Supply chain/ logistics managers and specialists never have it that easy as their tasks are complex and placed in a delicate situation of evaluating trade-offs between different supply chain components/ logistics networks amidst constraints. Otherwise, they may not be able to deliver what their organizations want, which is optimizing costs and maximizing the revenues. In other words, if they do not do that way, the survival of the businesses may be at stake. It is in this context; network planning acquires significance in the network planning/logistics network.
In this article, we would briefly mention what network planning/logistics network is elaborate on the five steps of network planning. We would also say in the concluding part of their importance from a functional point of view. Its purpose is to provide inputs and add knowledge to the logistics networking community, which would enhance their performance.
What is network planning?
Experts view network planning as something that aimed at maximizing the number of users while at the same time minimizing the number of sites. Wherein the end objective is to bring about an optimized solution. Logistics network, which also goes by the term ‘supply stream,’ seen as a strategy that puts together the operations to deliver a product/service to the ultimate customer, through a process, which identifies and implements structural improvement that would increase the speed of the production or service.
Step 1: Orient the project
Orienting a project geared towards making it defined that could understand and scheduled realistically. It helps in the understanding of issues connected by identifying the elements with which the problems solved.
It is possible with the creation of an ‘orientation and issues worksheet,’ which captures all the information by a team that comprises of a lead executive. And a cross-functional team from operating units, finance, etc., within the firm, who versed with the subject and a subject matter expert who can be from outside. A worksheet not only makes a list but also make a rating of the issues in order of importance on a 1 – 5 scale:
- A= Abnormal
- B= Very high
- I= Important
- O= Ordinary (implying though not important yet merits consideration.)
Still, there could be issues that are beyond the control of the team, and they would flag with ‘X.’
Step 2: Defining the variables & constraints
Setting the variables is required to gather information for the construction of the model. It will also weigh on the various trade-offs among the variables.
This step also has to define the constraints, place in the assumptions. Restrictions are nothing but physical limitations that restrict the capacities and abilities of different locations, as well as the resources. The premises describe the conditions that deployed to clarify the model’s scope. And explain how the variables treated, which all will go towards simplifying the model. Towards this, a variable ‘summary sheet’ would be created, the purpose of which is that it signals an assurance on the part of the team and decision-makers that they have agreed on all the modeling exercise before practically put in use.
Step 3: Validating the model
Step 3 focuses on the validation of the model. For this, they need to identify such constraints that are not feasible. It is an iterative process, and those involved would have to relax several times the impractical restrictions. Known as ‘hard choices,’ and turn them into soft policy constraints, termed as ‘soft choices.’ While doing so, they also mark the changes by way of adding notes and explanations on the worksheet to explain that the changes have made along with the reasons why they made. They relate to variances between the results arising out of the iterative process and the network’s actual performance.
Validation, in essence, compares the results of the model to the actual performance of the system during the model’s period. The credibility is correlating to the variance and accuracy of the model in that the smaller the variation. The higher would be the efficiency and, therefore, acceptance of the model.
It has noted that variation is the most challenging process and a prolonged one. As it can take several days, even assuming the model has been adequately defined and documented.
Step 4: Visualization of scenarios
The team would have to develop scenarios that speak of alternative network plans, as it cannot rely on a single model. Each situation comprises of making changes to the baseline model.
They can be:
- Adding/deleting products/locations
- Adding/deleting resources
- Adding/changing locations as per anticipated customer demands
- Making changes to the sources of supply
- Adding/relaxing the constraints
With the above, a ‘scenario summary sheet’ is created, which would contain the records of changes from the baseline, And results in terms of demands, utilization of resources, etc.
Alternative visualization scenarios and the changes it brings about enable the team to stay on course and be accountable. It also helps the team to take into account various situations, from optimistic to pessimistic and most likely cases, which facilitates the management to make informed decisions.
Step 5: Evaluation of the alternatives
The exercises in the previous steps culminate into this, which placed before the decision-makers, who compare and select the most preferred plan. It is done with the help of an ‘alternative analysis worksheet,’ which contains two variables, cost, and intangible analyses, respectively.
The cost analysis computes each alternative’s differentials from the baseline for each of the elements that are part of the total cost. While doing, the team decides to show all the possible values or only those that impacted by the proposed alternatives. There is no universal rule for this, and it depends on the nature of the business. However, by way of thumb rule, when the effect of the proposed changes on the total cost is not very high, it would be better to present and compare only the actual prices, as this would more correctly reflect the cost difference among the alternatives.
The intangible analysis concerns itself with the consideration of factors that are not amenable to easy modeling or cannot be measured in economic terms. Some examples of the intangibles are labor/ facilities concerning the organizational structure—the ability to respond to changes in demand, ease of implementation, etc. The importance of this analysis can be seen in a situation where two or more alternatives yield similar results, comparing them with the intangibles would help in the identification of which is the best among them.
This article concludes by mentioning the practical utility of effective planning, and logistics networks bring on the plate. It serves the twin purposes of being a ‘detail and do worksheet.’ It involves the engagement of professional planners because that is the first step that paves the way for the implementation. When the actual execution takes place, it is good to place a concurrent monitoring system, which would measure, from time to time, the performance, schedule, and take corrective action. When the process completed, an evaluation can be conducted. It could be in the form of a post-implementation audit.
It would capture the actual results and identify the variance between the projected and real savings in the cost. Such reviews performed within a gap of between 90 and 365 days. Respectively, after the completion of the implementation. Such a practice would offer useful lessons for future modeling and the ultimate effectiveness of network planning.
Other Keywords: NETWORK, MODEL, STEP, COST, TEAM, CONSTRAINT, ALTERNATIVE, network planning, Logistics network, VARIABLE