Network Optimization and SIOP Implementation Leads to $39M in Savings

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The Challenge

A U.S.-based manufacturer and distributor of electrical components was shipping from 3 warehouses, and all were at or near full capacity. With the company’s aggressive growth plans – both organic and acquisitive – they were looking to better understand their footprint and operations. We came in to advise on the network cost impact of consolidating warehouses and to identify other value-creation opportunities.

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Our Approach

We assembled a team of experts from supply chain, operations, and continuous improvement to focus on network optimization and SIOP processes. We:

• Analyzed current state DC sizes, capacity utilization, processes and systems
• Assessed opportunities to compress space requirements through optimized inventory levels and through more efficient layout and space utilization
• Determined the impact on fixed and variable labor, facility expense and overhead costs
• Modeled the U.S. outbound transportation network including all Manufacturing Representative Distribution Centers
• Mapped out the financial impact in conjunction with their five-year growth plan

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The Results

• Identified $8.7M of savings in operating expenses through network optimization and warehouse consolidation
• Recommended the implementation of a SIOP process to achieve an $18.2M reduction in net working capital and a $12.2M savings in annual carrying cost through the implementation of a SIOP process
• Discovered an opportunity to improve inventory mix to achieve targeted service levels
• Identified additional inbound freight savings opportunities and fulfillment labor efficiency opportunities