Increase Service Levels at Optimal Costs
In order to improve its brand image, a major auto manufacturer needed to improve service levels in its Asian service parts network. With an existing network of 15 distribution centers in the Asia Pacific area serving over 1,800 dealers in the region the company needed to know the most cost efficient locations for expansion and the best strategies for positioning and flowing the 147,000 inventoried parts through the network. The company needed a full supply chain network optimization study, but did not yet have the internal skill set to execute such a large project.
Needing both a tool and a team of experts to help train their internal supply chain design modelers, the auto giant turned to LLamasoft®. Using LLamasoft Supply Chain Guru®, the LLamasoft solutions team was able to aid the auto company’s team in building a baseline model of the existing network—a model that included the flow of parts, the inventory levels and cost of those SKUs, DC capacities, dealer demand, inbound and outbound transportation costs, DC to DC transfers, delivery windows and all other pertinent information. Armed with this model, the team used the Supply Chain Guru network optimization, product flow analysis and greenfield capabilities to determine the number and location of depots needed to meet defined service requirements at the optimum cost.
Three network-wide scenarios included a number of factors, including operating thresholds, capacities and costs, minimum and maximum throughputs, optimal number of DCs, DC relocation/alignment options, and resulting service levels by dealer count within a region/country. In the best scenario, adding new DCs in China, Indonesia, India and Vietnam increased total DC throughput by 9.4 percent, bringing 238 additional dealers into a one-day delivery service window—a 28 percent improvement from the baseline. In this design 43 additional dealers would receive two-day delivery service, a 10 percent improvement from the baseline. Additionally, some of the fixed costs associated with the new DCs were offset by a 14 percent reduction in average outbound distance.