The current business environment is characterized by growing consumer sophistication and a fierce competition to attract and retain them. This
imposes incessant pressure on the consumer goods companies to search for new avenues for growth and improving customer service.
A leading B2C company is seeking to launch new categories and products as an avenue for growth and differentiation, which implies a significant
increase in the complexity of storage and distribution operations. Thus, it is necessary to reevaluate the strategy for distribution and the configuration of the network, seeking to optimize the cost of service and customer service.
PROBLEM
By introducing new categories and increasing the number of SKUs in the protfollio in an accelerated manner, the company faces the following
problems:
- Significant increase in the variability of the demand.
- Different priorities and strategies in each country.
- Lack of coordination in plans for infrastructure growth.
- Lack of visibility of the restrictions for the flow capacity of the network.
- Uncertainty about the impact of the increase in SKUs on the storage capacity of the network.
HOW WE SOLVED THIS
Three courses of action were considered:
- Modeling the effect of the expected increase of SKUs on the density of storage and simulate it.
- Determine the optimum configuration of the distribution network based on the demand projections and the introduction of new categories.
- Generate a 5 year plan of capacities and investments required for the three countries.
A mathematical model was generated to simulate the effect of an increase in the variety of SKUs on the density of storage. This was used to evaluate the storage capacities required in function of the demand expected for the next 5 years and the corresponding policies for inventory.
BUSINESS BENEFITS
An investment equivalent to 6% of the annual income guarantees the implementation of the commercial strategies of the company from an infrastructure point of view. Not making this investment implies a risk of losing up to 9% of the total sales projected for the next 5 years.
In this manner, future configuration scenarios were generated that responded to the following questions:
- What should be the optimum number, size, type and location of the Distribution Centers?
- How feasible are the future demand scenarios?
- What are the eexpenses and investments needed in function of these scenarios?
About Sintec
Sintec is the leading consulting firm focused on generating profitable growth and developing competitive advantages through the design and execution of holistic and innovative Customer and Operations Strategies. Sintec provides a thorough and unique methodology for the development of organizational competencies, based on three key elements: Organization, Processes and IT. Furthermore, Sintec has successfully carried out more than 300 projects on Commercial Strategies, Operations and IT issues with more than 100 companies in 14 countries throughout Latin America. Our track record of more than 25 years makes Sintec the most experienced consulting firm in this area of expertise in the region.
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