Case – Strategic Logistics Consulting: Developing a Cost-Efficient and Sustainable Supply Chain for a Global US Technology Player
Discover how driving cost savings and service level improvements also builds a greener supply chain
Facts and Figures : In a nutshell
- 0% logistics cost savings
- 0% improvement in lead times
- 0% reduction in carbon emissions
- 0day or less transport lead time for all APAC demand
Summary: What has been solved?
A leading US technology player needed a second distribution hub in Asia to address growing customer demand and increasing local supplier volumes in the region. At the same time, it was necessary to build up greater supply chain resiliency and flexibility in light of changing market conditions.
DHL Consulting conducted an assessment covering qualitative and quantitative factors across four Asia Pacific (APAC) countries. Based on the results of this assessment, the team of experts then recommended the optimal location for the client’s Asia-based regional distribution center.
Client
A major US technology player
Task
To recommend the optimal second distribution hub location, in the APAC region, that fits the client’s growth trajectory
Results
A global distribution network that has optimized service levels, reduced costs, improved sustainability, and lowered operational risk
Team
An international team of four collaborating remotely from three different US states and Singapore
Challenge: Empowering growth – identifying the ideal strategic supply chain hub location in Asia Pacific
To remain competitive in the growing Asia Pacific market for high-tech components, the client, a US global technology player, was faced with the challenge of finding the ideal location in APAC for a second distribution logistics hub.
The client emphasized high service level requirements that put greater pressure on minimizing any potential for disruption – particularly critical due to the focus on the spare parts supply chain, for which the uptime of technology equipment, with fast response time in case of defects, is essential. These requirements meant that ensuring the availability of transport options, transport efficiency, and smooth customs operations was key.
Within this very large region, the location for the new APAC hub would also need to be able to support any future changes in supplier or customer locations and volume movements.
At the same time, the potential for growing geopolitical tensions in East Asia would have to be considered, since these may present additional operational complexity for the future of the APAC hub.
Team: The solution starts with putting together the right team of experts
It was quickly clear that the client would need a global team of supply chain and logistics experts to provide profound advisory. DHL Consulting immediately got to work – choosing a lean team of four experts with strong competence in their respective fields.
It was a truly international team of four nationalities, located across three different locations in the USA and Singapore, working with the client mostly situated in California and select APAC countries.
Interviews to gain an in-depth assessment and analysis insights were conducted across the different functions of the client’s team located across the USA and Asia Pacific.
The entire project was conducted remotely, with a daily check-in and check-out as well as weekly status review meetings. Despite the distance, communication and collaboration were smooth and frequent.
Approach: A holistic assessment helps to make informed decisions
A qualitative assessment and comprehensive network modeling by the DHL Consulting team, combined with the client’s internal business considerations, fed into the final decision for a new second distribution hub, in the APAC region.
The qualitative assessment focused on evaluating all potential locations’ suitability based on actual operating conditions across four key dimensions:
- Logistics Operations and Infrastructure
- Network and Connectivity (including specific flight schedules)
- Operating Environment
- Tax, Duties, and Customs (including customs officials’ operating hours)
The focus was on optimization by performing an assessment of the current state through analyses using the baseline model, a three-part scenario assessment for cost savings, and sensitivity analyses to evaluate feasibility.
The network modeling focused on transport and warehousing costs as well as service times and coverage. Finally, the environmental impact of the network shift based on reductions in carbon emissions was also considered.
A deep dive for each country was also performed to identify the most ideal location and other considerations (e.g. building restrictions, automation) for implementation.
Results: Cost savings can go hand-in-hand with sustainability improvements
Based on the assessments and analyses by DHL Consulting experts, an APAC hub location was chosen that could lead to a total logistics network cost savings of up to 21%. Furthermore, the green potential of our recommendations can reduce carbon emissions by up to a high 52%.
The reduced reliance on the prior single hub location in the USA will enable the client to experience greater resiliency across the overall distribution supply chain network. Thanks to the APAC hub location, operational ease and efficiency has been set in place – providing for a lead time improvement of up to 84% for clients in Asia and a more efficient, regional fulfillment of products.
Detailed operational considerations and potential risk evaluations by DHL Consulting experts supported the client by enabling the scoring of each potential hub location. The team also provided recommendations on the preferred location and the duty suspension scheme that would need to be adopted in each potential location.
Lessons Learned: Cross-functional collaboration and local expertise from a global company serve as the building blocks to complex decision-making
The search and decision for the ideal regional hub is a complex one, where many different interdependencies come into play. At the same time, the supply chain disruptions the world has experienced over the last years highlights the importance of supply chain resiliency, with the aim to avoid single points of failure. This is particularly true for time-critical spare parts supply chains like those in the technology industry today.
This is why stakeholders from all the different, relevant functions need to be involved as an interdisciplinary team from the start: supply chain operations, sales, procurement, compliance, tax, sales, and planning teams.
Furthermore, it has been shown that a reduced carbon footprint, a factor that is becoming ever more important, can be achieved along with a reduction in costs – these are not mutually exclusive.