To reduce supply chain costs, manufacturers should optimize their warehouse network every five to seven years – balancing warehouse capacity levels, operational costs, transportation costs, and service levels.
One particular automotive manufacturer sought to evaluate their parts distribution center (PDC) network to determine ways to support advanced customer service levels while reducing supply chain costs. At the same time, the OEM sought to understand the warehouse space requirements to support their business and the changing market dynamics over the next 10 years.
This type of network design and predictive strategy is extremely complex, especially given significant uncertainty in the future. It requires a team of experienced individuals who possess a deep understanding of best-in-class parts distribution networks and who can leverage their industry knowledge and network of industry peers to identify where the market is headed and how this will impact the chain.
Carlisle leveraged industry expertise and robust modeling software to identify the optimal network configuration for the client. This custom strategy incorporated four key components:
- Network Footprint
- Accessories Strategy
- Electric and Autonomous Vehicles
- Insource / Outsource Operational Strategy
The heart of this project centered on designing a network footprint that would provide sufficient network storage capacity, while minimizing costs and optimizing service levels. To do this, Carlisle built a flexible model to estimate 2030 network costs, forecasting nearly 50 scenarios to assess various PDC locations, cross-border interactions, segmentation strategies, and a new accessories strategy. The analysis resulted in a shortlist of five potential scenarios that compared annual cost savings, service levels, network footprints (facility openings and closures), and network storage capacity requirements through 2030.
Concurrently, Carlisle developed an accessories distribution strategy, a customized report on the predicted impact of electrification and autonomous technology on the client’s network, and an insource / outsource strategy to identify how the network would need to be designed based on these factors.
- Accessories Strategy: Carlisle developed a robust assessment to determine whether accessories should be kept in the client network or if they should be outsourced to a 3PL
- Electrification and Autonomous Technology: Carlisle built separate models to project the impact of electrification and autonomous technology on the client’s network. Carlisle summarized these findings and implications to recommend the appropriate network configuration from the shortlist of five potential scenarios
- Insource / Outsource Operational Strategy: Carlisle benchmarked 240 automotive PDCs in North America and Europe to evaluate the trade-offs between 3PL-run and OEM-managed distribution networks
The results of these additional analyses helped inform the client’s future-state network configuration, to help them meet future demand, service levels, and changing products while optimizing costs.
Leveraging Carlisle’s recommended network configuration, the client will achieve cost savings of upwards of $3M per year.
Additionally, Carlisle’s recommended network configuration would translate into the expected benefits of:
- Low up-front investment requirement: The strategy can be executed mostly within the client’s current building footprint
- High Flexibility: The scenario allows for the addition of a PDC in the case that network space requirements are higher than anticipated
- Fast Execution: Several restructuring and expansion actions can be executed quickly with immediate benefits
Upon adoption of a future state network, the global automotive OEM will be well-situated for an uncertain future and will be able to continuously support optimized customer service levels in a cost-effective, efficient manner.