Driving Savings via Inbound Logistics Network Design

Abstract

A CPG company is examining its end-to-end supply chain to find opportunities to optimize both cost and visibility. One minimally tapped source of these opportunities is the inbound supply network. This report studies three design changes to the CPG company’s current inbound supply network, namely: 1) Consolidated Inbound and Outbound Deliveries, 2) Supplier Village, and 3) Reallocated Near-Site Flow and Storage. Design 1 studies reusing inbound delivery trucks as outbound delivery trucks to reduce empty mile costs. Design 2 studies locating suppliers nearer the CPG company’s plants to reduce required lead time and inventory levels. Design 3 studies more efficiently allocating raw material and finished good storage to enable better end-to-end product flow via reduced inventory and handling. Models for calculating transportation, inventory, and handling costs for each design were developed. Current costs were compared with costs if these designs were applied. Overall, the studied designs of the inbound supply networks were determined to be feasible sources of savings for the company. Design 1 showed potential savings worth $800,000 per year. Design 2 generated savings of $886K. Design 3 led to better product flow, resulting in potential annual savings of $2.6M.