THE NETWORK IN SIX STEPS

CHANDRA NATARAJAN and LEE HALES describe a systematic six-step procedure for effective logistics network planning.

Supply chain networks comprise locations – suppliers, plants, warehouses, and customers – and transportation routes between them. Planning such networks requires a hierarchy of decisions, the implications of which can be worth millions of dollars. Typical decisions include:

• Which customers will be served and in which locations?
• What products will be supplied?
• Which products will be made internally and which sourced from outside?
• Which products will be made or distributed at which locations, and in what quantities?
• How much capacity will be provided at each producing or distributing location?
• Which suppliers will be used?
• Which customers will be served from which locations?
• How much inventory will be held at which locations?
• What will be the hours and days of operation?
• What modes of transportation will be used between locations?

The field of network optimization has evolved to improve such decisions, and in many companies, network modeling and planning are now daily activities. But in spite of powerful mathematical algorithms and software, a number of challenges make effective planning difficult:

1. Understanding the theory of optimization does not assure a well managed project or effective network planning. And while there are a number of excellent texts on optimization theory and tools, there are very few publications on how to manage their application on everyday business projects.
2. No formal methodology exists for planning and managing network planning projects.
3. Network analysis and planning become tedious when problems are not appropriately defined at the outset.
4. Lack of attention to pre-planning of projects leads to much rework and waste.
5. Network planning lacks standard outputs and documentation.

To address these challenges, the authors have developed a simple six-step procedure aimed at improving planners’ effectiveness on “simple” projects, i.e. those using existing models to address problems of relatively limited scope, such as the best existing location at which to add capacity, or the impact of a change in inventory policy, or of adding or closing a branch warehouse.

Simplified SNP uses the High Performance Planning model developed by Richard Muther and used in the well-known Muther methods of systematic facilities planning. It can be mastered in less than one day without formal training in network optimization. However, the planner will still need training in the optimization software necessary for network planning.

Natarajan and Hales illustrate the use of Simplified SNP at Mountain Trail Tonic (MTT), a fictitious manufacturer and distributor of organic juices. A key document is presented for each step. These and other worksheets are available free from Richard Muther & Associates.