$24M consolidation model disproved before the client spent a dollar on it

Network Design Ground and expedited Medical devices
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WHO

Business model

A multi-billion dollar manufacturer of medical devices that had grown by acquisition, with several manufacturing sites that also distribute orders.

Industry

Medical devices, where fill rate and time to deliver are the numbers customers hold you to.

PROBLEM

What they felt

After several strategic acquisitions, this manufacturer had a distribution network that overlapped and several inventory challenges. After completing a strategic network modeling exercise, and before investing millions in the solution, they wanted to know if the new facility alignment was correct and the savings real.

What we found

The strategic network model was built from inconsistent data and for the most part based on averages and aggregate data. The results from this exercise suggested closing 4 DCs and consolidating inventory into 1 DC with estimated savings in excess of $24,000,000 over 5 years.

WHAT WE DID

Prep and analysis

A new model of the current operation was built by Trans-solutions, using real warehouse, inventory and shipment level data for each mode.

Execution

Various scenarios to optimize the network were run. The challenge was to verify the amount of savings that was stated by the consultant and the changes in service to the customer, fill rates and time to deliver.

We told them the answer they did not want

The results showed limited savings. Because of the number of manufacturing sites that also distributed orders, there was a profound pull on the model back to the manufacturing locations. A significant amount of freight had to be expedited to maintain service that previously traveled via ground mode. The original model did not optimize as well as the theoretical study suggested, because it omitted the expedited service.

RESULTS

What they got

A $24,000,000 savings case, disproved before the money was spent

They verified the current network, gained an accurate model built on their own data, and kept the capital they were about to commit. Theoretical studies are good for theoretical answers. Real models built by Trans-solutions show real answers.

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