Network Optimisation Modelling

In a supply chain or a complex logistics network, strategic and tactical decisions about network design and its optimal use now go beyond the scope of experience-based or spreadsheet-assisted decisions.

In these situations, where there are many trade-offs and interdependencies, sophisticated decision support is required and the Network Optimisation Model is now recognized as the key tool to provide this support.

These models typically take account of activities, costs and capacities to enable the least cost network to be developed and to address issues such as the number and location of manufacturing or distribution facilities needed to support a particular service level. These types of models are particularly useful for merger planning, managing growth or reducing the overall cost structure of the business.

The more advanced modelling projects can also take account of revenue and pricing dynamics to provide a very sophisticated tool for considering, not only cost structure issues, but broader business decisions such as channel strategy; product mix and market allocation decisions for a scarce resource (such as timber); and market entry or exit decisions.

Carpenter Ellis and its principals and associates have been involved in many ground-breaking supply chain optimisation modelling projects in Australia and Asia including:

• Paint distribution in China – models of alternative service level/cost scenarios over 2 and 5 year timeframes (as infrastructure changes in China)
• Construction materials in Australia – development of distribution network, including trade supply retail network
• Mass merchandising retail in Australia – development of distribution network and channel selection tool by category
• Department store in Australia – distribution network strategy
• Paint manufacturer in Australia – manufacturing and distribution strategy to integrate acquisitions.

Chemworks Case Study

Supply chain network optimisation modelling allows current and potential network options to be evaluated, such as the alternative distribution options in the ‘Chemwork’ case.

Source: Adapted from a Slim Technologies case study.