Blog Posts Taking a Strategic Approach to DC Network Configuration

DC Network

When rapid growth of its Sparkling ICE® beverage line strained Talking Rain’s limited distribution network, the company recognized the need for network expansion. Today, a multi-node network of DCs nationwide puts the beverage producer’s inventory close to end customers, optimizes transportation costs and drives service excellence.

Talking Rain is not alone in recognizing the value of a strategic distribution network. Companies in a variety of industries are taking similar steps.

Our new whitepaper explores a growing trend toward network optimization. Following is an excerpt from the 2018 Distribution Network Trends Report

Finding the Optimal Configuration

Every company will have its own ideal DC network configuration based on company size, type, variety of sales channels, geographic distribution, etc. For example, omnichannel companies are more likely to have more DCs because they can provide faster, more cost-effective service when they’re in their customers’ backyard.

The design and management of these networks should be assessed on an on-going basis. The network is likely to change over time as the business grows and evolves.

To determine the ideal number of distribution centers for a business, it’s important to consider a variety of factors including order volume, product characteristics, reverse logistics needs and acceptable transit times. Data analysis and modeling can be valuable in the decision process.

Multi-Site Distribution Model

Today, as more companies move toward an omnichannel environment (or simply need to accommodate sales growth and market expansion), they opt for multi-node networks that put products closer to their customers.

In fact, Saddle Creek’s recent survey of omnichannel companies reveals a significant trend toward a multi-site distribution model. Within two years, 77.8 percent of omnichannel companies will use multiple DCs, the study shows. The number of companies using multiple DCs “with the source of fulfillment determined by business rules for the order” will climb from 23.5 percent to 49.4 percent while another 28.4 percent will use multiple DCs “with each primarily serving a specific geographic area or sales channel.”

Selecting Strategic Locations

When it comes to site selection, low operational costs and readily available inbound/outbound transportation should be key considerations. It also can be helpful to consider proximity to customers, sourcing, manufacturing, ports, major Interstates, etc.

Depending on how many nodes are required, Chicago Consulting’s 10 Best Warehouse Networks list identifies strategic DC locations based on the lowest possible transit lead-times to customers in the U.S.

When choosing the best geographic location for warehouse facilities, it is important to keep in mind unique business objectives.

“For example, if fast, free shipping is a service priority, strategically located DCs make it possible to reach more than 98 percent of the U.S. within two business days via ground service,” explains Tom Patterson, Senior Vice President, Transportation Services at Saddle Creek Logistics Services. “That helps you meet consumers’ expectations for delivery speed while significantly reducing your transportation costs.”

Download the 2018 Distribution Network Trends Report to learn more about strategic network configuration, common challenges for implementation, opportunities for operational improvements, and the role of outsourcing.