Case Study: How Supply Chain Optimization and Simulation Helped Cut Delivery Times in Half and Reduced Transportation Costs for One Retailer
How E-commerce Impacts Network Design
According to Statistics Canada, eCommerce amounted to US$3.82 billion in sales in December 2020 and it is estimated that it will total US$40.3 billion in 2025! This growing demand on the supply-chain network puts pressure on companies to try and deliver on time at a reasonable cost. How could one company optimize its supply chain to keep the same service level while keeping profits in the green with the increase in fuel costs and inflation?
Supply Chain Optimization and Simulation
In the fast-paced world, we live in, we must embrace the continuous improvement of all supply chains. There will always be changes in the network, new stores, new suppliers, and changes in costs, the optimal for a supply-chain network is very short-lived.
As Peter Drucker said: “If you can’t measure it, you can’t improve it.”
You don’t want to come up with an idea to improve something in the supply chain without knowing if it’s the real issue, right? More importantly, changes bring riptides. The real supply-chain network is not a good trial-and-error playground. It can get pricey, EXCESSIVELY PRICEY.
SimWell has developed a myriad of techniques to enhance the toolbox of supply-chain experts to achieve their objective of continuously improving their supply chain. A retailer approached us with an amazing problem to solve. They were tasked to reduce delivery costs to customers while decreasing delivery time for online orders.
Now a bit of a background to set the table:
- One distribution center
- More than 25 stores across the country in 5 different provinces
- Thousands of products delivered directly to customers with eCommerce
All products ordered online are sent from the distribution center. The distribution center is sending a truck or two a week to each store. The retailer has an idea to use its store to fulfill online orders when it’s possible.
But… which store? Should they all do it? Should they work together?
With data in hand, we built a simulation of the supply-chain network to test different “what-if’” scenarios. The first step is to create the base case, the virtual reality, where we ensure that costs are close to reality.
Now the fun begins!
- What if we use one store per province/state to fulfill online orders?
- What if we use each store as a delivery hub?
- What if we have one hub per province and all the other stores are satellites that can send it to the hub?
Obviously, many questions arose during the process.
- What happens if we don’t have on hand the ordered product in the store?
- What if the online order took a product that would have been sold in-store?
- How many orders will there be at the distribution center?
- How many trucks will depart from the DC with those changes?
- Are the stores big enough? What will be the peak inventory to face those online orders?
During working sessions using the proven SimWell agile methodology, we have been able to gather as much information and data as required to help the retailer make the right decision.
We have been able to compare a few dozen scenarios to find the right balance between costs and service levels across online and in-store operations.
You must be asking yourself, was the problem solved?
We have been able to cut the delivery time to customers for online orders in half while reducing total transportation costs by 5% and keeping around the same service level for customers.
Don't Miss Your Supply Chain Check-up
Don’t wait and miss the constantly growing e-commerce bandwagon, all supply-chain networks need continuous improvements. You wouldn’t miss your yearly medical check-up. Why would you do it with your supply chain, book a demo, and we will find the right technology to solve your own problems?