CSCMP's Supply Chain Quarterly
October 21, 2018
Forward Thinking

Network redesign emerges as top priority in tough times

Companies see revising their distribution networks as one of the best ways to respond to challenging economic conditions.

Redesigning distribution networks has become a top priority for companies that want to better manage their businesses in tough times, according to "2010 Distribution Network Trends Report," issued by third-party logistics service provider Saddle Creek Corporation. The report includes the findings of a May 2010 survey of 235 logistics decision makers who work for manufacturers, distributors, and retailers.

Two-thirds of those surveyed said they had already made changes to their distribution networks as a result of the economic downturn, and nearly half reported that they planned to make additional alterations in the next 12 to 18 months.

The most commonly implemented changes involved transportation, cited by 44 percent of the respondents. Those initiatives included increased use of intermodal transportation, revised routing, renegotiation of rates and fuel surcharges, and reductions in delivery frequency. Respondents also engaged in other types of network modifications; for example, 34 percent said they had changed the size or configuration of their warehouses, while another 25 percent said they were consolidating shipments from suppliers.

A little over one-fourth (26 percent) of respondents said they outsource logistics and distribution to a third-party logistics service provider (3PL). Companies with five or more nodes in their distribution networks were more likely to engage in outsourced distribution. Thirty-one percent of those respondents who outsource logistics operations cited increased flexibility as the key benefit of doing so.

When asked how they have changed the way they manage their distribution networks in response to the current economic environment, 25 percent of respondents said that they had added or replaced vendors. Another 18 percent had changed the size of their facilities. Meanwhile, 12 percent had begun to use or had increased their use of outsourced distribution, and another 10 percent had reduced that practice in their operations.

Shippers are also expecting their 3PLs to provide more information these days. In particular, they are being asked to provide real-time tracking, statistical data, various reporting capabilities, and advance shipment notices.

What changes are companies making to their networks?
Respondents to a recent survey conducted by Saddle Creek Corporation said their distribution network changes most often involved transportation initiatives. The study also found that 30 percent of the respondents made no changes.
Transportation-related initiatives 44 percent
Warehouse size or configuration 34 percent
Supplier shipment consolidation 25 percent
Implemented value-added services 17 percent
Reduced the number of nodes 19 percent
Moved node locations 10 percent
Added nodes 5 percent
Other 2 percent

Source: "2010 Distribution Network Trends Report"

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