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Global Logistics Models Identify the Best Number and Location of Facilities, Best Transportation Routing, and Service in Your Distribution Network

As conditions for inbound and outbound logistics change constantly one thing remains certain: customers and transportation vendors will continue to change their buying habits and service levels. Customers may decide to buy more frequently and in smaller quantities, or to buy less frequently and in bulk. Vendors may decide to deliver more frequently - in smaller quantities, or perhaps less frequently - in larger quantities. In the chaotic global environment that is present day logistics, what can companies do to combat fluctuating transportation rates, and customers demanding shorter lead-times, more specific carriers and appointment times?

All these changing conditions affect the global logistics network and cost levels. It is nearly impossible to change the network fast enough to keep up with the changes in conditions. And yet, most companies do not change the logistics network or shipping policies daily, weekly, monthly, or even annually. In reality, changing too frequently could cause a shipper to have unreliable service to customers; but not examining the network for improvement opportunities on a regular basis could mean that the network is inefficient, costing a company more than it should, and providing less than optimal service to customers.

A global network model can evaluate a specific region or the entire network to lower cost and improve service. Distribution networks have expended rapidly between continents as manufacturing made a significant shift in the past years to China and Eastern Europe. Many companies made the move to re-evaluate their entire network with the help of modeling tools to lower costs and improve service to customers. Did your company re-evaluate your global distribution network?

Cost savings from network planning occurs in several different categories:

Small changes in the logistics network - - the result of fine tuning - - are frequently in the 5 percent range. The changes that result in this level of savings include shifts in service areas between warehouses, changes in shipping policies and practices, and changes in the cost structure of operating facilities.

Larger changes in the logistics network - - such as changing the number and location of facilities, the carriers used, and the methods of consolidations - - can result in savings in the 10 percent range.

Thinking outside the box and making changes in distribution channels, sources of supply, modes and methods of delivery can result in savings in the 25 percent range.

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