If your supply chain feels like it’s working harder than it should, you’re probably right. Most supply chains are not constrained by capacity or cost in the way organisations assume. They are constrained by design — network configurations, warehouse footprints, and inventory policies that made sense when they were established but have been stretched beyond their original intent by growth, channel change, or operational drift.
Network optimisation and strategic warehouse review are the interventions that address these underlying design constraints. Done well, they unlock cost reductions and service improvements simultaneously — not as a trade-off, but as complementary outcomes of better design.
What Network Optimisation Actually Involves
Network optimisation is the process of evaluating the physical configuration of a supply chain — the number, location, and role of facilities; the flow of product between them; and the logistics costs associated with those flows — and redesigning it to reduce total cost while meeting service requirements.
The starting point is always a fact base. What are the actual landed costs of serving different customer segments from different locations? What are the demand patterns across the network, and how are they changing? What are the constraints imposed by existing leases, capital assets, and supplier arrangements? What service requirements are genuinely differentiating versus what has simply accumulated as expectation?
Once the fact base is established, the optimisation work involves modelling alternative configurations — different numbers of facilities, different locations, different flow strategies — and evaluating each against a cost and service objective function. The output is not a single optimal solution; it is a range of options with different cost, service, risk, and implementation complexity profiles, from which the organisation can make an informed decision.
For most organisations, network optimisation is triggered by one of a few conditions: significant growth or contraction in volume, geographic expansion into new markets, a lease event on a major facility, a significant change in customer or channel mix, or a strategic review prompted by margin pressure or competitive dynamics.
The Role of Warehouse Review in Network Strategy
Warehouse review is often treated as an operational activity — improving layout, processes, and technology within an existing facility. It is sometimes that. But at a strategic level, warehouse review is an input into network design: understanding what each facility in the network is actually capable of, what it costs to operate, and what role it should play in the future network.
A strategic warehouse review examines each facility against several dimensions. Capacity: can the facility handle the volumes required of it over the planning horizon, including seasonal peaks? Layout: is the facility designed for the product and order profiles it is handling, or has it been adapted over time in ways that create inefficiency? Technology: are the systems and equipment in the facility appropriate for the work being performed, or are there productivity and accuracy gaps that better technology could address? Cost: what is the true cost of operations at this facility, including labour, occupancy, utilities, and equipment, and how does it compare to the cost structure of alternatives?
The output of a strategic warehouse review often reveals that facilities in the existing network are serving roles they were not designed for, operating at costs that are higher than they need to be, or that the network has more facilities than it needs — or in some cases fewer, with existing sites overloaded as a result of consolidation decisions that reduced cost per facility without reducing cost per unit.
When to Run a Network Review
Network design has a natural review cycle, but most organisations review their network less frequently than they should. A few specific triggers warrant an accelerated review.
Significant growth is the most common trigger. As volume grows, the network configuration that was optimised for a smaller business may no longer be efficient. Additional facilities may be warranted. Existing facilities may need to be repositioned within the network to serve growing demand centres.
Channel mix change is increasingly relevant for retail and consumer goods businesses. A network designed primarily for wholesale distribution to retail stores operates differently from one that needs to handle a significant proportion of direct-to-consumer fulfilment. The order profiles, throughput requirements, and service standards are fundamentally different, and a network designed for one channel often performs poorly when pushed to serve both.
Lease events on major facilities are often the practical trigger for network reviews that should have happened earlier. A lease expiry or a lease break option creates a decision point: should the facility be renewed, relocated, or exited? Making that decision well requires understanding the role the facility plays in the network and whether a different configuration would be more cost-effective.
Margin pressure in a competitive market often drives network reviews as organisations look for structural cost reductions that can be sustained rather than one-time savings from tactical cost management. Network consolidation, in particular, can deliver meaningful reductions in fixed cost that have a durable impact on the cost structure.
The Optimisation Methodology
A rigorous network optimisation process involves several stages.
The first is fact base development: gathering and validating the data required to model the network accurately. This includes demand data (volume, geographic distribution, seasonality, channel mix), cost data (transportation rates, warehouse operating costs, occupancy costs), service data (current service levels, customer service requirements by segment), and constraint data (existing lease terms, capital assets, supplier minimum order quantities and lead times).
The second is current state modelling: building a model of the existing network that accurately represents how it operates and at what cost. This establishes the baseline against which alternatives will be compared, and it often surfaces costing insights that were not previously visible — the true cost of serving specific customer segments, the cost of specific product flows, the efficiency gap between facilities.
The third is scenario development: defining the range of alternative configurations to be evaluated. This is not an exhaustive enumeration of all possible network configurations; it is a structured exploration of the most relevant options based on the organisation’s context. Scenarios typically include different numbers of facilities, different facility locations (using modelling to identify optimal locations within geographic constraints), different flow strategies, and different make-versus-buy decisions (own and operate versus third-party logistics).
