Leading South African retailer creates network optimization model for Continuous Supply Chain Improvement - Case Study

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Courtesy of LLamasoft, Inc.

Challenge
One of South Africa’s leading retail chains with more than 400 stores throughout Africa and the Middle East was facing major warehouse capacity constraints due to increased demand. Facing a period of significant growth over the next five years, the company needed to understand the impact of the projected volume on its network. Was a new distribution center needed? What was the best location for any potential new DCs? Should the capacity of existing DCs be extended? Should the imports warehouse, currently in Cape Town, be relocated to Johannesburg which is closer to the majority of demand?

Solution
The retailer partnered with leading supply chain consulting firm Business Modelling Associates, which used LLamasoft Supply Chain Guru to perform an extensive review of the company’s entire supply chain network in order to provide strategic direction for capital investment to maintain growth. This network study forms part of an investment decision journey to analytically explore and quantify key supply chain decisions that will impact the business over the next 10 years and beyond.

After a detailed baseline model was created, multiple scenarios were analysed to quantify the end-to-end cost and lead time analysis of:

  • Investing in a 100 percent warehouse model and where should this be located?
  • Extending the DC network and where are the optimal locations?
  • The impact of converting an existing cross-dock into a full DC?
  • How would a shift in the supplier base impact the existing supply chain network?
  • The impact of different supply chain models for local and international suppliers?
  • What is the most optimal port for imports?

Results
The findings of the network analysis study suggested that the main issues to be addressed were capacity issues at existing locations rather than opening new facilities. In the end, the existing hybrid model was still the most cost effective relative to other scenarios.

Getting the most out of your existing network
Here are some of the key benefits of performing a network analysis study and establishing a supply chain design center of excellence (COE) within your organization:

  • Baseline modeling creates an accurate picture of the existing network
  • Scenario analysis enables understanding of possible alternatives and their associated costs and savings
  • A network study empowers you with a ‘living’ supply chain model to explore other questions in your business e.g. inventory optimization, vehicle route optimization, simulation of new replenishment methods, etc
  • It is easy to build on the network analysis (e.g. with transport and/or fleet optimization or inventory management) because the model and its data all reside in the same database
  • Significant savings can be realised in an optimized network
  • Corporate risk factors can be identified and quantified
  • Creating a ‘living model’ of the supply chain allows ready analysis of business and supply chain questions, mitigating risk and providing continuous optimization opportunities

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