What Is Greenfield Analysis?
Greenfield Analysis (GFA) is used by companies to determine the optimal number and location of distribution centers. As a result, GFA is commonly used in supply chain design because it helps companies make better planning decisions.
Imagine that you’re a VP of Supply Chain. In a leadership meeting, your team set goals to lower expenses and reduce the companies carbon footprint. You've now set new initiatives to minimize cost and carbon footprint in the supply chain. You know the highest cost and highest environmental impact is associated with transportation costs in your supply chain. So what do you do?
Once you know the problem (transportation has a high cost and negative impact on the environment), then you can start to explore solutions. As an experienced supply chain management professional, you know that you can reduce transportation costs and emissions by reducing the distance between you and your customer, but of course, you can’t have a distribution center (DC) in every neighborhood.
You may use Greenfield Analysis to help you find the optimal number of Distribution Centers and approximate locations for those distribution centers given demand, customer locations, products, and distances to and from the DC.
Greenfield analysis helps you make better, data-driven decisions on your supply chain.
Why Do Greenfield Analysis?
The goal of GFA is to find the optimal number of distribution centers and approximate locations for each distribution center to service your customers.
GFA is a great way to quickly answer questions like the following:
- What is the optimal number of Distribution Centers and Factories for my supply chain?
- How many distribution centers are required to meet specific service levels?
- What is the optimal geographic location of our DC’s if we want to minimize cost?
- Which customers will be serviced from each distribution center?
- What is the right multi-echelon strategy?
- How resilient is my network to respond to demand and supply changes in the future?
Greenfield analysis is almost always the first step in supply chain network design strategic planning because it’s relatively quick and easy.
Of course, it’s great when you have an actual greenfield supply chain with nothing set in stone yet, but you can also use GFA when you’re changing an existing supply chain or to compare an existing, real-world supply chain with an optimal supply chain design.
How To Build a Greenfield Analysis Model
The first step to GFA is structuring your model. You’ll need to define customer/node locations, products, demand, and an objective for the model to solve towards.
Once you plan your model, you can build it in a tool.
One of the most common approaches to GFA is using Excel. The Supply Chain Detective does a great job of describing how to model a GFA in Excel, so I won’t repeat his work (Awesome blog by the way that’s both informative and entertaining).
Traditional methods like Excel are often limited in features and options. Building the model can take more time when compared to other tools that are built for GFA. The biggest challenge is that it takes a lot of time to run an optimization model using Solver in Excel, especially when you’re looking at a real-world supply chain with a lot of drivers.
Tools built specifically for solving problems like GFA provide more functionality and faster runs, but of course at a higher cost. In exchange for paying for a tool, you’ll improve the accuracy, speed, and flexibility of your model.
If you’re doing GFA of a real-world supply chain, I would always recommend a commercial tool. We specialize in a tool called AnyLogistix. AnyLogsitix combines simulation and optimization in one tool. This innovative technology allows you to build GFA, Network Optimization, Transportation Planning, Inside The Four Walls Analysis, and more. ALX allows you to model of these problems, and connect them so you can build your NO model out of a GFA, or simulate a plan generated from your NO.
The video below is a great introduction to building GFA in AnyLogistix.
Using AnyLogistix for Supply Chain Design
AnyLogistix combines best in class simulation (AnyLogic), best in class optimization (IBM CPLEX), GIS Integrations, and an intuitive interface that makes it easy for anyone to use. ALX is a fantastic all-in-one solution so that you can analyze and improve your network end-to-end.
ALX is an innovative tool. It’s the only solution that combines simulation, optimization, and GIS into a supply chain design solution. If you’re interested in other use cases for ALX, check out this article on supply chain network optimization.
SimWell is the North American leader in simulation and optimization solutions. If you need help with Greenfield Analysis, or you need to find the right tools to do it yourself we can help.
It starts with a conversation. Send us a live chat, or click Start the Conversation. We want to learn about your supply chain challenges, and see how we can help.