The Many Flavors Of Network Optimization

This is an excerpt of the original article. It was written for the December 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

December 2015

It’s December, and time once again for our annual Executive Guide to Supply Chain Resources. This is a comprehensive guide to services, products, and educational opportunities targeted specifically to supply chain professionals. The editors at Supply Chain Management Review wish all of our readers a successful year to come.

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You see a new distribution center rising from the ground, you read the discouraging news that a local plant is closing, or you learn that a new company is breaking ground in an industrial park outside of town and think that there must be some inherently good or bad things about those locations. After all, aren’t the three most important things in real estate: location, location, location? Maybe it’s the quality of the site, access to the highway, tax incentives, or the cost and availability of labor. But what happened prior to this? Which factors caused the company to get interested in that location, or to get out of Dodge, in the first place? Why did an organization focus on that part of the country, at this point in time and with those site, building, and workforce requirements? How did that location fit into an overall network or supply chain network strategy, or, alternatively, what changed to make it a less optimal location?

You might think that there is one set of rules to help companies optimize their networks and enable their supply chain strategies, but in reality, the answers to those questions vary by industry and how a company goes to market to service its customers. Often, the reasons are different than you might think. Let’s look at some of the key decision drivers in network optimization and how they often vary by industry.

It’s Not the Building
Let’s start by looking at something that doesn’t matter all that much: the building you saw rising from the ground and the piece of ground from which it is rising. To anyone who has lived through the experience of building their dream house on the perfect piece of land, that sounds counterintuitive because people invest so much time, energy, and money in getting everything just right. But the truth is that in a supply chain network: “Real estate is a rounding error.”

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