![distribution_center_header](https://www.pacellico.com/wp-content/uploads/2024/03/distribution_center_header.jpg)
CUSTOMER CASE STUDY
The client had built up an extensive network of DCs and cross-dock shipping centers with high levels of inventory but was achieving disappointingly low levels of next-day delivery (around 70%) and suffering from high product return-levels and inter-site transfer shipment cost.
Results
Story
The client is a leading spare parts distributor with network of 9 Distribution Centers (DCs) serving US auto repair shops with next-day delivery. Pacellico was asked to model and recommend the optimum network for next-day delivery to the client’s customers.
We built an inventory and freight model for a variable number of DCs to quantify the increased transportation cost against decreased inventory for fewer DCs with consolidated stock. Variance analysis for 2 million sales records was used to model safety-stocks. We experimented with a range of scenarios for DC count and location to determine the optimum network design. We investigated the client’s procurement and replenishment methodology to identify and address process weaknesses.
![diagram](https://www.pacellico.com/wp-content/uploads/2024/03/diagram.png)
![02](https://www.pacellico.com/wp-content/uploads/2024/03/02.png)
Conclusion
Our DC network analysis found that reducing the DC count from 9 to 4 would reduce inventory from $69M to $41M while achieving 95% next-day delivery. While freight costs would increase from $2.2M to $3.6M due to the longer delivery distances, this would be fully offset by a $4.9M reduction in transactional cost. We found the replenishment process was highly dependent on human judgement and proposed a methodology for forecasting and order generation which will further improve inventory performance.
![Businessman,Hand,Holding,Smart,Phone,With,Icon,Mobile,Phone,,Mail,](https://www.pacellico.com/wp-content/uploads/2021/11/contact_shutterstock_792913780-scaled-e1637403996664.jpg)
Contact us to schedule a complimentary online free consultation and discuss tailored solutions for your business.
Pacellico Blog
Embracing Sustainability: A Blueprint for Manufacturing Companies
Sustainability has become a critical focus for businesses worldwide, and the manufacturing sector is no exception. [...]
Navigating Uncertainty: Strategies for Building Resilience in Your Business Operations
No matter which business we are working in, uncertainty is the new normal. While lack [...]
The Synergy between Leadership and Management for Business Growth
In today's rapidly changing business landscape, organizations must be agile, innovative, and growth-oriented to survive [...]