2. Modelling the as-is operation and fully grasping its intrinsic characteristics
The following step of the project was to explore the available data and build an analytical model that represented the operation of the company at the time. Through statistical analysis and optimization modelling, the team was able to replicate the logistics process with close-to-reality operational indicators such as distance travelled during transportation, warehouse productivity and stock levels.
3. Mapping and exploring alternatives for further testing and evaluating
Together with the retailer and according to the company’s strategic goals, a wide variety of configuration hypothesis was established for testing and evaluation. The different available solutions included having storage hubs with or without stock, keeping stock in one country or choosing a hybrid approach and outsourcing or internalizing the warehousing process.
3. Validating the developed models and retrieving final indicators and results
The ensuing phase consisted in developing a holistic optimization and simulation model to test the different scenarios regarding warehouse future locations, logistic flows, and warehouse-to-store allocations, aiming to minimize overall costs while ensuring a high service level. In this step, and for each scenario, all previously defined indicators and costs were predicted.
4. Gathering relevant stakeholders and making the final decisions
Towards the end, all involved stakeholders were gathered, the different options were discussed and compared, and a final decision was made. The most relevant decisions of the project involved the centralization of part of the distribution process in the Portuguese warehouse, the relocation of the Spanish warehouse to a more cost-effective area, and a significant boost of the supplier-store direct deliveries.
In this step, it was critical to ensure alignment between stakeholders and to reach a conclusion in which everyone agreed on, even though it wouldn’t necessarily bring gains to all parties involved. It is crucial to bear in mind that to maximize the overall benefits, some departments and stakeholders may temporarily have losses.