Logistical Network Analysis Meaning, Objectives, Importance

Strategic analysis of logistical networks is designed to reduce costs, increase client service levels, and maximize profits. To achieve these goals, strategic decision making must be balanced between procurement, production, inventory management, and transportation.

Objectives of Logistical network analysis

Logistical network analysis is fundamentally aimed at determining the number of production sites, warehouses, and depots. It is also used to develop scenarios for assigning not only a capacity to each of these sites, but also an optimal geographic location in view of specific network constraints.

From both a local and global perspective, logistical network analysis is aimed at determining supply sources, production volumes, and inventory levels for each site being studied. As this pertains to transportation, logistical network analysis is used to weigh the merits of various transportation modes.  It is also used to develop a transportation plan with a view to determining the most suitable modes for each segment of the network.

Logistical network analysis: Proposed methodology

Given the need to jointly optimize various logistical aspects, such as production levels, inventory levels, and supply sources, adopting a systemic methodology is essential to the success of such a project.

Collect data

It is very important that data be collected concerning the current network (site location, node typologies), products (nomenclature, weight and volume), constraints (client demand, production capacity, delivery lead times, service levels, etc.), network costs (facilities, storage, production, transportation, etc.), and the transportation modes utilized.

Determine distribution strategy

The distribution strategy is used to determine the service level sought by the organization in response to demand in various markets. This strategy also stands at the forefront of considerations concerning the desired network transportation structure.

Determine scenarios

Determining scenarios forms the central pillar of strategic analysis. By varying site locations, network structures, client demand levels, and service levels, an array of scenarios can be developed to model a large number of situations with a reasonable likelihood of occurring. For example, you can determine the impacts of soaring client demand on network costs, significantly increasing service levels in certain regions or delocalizing your production activities.

Evaluate scenarios and select one

Once various scenarios have been established, they should be evaluated. To this end, you should develop an evaluation scale, including parameters to be considered and appropriate weighting factors. Once the criteria have been established and the scenarios have been evaluated, you can decide which scenario is most suitable this will be the future logistical network.

Implement scenario

Implementing the scenario requires meticulous planning, not only in structural terms, but also in terms of change management and training, two intangibles that remain a key component of project success.

Evaluate performance

After the scenario has been implemented, performance evaluation is used to provide the feedback required for project analysis. Evaluating financial factors (effective cost of the new network) or client service factors (delivery lead times, inventory outs, etc.) facilitates competitive benchmarking and ensures continuous improvements in our logistical network.

The source of a competitive advantage

From a perspective of globalized supply chain management, logistical network analysis thanks to the role it plays in reducing costs and improving client service is likely to be a major source of competitive advantages.

1. Network design is prime responsibility of logistical management since a firm’s facilities and structure is used to provide products and materials to the customers.
2. Logistics facilities typically include manufacturing plants, warehouses, cross-dock operations, and retail stores.
3. Determining how many of each type of facility are needed, their geographic locations, and the work to be performed at each is an important part of network design.
4. In certain situations, some of the facility operations may be outsourced to service specialists. Regardless of who does the actual work, all facilities must be managed as an integral part of a firm’s logistical network.
5. Network design, not only determines the number and location of all types of facilities required to perform logistics work but also determines what inventory and how much to stock at each facility and where to assign customer orders for shipment.
6. The network of facilities including information and transportation forms a structure from which logistical operations such as processing of customer orders, maintaining inventory and material handling performed.

The design of network must consider geographical variations. In context of global logistics, issues relating to network design become increasingly more complex.

The factors influencing modification of network design are:

• Change in demand and supply
• Product assortment
• Changes in Supplier’s supplies
• Manufacturing requirements.