Network Studies: What Are They Really Good For?

March 7, 2013
Sometimes topics come at you in waves, and that has certainly been the case. What are some of the common questions that have been asked about Network Studies?

Sometimes topics come at you in coincidental waves. For instance, I’ve had several business leaders from different industries ask me about network studies and redesigns over the past month.

I wanted to share the feedback that I provided to these colleagues.

Q:  From a retail executive:  “I know a network study would help us minimize costs, but how can I be sure that it will grow revenue, since sales and revenue are what I need to focus on now?”

A:  By optimizing the location of distribution and fulfillment facilities, network studies do help grow the company’s revenue.  Fulfillment center location and order cycle time speed will drive sales and help grow your business – not just optimize costs.  However, most retailers are not getting this correlation between network design and revenue.  An improved service level will lead to improved sales and revenue.  So if you do get this correlation and react, then you are already ahead of your competition.

Q:  From a supply chain director in a consumer goods company:  “How can I justify a network study and potential redesign?  I have multiple priorities that it would need to cover to even get it approved.”

A:  Fortunately, the Tompkins Supply Chain Consortium has gathered data on why organizations conduct network studies.  The major factors or goals impacted by network studies, as cited by member companies, include:

  • Cost minimization
  • Customer service improvement
  • Profit maximization
  • Reduced capital outlay
  • Revenue maximization
  • Change / disruption minimization
  • Risk minimization

And from the answer to the retailer’s question in #1, we know that sales and revenue growth is also a great (although frequently overlooked) justification for network analysis and redesign.

Q:  Manufacturing executive in partnership with a logistics service provider (LSP): “How often do we need to do these studies? I don’t want to feel locked into a network design and I want to include my LSP, so how easy is this process, really?”

A:  Manufacturers that depend heavily on their LSP networks are especially vulnerable to becoming inflexible, expensive, and people-dependent within a few years. And much of this has become event-driven, such as with a merger or acquisition.  In fact, LSP-driven networks can have unique advantages that make it easier to evaluate how they are laid out and redesigned for flexibility.  The smartest companies are doing network studies every one or two years, or even better, continuously. 


About the Author

Jim Tompkins | CEO

Dr. James A. Tompkins is an international authority on leadership, logistics, material handling, outsourcing, and supply chain best practices. As the founder and CEO of Tompkins International, he provides leadership for Tompkins globally.

His 30-plus years as CEO of a consulting / integration firm and his focus on helping companies achieve profitable growth give him an insider’s view into what makes great companies even better. Listen to an interview of Jim Tompkins on the Business Leader Radio show.

As a high-level business advisor, his unique perspective prepares corporations and executives for the future.

To share his knowledge and provide up-to-date information on supply chain and business trends, he developed the GoGoGo! Blogand Global Supply Chain Podcast.

He has written or contributed to more than 30 books and eBooks, including Caught Between the Tiger and the Dragon, Bold Leadership, Logistics and Manufacturing Outsourcing, The Supply Chain Handbook, andNo Boundaries. Jim has been quoted in hundreds of business and industry magazines such as The Journal of Commerce, Supply & Demand Chain Executive, and FORTUNE, and he has spoken at more than 4,000 international engagements.

Jim has served as President of the Institute of Industrial Engineers, the Materials Management Society, and the College-Industry Council on Material Handling Education, and Purdue has named him a Distinguished Engineering Alum. He has also received more than 50 awards for his service to his profession.

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