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-May 28, 2010 -


Supply Chain Graphic of the Week: Savings Impact of Dynamic Routing

  One Retailer Finds Big Savings from Varying Store Delivery Times, but Others May Find Trade-Offs not Worth It  

By SCDigest Editorial Staff


In the end, supply chain is in large measure about managing trade-offs, and the idea of more "dynamic routing" is certainly one area where it is interesting to explore that balancing act.

In an outstanding videocast this week on The Supply Chain Television Channel, Dr. Mike Watson of IBM went through a number of case examples of how supply chain optimization technology is being used, including the one illustrated below, in which a retailer looked at various options for its store delivery strategy. (To view the on-demand videocast, go to: Supply Chain Optimization and Network Design Videocast.)

As shown in the graphic, the retailer, using network design tools, looked at comparing its existing strategy of promising store deliveries on a specific day each week against giving stores a 1-2 day window for the week and making it variable each week.

The latter strategy especially would enable to the retailer to use more dynamic routing, leading to tremendous reductions in transportation costs, taking the existing costs of $88,000 per week down to just under $30,000 per week.

Source: IBM

Ultimately, said Watson, this is the choice the retailer made. However, this lowst cost approach could have an impact on store inventory levels and stock outs, as well as store labor planning, etc.

Which answer is right? It depends, of course, on a company's strategy, business success drivers, risk tolerance and more - and that's the fun of supply chain!


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