What is network optimization?

Network optimization is the process of finding the optimal combination of facilities, factories, suppliers, products, and distribution centers in the supply chain to ensure the highest level of service for customers at a minimal cost. It is the art and science of designing a quantitative, strategic, and holistic view of the organization’s end-to-end supply chain.

Information that network optimization uses

The network optimization approach uses numerous pieces of information to build a supply chain network design. They are as follows:

  • Demand
  • Locations of customers, suppliers,
    existing and potential facilities
  • Constraints
  • Costs
  • Time periods
  • Transportation flows
  • Inventory storages

Factors that determine the need for network optimization

Companies should know how to handle changes to maintain logistics operations at maximum productivity and profitability to stay ahead of the competition. A wide array of elements determine the need for network optimization. They are:

Acquisition and mergers

Acquisition and mergers

Inventory

Inventory

Operational inefficiencies

Operational inefficiencies

Uncertainty

Uncertainty

Carbon footprint reduction

Carbon footprint reduction

Inability to keep up with diverse customer needs

Inability to keep up with diverse customer needs

Growth and expansion

Growth and expansion

Consolidation and Deconsolidation

Consolidation and Deconsolidation

New markets

New markets

Volatile markets

Volatile markets

Fragile supply chain network

Fragile supply chain network

Formation of new customer segments

Formation of new customer segments

Sourcing

Sourcing

New Product lines

New Product lines

Why has network optimization become more important today?

With rising competitive pressure, market volatility, and increasing raw material costs today, network optimization has become more important than ever. Here are the factors that emphasize the need for network optimization. Minimizes supply chain costs

Minimizes supply chain costs

Network optimization creates savings on all levels from small regional connections, national systems, to global, international supply chains. It enables a company to minimize the cost of operations drastically. The decrease in supply chain costs leads to increased profits.

Minimizes supply chain costs
Improves customer service levels

Improves customer service levels

A well-optimized network with warehouses and production sites helps a company efficiently communicate with its clients. It offers them more flexibility to fine-tune their supply chain operations and meet unexpected changes in the market.

Facilitates What-If Scenario analysis

A proper network optimization tool enables businesses to undertake what-if scenario analysis effectively. It helps them understand the impact of removing, adding, or expanding the manufacturing centers, warehouses, and distribution centers. It supports them to do a large set of geospatial visual simulations of supply chain networks and configure them.

Facilitates What-If Scenario analysis
Make effective contingency plans

Make effective contingency plans

Network optimization helps companies guard against the failure arising from unpredictable changes in logistics operations. Its what-if analysis helps them analyze all risks and their impacts on logistics operations, financial results, and service levels. Overall, they enable businesses to develop their supply chain resilience.

Build strategies for company’s growth

A network optimization tool helps businesses understand the organization’s growth potential based on various business factors. It enables them to identify potential growth and offers hard data to prepare for expansion plans. It also helps them have backup plans when the existing methods do not go their way.

Build strategies for company’s growth
Deal with acquisition and mergers

Deal with acquisition and mergers

An effective network optimization tool helps companies develop a well-functioning supply chain network design for smooth operations. It enables businesses to consolidate manufacturing and distribution networks after mergers and acquisitions quickly. It helps them to promptly realize Return on Investment (ROI) and minimizes the waste of company resources.

Optimize production sourcing decisions

Network optimization helps businesses source products based on total supply chain cost analysis. It minimizes inventory costs and reduces the supply chain surplus for the products leading to better economies of scale. It makes way for effective risk-sharing apart from increased forecasting and planning efficiency for goods.

Optimize production sourcing decisions

Network Optimization: A tool to build a cost-effective supply chain network

An optimal network design has become necessary to achieve an efficient supply chain that is flexible enough to respond to changing market conditions. Businesses should focus on improving their network optimization process to keep costs in control and maintain their flexibility.

With its powerful digital twin, Locus network optimization tool enables businesses to visualize and optimize their supply chain networks. It helps them build a sound network design with simulated multiple real-time scenarios. It supports them to strategically plan supply chain operations for small, medium, and long period goals based on constraints, risks, and costs.

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How can Locus help manage your logistics?

  • Locus’ proprietary geocoding engine converts the fuzziest of the addresses into precise geographical coordinates thereby helping your on-ground executives locate addresses easily.
  • Digitize all your operational variables such as fleets, delivery persons, etc to come up with the best route plan every day.
  • Track your orders in real-time with the Locus Live Dashboard. Locus’ last-mile delivery app Locus On The Road (LOTR) helps delivery partners process orders.
  • Visualize and tweak your scheduled plans via three key metrics— geography, time, & vehicle(fleet)—with a birds-eye view of your entire operations.
  • Build your own reports and analyze important parameters that you need to make key decisions.

Join Industry Leaders:

$100 M+
Logistics costs reduced
100+ Years
Planning time saved
6300 + Tonnes
GHG emissions reduced

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