MAKE FASTERAND BETTERDECISIONS

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Deciding on which way a product shall travel through your supply networkcan be a complex choice. Decisions about suppliers will affect lead time,logistics costs, tariffs, and sourcing costs. Responding to marketrequirements, while optimizing operations of the supply chain is often donebased on experience and gut feelings. However, even with skilledprofessionals this does not often result in optimal choices. Case studiesperformed by FREJA 4PL Services have shown that utilizing data in thedecision-making can give a 10% reduction in costs of logistics.

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Figure 1. When thesupply chain hits the

right balance betweencosts and

responsiveness relativeto the product and the

market, it is called“Zone of strategic fit”.

When designing the supply network itshould include elements that enablesboth a responsive track through thesupply chain, a more cost-effectivetrack, and maybe some tracks thatbalance the two. This will enable thesupply chain strategy to enter “zoneof strategic fit”, which is when thesupply chain is responsive enough tomeet the market requirements, andthereby competitive, without wastingresources and thereby being tooexpensive.

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In other words “zone of strategic fit”is achieved when the capabilities andthe efficiency of the supply chain isproperly balanced. In practise, thiscan be achieved by tuning the sub-elements of the supply chain. Anexample could be to ensure customerdemands are met, while transportcosts, stock binding, tariffs, andsourcing costs are minimized.

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Figure 2. The supply chain must balance cost level and response capabilities. This is ensured by having theright sub-elements in the supply chain

A decision model can helpapproaching this challenge in astructured and data-driven manner. Adecision model will typically takeinputs about customer demands,such as demanded lead time etc.Based on these inputs, a list offeasible suppliers along with a costoverview is given as output from thedecision model.

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To further support the decision, asensitivety analysis of the customerdemands is often included in thedecision model, as this is a great toolwhen challenging the customerdemands, and hereby ensuring thatresponsiveness and cost-effectiveness is balanced to maximisecustomer satisfaction.

Are you interested in hearing more about how FREJA 4PL Services

may help you? Contact Head of Digital & Innovation,

Kenneth Sandgaard, on ksa@freja.com or on +45 9670 5360.