Supply chain Network Audit Services

A Supply Chain Network Audit using Centre of Gravity (CoG) Analysis is a strategic evaluation method aimed at optimizing the geographic positioning of warehouses within a supply chain network. This service leverages extensive data analysis to assess cost optimization and delivery efficiency by evaluating multiple data points for each warehouse, including location, volume throughput, transport patterns, and cost metrics. The goal is to identify cost-saving opportunities while enhancing operational efficiencies. The key components of the Supply Chain Network Audit are outlined as below:

 

1. Establishing baseline performance metrics

This has to be defined on a case to case basis. Some indicators include:

• Total Transportation Costs (TTC)
• Delivery Efficiency TAT (Turnaround Time)
• Warehouse Utilization Rates

 

2. Data Collection and Analysis

Comprehensive data collection across the supply chain, including:

• Geographic coordinates of warehouses and delivery destinations.
• Size of each warehouse and capacity utilization.
• Volume throughput and frequency of shipments.
• Transport movement patterns and associated costs.

 

3. Centre of Gravity (CoG) Analysis

The CoG methodology involves identifying optimal warehouse locations based on weighted averages of delivery destinations, demand volumes, and cost structures. The calculation identifies the geographic point minimizing total transportation distances and costs. Factors such as demand density, service regions, and cost of operations are incorporated into the analysis.

 

4. Cost Optimization Metrics Evaluated

Transport Costs:

• Distance between warehouses and delivery destinations.
• Frequency and volume of shipments.
• Direct vs. indirect shipment costs.

Warehouse Size and Capacity:

• Appropriateness of current warehouse sizes based on throughput data.
• Potential for downsizing or upsizing warehouses for efficiency.

Inventory Management:

• Storage capacity utilization.
• Inventory turnover rates and obsolescence.
• Delivery Efficiency and Turnaround Times (TATs)

 

5. Analysis of delivery timelines from the warehouse to destinations.

• Impact of warehouse proximity on delivery speed.
• Performance benchmarks for TAT improvements.
• Strategic Recommendations for Network Re-engineering

Based on insights gathered through CoG Analysis, a range of strategic actions can be recommended:

Warehouse Relocation:

• Relocating one or more warehouses closer to key demand clusters.
• Balancing geographic spread for optimal service coverage.

Warehouse Size Adjustments:

• Rightsizing warehouse capacities to match volume throughput requirements.
• Avoiding over-capacity leading to underutilization and high fixed costs.

Warehouse Consolidation:

• Merging multiple smaller warehouses into larger, more centralized hubs.
• Reducing the number of physical locations while improving efficiency.

Operating Model Transformation

• Transitioning from dedicated 3PL (Third-Party Logistics) warehouses to shared, pay-per-usage models.
• Exploring flexible warehousing arrangements to align with variable demand patterns.

 

6. Cost and Efficiency Benefits

Implementing the recommended changes can result in significant cost savings and operational enhancements, including:

Reduced Transportation Costs:

• Minimized distance traveled.
• Efficient load consolidation and fewer partial shipments.

Improved Delivery Efficiency:

• Shorter delivery timelines.
• Enhanced service levels and customer satisfaction.

Optimized Space Utilization:

• Better alignment of warehouse size with actual storage requirements.

Flexible Cost Structures:

• Pay-per-usage models reduce fixed overheads.
• Data-Driven Decision Making

 

This service emphasizes a data-driven approach where decisions are backed by analytical insights rather than assumptions. Key data points considered include:

• Historical shipment data.
• Customer demand patterns.
• Real-time transport cost analytics.