Case study: Network optimization

You are part of the supply chain network evaluation for products A and B that are produced in various regional manufacturing facilities of the same company. You have a team supporting your evaluation of procurement, transportation, warehousing costs and review of sales data to complete your presentation.

You have been tasked to reevaluate the total costs of operations and efficiency of each region in order to make investment and optimization decisions as there have been few changes introduced within the last 2 years:

1. Regions 1 and 2 have increased their capacity with equipment upgrades allowing them to run lower-cost higher batch sizes.
2. Regions 3,4 and 5 had new suppliers contracted, offering bulk delivery at more competitive costs.
3. In Regions 2,3 and 4 we have added new customers increasing demand for our product.

3. Some of the information was missing but you can provide assumptions to support your statement, using what was available in the report in Excel, and below:

• In Regions 1 and 2 supplies are normally delivering materials twice per month due to transportation challenges and warehouse lacking staff to receive and in the rest of the regions it is delivered daily due to broader transportation availability, bulk supplies available and contracts with high-efficiency 3PL allowing flexibility with materials volumes.
• Regions 4 and 5 are located in transportation hubs where we have lots of options for transportation and back-haul and saving on inbound as well as outbound.
• 3PLs are used to manage materials movement and storage for all regions other than Regions 1 and 2 where warehouses are owned by the plant and are part of the main assets, with costs provided in the report.
• Plants in Regions 3, 4 and 5 can accommodate bulk materials delivery at a very competitive cost due to proximity to rail as well bulk materials supply.
• Customer mix varies within each region, breakdown is provided by customer sales volume as A, B, C.
• The product mix between A and B is provided by region.
• Product high-level Bill Of Materials is provided and is standard across all plants.
• Manufacturing costs are provided together with current batch sizes.

After this review, you have to present it to the board in order to influence the decision and to proceed with an overall supply chain network optimization project that should bring efficiency and overall lower costs to the company.

In your presentation you need to present informed decisions on the next few points and questions :

1. You have to evaluate required investments in capacity increase. Which region requires an increase in capacity and why.
2. Total costs (as available in the report), by region-how, do you need to change product mix (between A and B) in order to optimize costs.
3. Warehousing capabilities and costs. What changes are needed based on transportation and warehousing costs and efficiency in order to provide best total costs of logistics.