Trends affecting engineering and manufacturing sector
Companies in the engineering and manufacturing (E&M) sector are currently impacted by the trend of shifting markets. This increases competition from lower-cost organizations and brings changes in demand patterns which are moving the center of economic gravity to emerging markets. At the same time, many companies are increasing their focus on re- and near-shoring activities. They are also struggling to respond effectively to customer demand for shorter lead times and quicker product provision, particularly the availability of spare parts. Strategic network design enables an optimized infrastructure footprint, unlocking potential in the supply chain.
Doubling demand coverage & cutting logistics costs
Growing global demand for shorter lead times was a key challenge for one of our E&M customers. With its global distribution center in a sub-optimal location – close to manufacturing sites and local suppliers, but poorly located for international delivery of goods – the company turned to DHL Consulting.
We took a two-pronged approach to strategic network design. In the first place, we analyzed industry peers to accurately benchmark the customer’s network and warehousing; this initiative provided useful guidance on where best to relocate the distribution center, and indicated the value of converting this to an automated facility. Secondly, we considered network optimization, undertaking scenario-based network modeling to find the optimal balance between promised service levels and reduced overall logistics costs.
As a result, the customer was able to double global demand coverage within a single day. The company also cut logistics costs by 11% thanks to the new, optimized location of its distribution center which reduces air freight and incorporates warehouse automation. In addition, logistics activity is now 23% greener with less reliance on air transportation along with improved road and ocean connectivity.
Please contact me if you are interested in conducting a similar network design initiative or a general initial exchange.