5 YEAR STRATEGY PLAN

In the strategic planning process, there are several important steps to follow to ensure the plan defines the most effective way of meeting all customer requirements, while maximizing long-term profits. These steps include:

  1. Visioning and assessing your current business
  2. Developing design criteria
  3. Conceptualizing and formulating alternatives
  4. Determining the costs, benefits and risks of each alternative
  5. Selecting the alternative that best fits the company’s goals

Typically, this is a 10 to 12 week study that determines the methods, capacity, labor, location, space, warehouse management, and inventory requirements, operating and transportation costs and customer service capabilities of an improved system to meet the requirements for projected growth over the next 5 years or foreseeable future.

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LOCATION ANALYSIS

The objective of a facility network analysis / location analysis is to determine the optimal network alternative that meets defined service level requirements while minimizing distribution and logistics costs. This analysis is often part of the Feasibility Study / 5 Year Strategy Plan.
To complete the study, delivery service levels and distribution and logistics costs need to be calculated and summarized for various network alternatives. These alternatives differ in the number of facilities and specific locations within the service area.

Many factors need to be considered when determining the optimal network. In addition to inbound and outbound freight cost impacts, other factors to consider include; carrier transportation network, city, county and state economy (cost of living), unemployment rates, wage rates, work force culture, real estate market and costs, tax abatements, real estate and sales taxes, insurance costs, tax incentives and training programs/reimbursements. These factors need to be investigated thoroughly before a final site can be selected.

At the end of the study you will have answers to these questions and many more:

  • How many facilities?
  • Where should they be located?
  • What size each facility should be?
  • How should they operate?
  • Who do they service?
  • How will they be supported?

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OPERATIONS ASSESSMENT

An operations assessment involves a thorough review of all distribution operations and all logistics processes impacting the supply chain. The assessment will:

  1. Identify non-value added steps within the current distribution processes and determine alternative ways to eliminate
  2. Brainstorm potential processes, systems and equipment changes that could positively impact service, quality, productivity and employee moral
  3. Quantify and qualify the expected benefits to the distribution bottom line
  4. Determine processes, systems, and equipment implementation expenses for each of the proposed changes

Recommendations are provided for short, medium and long-term improvements with supporting cost/benefit analysis. Ultimately we are looking for ways to implement distribution best practices and enhancements for you to deliver the highest level of service and quality while maximizing the use of distribution resources through the elimination of waste. The methods to complete the study are based on Total Quality Management (TQM) practices.

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TRANSPORTATION ANALYSIS

Analyze transportation needs to optimize services while minimizing costs. This consists of a comprehensive review of existing carrier contracts, invoices, and special arrangements. Operational teams are interviewed to assess current processes and formulate objectives. Additionally, inbound and outbound shipment data, including service and cost level information, will be collected, analyzed, and summarized to fully understand the potential opportunities. The opportunities are evaluated to complete a cost/benefit analysis concluding with quantified and qualified recommendations.

The information collected in the analysis phase is utilized in the preparation of data for inclusion in the transportation Request for Proposal (RFP). The RFP document is developed and distributed to qualified carriers and meetings and/or correspondence with carriers are held as needed to insure timely and complete responses. Once proposals are received, they are evaluated based on cost of services, technical capabilities, customer service and support, information system capabilities, capacities, etc. Then, final negotiations are facilitated. Final steps prior to selection are to confirm integration and rollout plans with preferred carriers

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OUTSOURCING FEASIBILITY

Should you outsource your distribution services?

It is critical to define your distribution goals and objectives before taking on a logistics provider. These will help to establish the criteria for 3PL selection including IT capability, customer service requirements, seasonal fluctuation and cultural fit.

Once the goals and objectives are defined, it is necessary to investigate the costs and benefits of outsourcing including 1) return on assets, 2) key personnel and management considerations, 3) flexibility, 4) implementation, and 5) order consolidation/shared facilities opportunities.

With favorable expectations, you begin your 3PL selection process and refine your cost/benefit analysis.

Article on deciding when to outsource distribution services “To 3 or Not To 3”