LOCATION. LOCATION. LOCATION.

HOW TO FIND THE BEST LOCATION FOR A POSTPONEMENT HUB

Location, location, location. 3 important things about postponement

Supply Chain Consulting

By Matthias Vollmert, Partner, DHL Consulting

February 20, 2018

The 3 most important things about a property are its location, and (for emphasis) its location and its location! The same mantra holds true for postponement. Once you have decided to delay some of your supply chain activities, finishing or customizing your products before final delivery, it is essential to do this within easy reach of your end customers.

THE BENEFITS OF POSTPONEMENT

As discussed in my earlier blog articles in this series, using the right postponement strategy can bring many valuable benefits to the organization, creating flexibility by delaying activities and answering demand for customized products without imposing a premium charge for the processes involved. Along with this competitive advantage, postponement also reduces waste through on-demand production and delivery, enables exciting new product-service interactions, and saves money. The right postponement strategy requires careful consideration of strategy design and implementation, and during this process it is essential to analyze the location of your future postponement activities.

LOCATING A CUSTOMER’S PACKAGING HUB

When a leading global pharmaceutical company asked us to determine the most suitable location for its new secondary packaging hub in APAC, the DHL Consulting team undertook in-depth analysis from both external and internal perspectives.

We started by ranking 18 shortlisted countries against specific criteria. From this deep-dive, Singapore emerged as the second-best country in terms of flight frequency and available airfreight capacity, offering the world’s most efficient border administration results, very low tariff rates and trade barriers, and 10+ different types of tax benefits. The country also ranks highest for availability and quality of transport services, and has the best quality of air, port and road transport infrastructure, although it does have a relatively high cost of labor. Lastly, it takes an average of only 150 days to solve a standard commercial dispute with relatively low costs, and there is relative freedom on contract with rapid contract resolution.

To obtain an internal perspective, the DHL Consulting team conducted surveys and Q&As with employees located in the shortlisted countries to collect their feedback on location preference and requirements. With the assurance of objective analyses based on credible external and internal sources, the pharma company was able to identify Singapore as the best location for their new hub. Our team also supported this customer through the implementation phase, and the hub celebrated its go-live in July 2017.

DISCOVERING HIGH SIX-DIGIT FREIGHT COST SAVINGS

As part of this project with our pharmaceutical customer, the DHL Consulting team also undertook transportation cost modeling for the new Singapore hub. This involved changing various parameters – particularly switching transportation mode, from air to ocean whenever feasible – a process that helped to highlight key hub requirements to the customer. Significantly, this exercise revealed that the customer’s initial estimate of potential future freight cost had been overly conservative and there was room for further cost optimization. With the DHL Consulting models, the customer was pleased to discover potential for a 40% reduction in freight costs, equating to annual high six-digit savings.

If you are thinking that a postponement strategy could play a useful part in your own organization, please get in touch with us. Together we can undertake a high-level feasibility and cost benefit analysis and follow this up with the necessary to-be scenario modeling. Our commitment to you doesn’t end there. We can also include recommendations and roadmapping, as well as roll out to full implementation. I look forward to future discussions with you.

GET IN TOUCH WITH MATTHIAS VOLLMERT

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