Network design can play a key role in transforming a supply chain.  Dan Gilmore of SupplyChainDigest wrote a nice article on the transformation of The Home Depot’s supply chain.

In the article, Mr. Gilmore reported on the aggressive transformation of The Home Depot’s supply chain from one where the suppliers mostly delivered directly to the stores to one where product flowed through distribution centers first.  The Home Depot had to use network design software to determine the best number and locations of these distribution centers.  The article did not mention the transportation savings, but mentioned that the strategy could help free up $1 billion in inventory.

The transformation of the supply chain was so important that it was mentioned in the letter to shareholders in the 2009 Annual Report.

In the summer of 2008, Miller and Coors merged US operations to become MillerCoors.

When two firms merge, they can often find savings by combining their supply chains.  This means sharing suppliers, plants, and distribution centers.

MillerCoors reported on their supply chain savings in their quarterly earnings announcements.

For example, in a May 2010 letter, they announced that they were on track for $750 million in synergies (with network design an important part of this).  Specifically around network design, they mentioned:

“Supply chain integration continues to proceed on schedule. The brewery optimization project is nearing completion, as product moves are more than 90 percent complete.”

By the November 2010 letter, they mentioned:

“In the third quarter, MillerCoors successfully completed initial product transitions within its national brewery network. The company will continue to focus on further network optimization through peak/non-peak season sourcing changes, as well as opportunities for increased efficiencies. “

By the November letter, it is interesting that they mentioned that they would continue to their network optimization work to look at different strategies for different times of the year.

IBM (led by Sara Lewis, one of the co-authors of the book) presented with GE Healthcare at an IndustryWeek Webcast.  Click here to go to a link that allow you to view a replay of the event.   This event gives you a good overview of how network design is applied in practice.

The following is from the IndustryWeek registration page:

Conference Information

Managing a global supply chain is a constant balancing act. Making sure you’re getting the best results means calculating thousands of trade-offs. You need to consider every cost and constraint associated with transportation, production, storage, and global trade, while keeping service levels as high as possible. And when you consider how unpredictable high-growth markets can be, the levels of complexity increase exponentially.

Attend this IndustryWeek webinar featuring experts from IBM and GE Healthcare to learn best practices for simplifying the complex. Find out how your company can calculate the best possible supply chain network design to meet rapidly expanding business needs.

You will learn:

• Why leading companies are integrating ongoing network optimization into every major supply chain planning activity — and how you can benefit from their insights
• How major companies such as GE Healthcare are managing their global supply chain structures in order to reduce costs, improve customer service, and prevent disruptions
• How solutions can help your company simplify the complex though all-in-one packaged network design and planning

Speakers

Ryan Hahn, Global Network Optimization Manager, GE Healthcare

Sara Lewis, WW Technical Lead, IBM

In the 2009 annual CSCMP conference, Mars and Wrigley spoke with IBM about network design.

The talk was covered by a post from IBM’s blog site and one from Bob Ferrari’s Supply Chain Matters.

The talk did a nice job of highlighting the value of network design.  They spoke about $10M in savings just from the initial models.

Of the points mentioned by Supply Chain Matters, the following helps highlights points from the book:

“When modeling scenarios were completed, combined management was in a better position to make more informed  decisions regarding warehouse synergies, potential common systems, or customer shipment consolidation.  Additional insights were also gained regarding potential impacts of an increased cost of energy, or reduction of overall carbon footprint.”

This is an important part of network design:  running multiple scenarios to help the management team make a better decision.   Since decisions are still made with uncertainty (what will happen to the price of oil?  to demand?) and strategic considerations (what is important the Mars and Wrigley brands), the modeling can better help quantify alternatives.

DCVelocity wrote an article on the merger of Whirlpool and Maytag.  You can see from the quote below that the network design portion of the study was expected to deliver $40M in savings.  Network design was an important part of the overall merger of these two firms.  They needed to get this part right to deliver on the savings.

The following is a quote from the article explaining some aspects of the network design:

“Another early initiative was to provide the real estate department with information about the location and size of each existing facility. This was completed by the end of April and allowed for modeling of an optimized distribution network. The real estate department then began the work of disposing of facilities that were slated to close and acquiring new facilities in areas where it fit the network model. “Their job was to find the most efficient facility that would get us as close as possible to our network optimization,” says Iddings.

Big-time savings
The overall goal for any acquisition is to gain competitive advantage. Whirlpool’s acquisition of Maytag was no exception. Management’s main objective was to create a stronger, leaner company from the two units. There was obvious duplication in nearly every area of the two companies. Not only did they have similar product lines, but they also had the same basic distribution configuration—each had manufacturing operations that shipped from factory distribution centers to regional DCs, then on to local DCs. Streamlining these operations and eliminating redundancy could offer the kind of savings that made the merger very attractive.

Senior management had committed to the investment community the huge goal of $400 million in savings over the first three years, 2006 to 2008.

“That would be achieved from savings in procurement, manufacturing, and logistics,” says Gorbett. “We targeted $40 million of savings in freight and warehousing costs alone for each of those years. That aggressive target galvanized everyone into action, as we organized and immediately began to identify where we could achieve those savings.”