The fourth is scenario evaluation: modelling each alternative against the cost and service objective function and presenting the results in a way that supports decision-making. This typically involves a cost comparison, a service comparison, a risk assessment (including implementation complexity and transition cost), and a sensitivity analysis that tests how robust each option is to changes in key assumptions.
The fifth is recommendation development: translating the modelling output into a clear recommendation with supporting rationale. The recommendation should be specific enough to act on, but should also be honest about the assumptions on which it rests and the conditions under which a different option might be preferred.
Common Findings
Network optimisation and warehouse review work produces consistent patterns of finding across different industries and organisations.
Facilities in the wrong locations is one of the most common. Networks accumulate facilities based on historical decisions — where the business started, where leases were available, where acquisitions happened to locate their operations. Over time, the demand centre of gravity shifts, and facilities that were once optimally located become suboptimally positioned. Correcting this usually requires a lease event or a significant capital investment, but the cost benefit over a long horizon is typically compelling.
Underutilised or overloaded facilities is another consistent finding. Networks that have evolved organically tend to have uneven utilisation across facilities, with some operating well below capacity (creating fixed cost inefficiency) and others operating above designed capacity (creating operational inefficiency and service risk). Rebalancing the network to improve utilisation often reduces total cost without requiring additional capital.
Suboptimal product flows is a finding in almost every network review. The specific routes by which product moves from supplier to customer were often established based on historical convention rather than cost optimisation. Cross-docking opportunities are missed. Direct-to-customer flows that would reduce handling cost are not used. Products are routed through facilities that add no value. Identifying and correcting these flows can reduce logistics cost without changing the physical network configuration.
Technology gaps that limit facility capability is increasingly common as automation technology has advanced faster than most organisations’ investment cycles. Facilities that were designed for manual operations are handling volumes and order profiles that are significantly better served by automation — but the investment case has not been built or the capital has not been available. The warehouse review process often surfaces the cost of not investing, which is frequently higher than the cost of investing.
Third-Party Logistics: When to Use It and When Not To
Every network review involves at least an implicit consideration of the make-versus-buy question: should the organisation own and operate its logistics infrastructure, or should it use third-party providers?
The answer depends on several factors that vary by organisation and by facility. Scale is one: third-party providers can often achieve lower costs for smaller-volume operations by spreading fixed costs across multiple clients. Strategic importance is another: for operations where the supply chain is a genuine competitive differentiator, the control that comes with ownership and direct operation may be worth a cost premium. Flexibility is a third: owned assets create fixed commitments that can become disadvantageous if volume changes significantly; third-party arrangements can provide more flexibility to scale up or down.
The network review process should include a structured assessment of the 3PL market for any facility or flow where the make-versus-buy question is relevant. This means understanding what third-party providers can offer, at what cost, and under what contractual terms — rather than assuming that the existing arrangement (whether owned or outsourced) is necessarily optimal.
Implementation Considerations
Network redesign is complex to implement. The organisational, operational, and commercial dimensions of changing a network configuration are all significant, and they require careful planning and execution.
Transition planning is the most critical element. Moving product from one facility to another, closing a facility, or opening a new one all involve risks to service continuity that must be managed. The transition plan needs to address how inventory will be managed during the move, how customer service will be maintained, what the communication plan is for customers and suppliers, and what the contingency is if the transition encounters problems.
Industrial relations considerations are often significant in network changes that involve workforce reduction or site closure. The process for managing these considerations needs to comply with legal requirements and be consistent with the organisation’s values, and it needs to be planned early enough that it does not constrain the timing of operational decisions.
Lease and contract obligations create practical constraints on the timing of network changes. Understanding these obligations — when leases expire, what break costs are, what contractual notice periods apply with third-party providers — is an input into the implementation planning process, not an afterthought.
How Trace Consultants Approaches Network Optimisation
Trace Consultants conducts network optimisation and warehouse review engagements across a range of industries and supply chain contexts. Our approach is fact-based and hypothesis-driven: we build the data foundation required to model the network accurately, develop and evaluate a structured range of scenarios, and provide recommendations that are specific, actionable, and grounded in a transparent analytical framework.
We are independent of any logistics provider or property interest, which means our recommendations are based on what is best for the client rather than on any commercial relationship with a preferred provider. We work with clients through both the strategy and the implementation, which means we are accountable for the recommendations we make and have an interest in seeing them delivered successfully.
If you are facing a network review — whether triggered by a lease event, growth, margin pressure, or a desire to understand whether your current configuration is still optimal — we would welcome the conversation.
Contact Trace Consultants to discuss your network optimisation needs.
