Future fit distribution network
The client, a leading fast moving consumer goods company in the Philippines, maintains one of the most highly developed distribution systems throughout the archipelago.They asked Cobena to help improve their distributor operations by challenging the currentlocation of their supply depots in relation to where the bulk of their sales come from and where the growth opportunities are. The client believed that data-driven recommendations will improve the efficiency and productivity of their whole network, which now needs to be re-visited since it got constructed over the years without any real masterplan. Conditions have now changed and more parts of the Philippines are growing rapidly , showing massive potential : now is the best time to review if the location of the distributors’ warehouses are supportive of the current source of sales as well as the company’s growth ambition.
Creating an Optimization Model
Using Gateway, Cobena’s proprietary location analytics tool, Cobena data analysts geotagged the locations of the current warehouses, customer accounts, and pooled these coordinates with the rest of client’s performance data into one data source.A linear programming model was then developed to be able to maximize sales coverage while reducing input variables and ensuring that certain time considerations were met in each area.In a country where distance is more importantly measured in terms of travel time versus actual kilometers, Cobena had to use traffic data as another important consideration in the model design. Inevitably, certain warehouses will need to be re-located so Cobena had to take into account cost of land as well as the topography of the environment and the road network in order to ensure that new warehouse recommendations were at the most optimal: in terms of location proximity to customers, overall accessibility and cost of rent or purchase of the land to be used for setting up the new warehouses.
The outputs were then visualized into an advanced Business intelligence tool which displayed current as well as potential locations onto an interactive map.Overall, the results showed that there was significant sales upside that could be realized with minimal disruption to the current state.Distributor managers were then able to bring the outputs to their distributor partners and simulate the business impact of relocation versus staying put.The exercise was conducted for the national distribution network spanning the 1600 municipalities all over the Philippines.