A proven application of supply chain simulation is the location optimization of supply networks, i.e. the strategic optimization of the logistics structure of companies. The focus of these analyzes is the question of the optimal location of logistics locations such as production or shipping warehouses or depots. So the question of where suitable storage locations are to be placed in order to satisfy customer requirements. But the question of the optimal number of locations and the resulting size of these locations also falls within the scope of these analyses. The location optimization also aims at the question of the assignment (allocation) of customers to the locations.
Mathematical optimization of the number and location of logistic locations
SDZ supports companies from industry and trade in supply chain simulation for location analysis. With the supply chain simulation software Median we have a unique tool at our disposal to create mathematical models of your supply network. Standardized simulation models enable us to quickly analyze the location structures of your logistics. Our exceptional software expertise also enables us to adapt the analysis models for individual requirements. This enables us to analyze the following issues for you:
- How many warehouse locations are optimal from a service point of view?
- How many warehouse locations result from a cost-optimized view?
- Which warehouse locations should be relocated?
- Where are the optimal locations for our warehouses?
- How large should the locations be?
- What is the optimal allocation of customers to shipping warehouses?
- Which assortments should be stocked at the locations?
SDZ’s methodical approach enables regular site analysis
Companies use this standardized application of supply chain simulation for location optimization of the logistics structure to regularly analyze their distribution structure. The cost pressure requires this systematic review and improvement of your own supply networks. In most cases, the analysis is carried out annually, often as part of the regular review of corporate strategy. But location scenarios are also analyzed for what-if questions that are asked in different departments and for different reasons during the year. Site optimization provides the management with well-founded statements in order to make the right decisions for site planning.
Improve delivery service & reduce costs | We show how it’s done
The analysis is based on a computer model in which the location structures of warehouses and customers (delivery addresses distribution) are mapped in mathematical models. Also the locations of suppliers (procurement) can be represented in the simulation models. In these mathematical models the locations are represented over their exact geo coordinates, in order to be able to accomplish distance computations between locations. Thus the goods flows between relations (warehouse-customer, supplier-warehouse) are illustrated and the assignments are optimized. This can be done according to different criteria (e.g. distance, costs).
For mathematical optimization, proven algorithms are used to automatically determine ideal solutions for location optimization. For this purpose, location scenarios are analyzed in which existing locations can be reduced or expanded. Locations can be relocated or the location for completely new sites can be determined. In addition, different business cases of your expectations for the development of your customers’ demand can also be analyzed. We convert forecasts in this regard into sales volumes as a basis for simulating and evaluating further scenarios.
The decisive factor is the profitability of your supply chain
The evaluation of the location scenarios is mainly based on cost aspects. The total supply chain costs are considered. Transport costs, location costs, i.e. costs for infrastructure and order processing, and inventory costs. These are divided into fixed costs and dynamic costs. By customizing the cost function, we can also take customer-dependent costs into account. In this way, we can also determine the optimal allocation of customers to a shipping warehouse from which they are supplied. The cost function for evaluating the location scenarios also takes into account factors such as distance and travel time, which we determine using the integrated distance calculation function. In this way, we answer the questions of how much it costs to supply an individual customer or how high the total transport costs are and what the operation of each warehouse location costs.
SDZ delivers extraordinary facts for your informed decision
With a location optimization, we determine a cost-optimal configuration of your supply network, through which the necessary investments for restructuring amortize very quickly through an improved cost structure. Depending on your planning horizon, we will show you which measures will pay off within this period and which require a longer amortization period. Depending on the scope of your current location structure, there are potential costs of up to 30% of your supply chain costs.
SDZ evaluates ideal location scenarios in an amazingly short time
With the Median simulation software, we can perform analyses faster than your own strategic department. The great advantage of our tool is its flexibility in analyzing site scenarios. Once the simulation model is created, it can be used for a wide variety of scenarios. It only takes a few minutes to optimize a scenario. This can be used to answer a wide variety of what-if questions, for which we provide you with well-founded key figures for your decision.