Allocating capital, deploying assets and positioning inventory well in a supply chain network is critical to delivering the right service at the right cost. Supply chains often evolve organically and for some organisations, become awkward collections of sites, sources and inventory.
In the competitive world of retail, a well-designed and optimised omnichannel distribution network can be the key to success. With the rise of e-commerce and changing consumer demands, retailers must focus on network footprint design to optimise fixed, variable, and transport costs.
In this article, we will explore key principles for building an omnichannel distribution network that is optimised for cost efficiency.
Optimise Warehouse Network Footprint Design
To minimise fixed costs, retailers must design an optimised network footprint. This involves locating distribution centers and warehouses in strategic locations to reduce transportation costs and increase delivery speed. By analysing transportation routes and customer demand patterns, retailers can identify the optimal location for each facility to reduce fixed costs and improve overall efficiency.
Utilise Variable Cost Reduction Strategies
Variable costs, such as labor and energy costs, can be optimised through the use of technology and automation. By investing in technologies such as robotics and AI, retailers can reduce labor costs and increase accuracy and efficiency. Additionally, the use of energy-efficient technologies can reduce energy costs and minimise the environmental impact of the distribution network.
Leverage Advanced Analytics and AI
To optimise transport costs, retailers should leverage advanced analytics and AI technologies. By analysing transportation data, retailers can identify inefficiencies and optimise routes to reduce costs and improve delivery times. Additionally, the use of AI can improve demand forecasting and inventory management, reducing the need for costly expedited shipping.
Embrace Innovation and Experimentation
As the retail industry continues to evolve, retailers must be willing to embrace innovation and experiment with new technologies and processes. This can involve exploring new delivery models, such as same-day or on-demand delivery, or leveraging emerging technologies such as blockchain or IoT to improve supply chain transparency and efficiency.
Build a Culture of Continuous Improvement
To sustain a successful omnichannel distribution network, retailers must build a culture of continuous improvement. This involves encouraging cross-functional collaboration and fostering a culture of innovation and experimentation. By continuously seeking out new ways to optimise costs and improve the supply chain, retailers can stay ahead of the competition and provide superior customer experiences.
Building an optimised omnichannel distribution network requires a focus on network footprint design and cost optimisation. By optimising fixed and variable costs and leveraging advanced analytics and AI, retailers can improve efficiency and reduce costs. By embracing innovation and experimentation and building a culture of continuous improvement, retailers can stay ahead of the competition and provide superior customer experiences.
Allocating capital, deploying assets and positioning inventory well in a supply chain network is critical to delivering the right service at the right cost. Supply chains often evolve organically and for some organisations, become awkward collections of sites, sources and inventory.
Warehouse Network Design is a strategic review – often at board and c-suite level – where a retailer is seeking to lock in their network footprint, asset profile, infrastructure and capabilities decisions for the future. It clearly pays to get these decisions right and the consequences of getting them wrong often can result in years, if not decades of pain.
Scenario modelling is a practice trace. has strong capabilities in. We are here to assist retailers determine – what is the optimal network for their business?
Contact us today, trace. your supply chain consulting partner.
