic outcome based on its experience or based on special tactical targets.

In a next project stage the calculation of the production capacity was defined and standardised for all production facilities to secure comparable data. A similar approach was followed for the sales forecasting/demand planning, where in a separate project the methodology was defined. In this case the key was the selection of the best suitable statistical models for the projection. This selection was founded on the historical sales curves per product family.

By these two additional improvement projects it was secured to use homogeneous forecast data in the network planning tool.

Deliverable:

• Calculation model for the production capacities
• Defined methodology to forecast demand based on statistical models,
• Distribution network optimizing tool – securing visibility on possible future restrictions and optimizing the network distribution from cost perspective

The customer was highly satisfied and is assigning an important share to the improvement of the service level and cost savings to this project.