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Key challenges
Fueled by organic sales growth in their local region, the client's distribution network was facing challenges in meeting rising demand. To improve efficiency, the client looked to optimize their distribution network by rationalizing their distribution centers and establish a new facility in a strategic location.
The client asked for support in determining the optimal network configuration to support the future volume growth requirements, where the most strategic position for a greenfield was when considering land availability and demand, as well as the optimal DC operational layouts and what types of automation were suited to the business requirements.
Our approach
TMX collaborated with the client to produce a last mile network simulation to test their current network and explore future configuration options.
The model enabled dynamic route allocation, assigning a route to a truck based on travel distance, and DC and truck capacity. This allowed TMX to not only test the impact of opening a greenfield DC, but also determine its optimal location to reduce costs. The dynamic nature of the model enabled TMX to assess the impacts of opening and closing DCs on the network and evaluate the distribution of demand across the facilities accordingly.
As a result of completing a successful simulation, TMX was able to quantitatively evaluate each network configuration and provide insights on aspects such as transport versus facility costs, and demand distribution.
Once the optimal network was determined, a concept facility was designed including suitable automation.
The results
Simulation enabled TMX to optimize the last mile network for the client, by reducing the number of nodes and introducing a greenfield facility. Dynamic route allocation determined that with this optimized network, truck utilization could be maintained at 83% whilst achieving a net saving of AUD $10M in logistics costs.