Case Study

Network Optimization Identifies $17 Million in Savings While Exceeding Service Levels

Highlights

Locate optimal DC locations to best serve areas of expansion
Test the impact of changing import locations
Maximize existing DC- to-store shipping to “zone skip” on direct customer shipments

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Challenge

A leading retailer of outdoor clothing and equipment and one of the largest directmarketing businesses in North America, is experiencing continued expansion in theNorth American market. As they open retail locations in new geographic areas it isnecessary to evaluate the need for new DCs in their distribution network, the bestlocations for potential new facilities, and the opportunities to enhance capacity in existingDCs. In addition, the company anticipates changes in their overseas sourcing strategy,with a resulting shift from West Coast to East Coast ports of entry. Reducing supplychain expenses and lead-times, both to their retail loca- tions and their direct marketcustomers, are key performance metrics that the company seeks to improve through asupply chain design project.

Solution

The company turned to LLamasoft® to optimize the company’s current network anddetermine where and how many new DCs should be added to accommodate projectedgrowth and changing supplier locations while meeting their desired transportation budgetgoals and reducing DC-to-store and DC-to-direct customer lead times. Ten scenarioswere created optimizing the existing network, examining potential new DC locations,accounting for seasonal peak inventory flows, implementing “zone skipping” strategiesfor direct customer shipments, and testing shifting supplier strategies.

Results

The completed model enabled the retailer to make decisions about how to best servicethe growing retail and direct sales markets. By acting on the analyses provided by LLamasoftSupply Chain Guru® the company can save up to $17 million dollars annually whilemaintaining or improving its service levels. A fully implemented network optimization andDC expansion program will help them continue to compete in both the brick-and-mortarand e-commerce worlds while maintaining favorable transportation and distribution costsas a percent of total sales.

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