What are the key factors to consider when choosing a logistics network design and location?

Actually service level is usually the strongest constrain when reviewing supply chain network design. Other factors mentioned later prove to be less important. However, the real challenge is to agree on a service level metric to use. Most common ones are on time delivery and standard delivery time. Note you cannot use On-Time-In-Full in optimization research as it depends not only on the network design characteristics but also on operational decisions made later on.

Proximity to customers: Choose locations that reduce transportation time and costs, ensuring timely deliveries. Distribution network: Optimize the distribution network to meet customer demands efficiently. Order fulfillment: Design the logistics network to ensure quick and accurate order fulfillment.

The highest cost in every logisitics network is the last mile. Therefore, the question you have to ask yourself is: How do I deliver to my customer or re-phrased what is the order behavior of my customer? Knowing this will give you an idea of where you are able to locate your warehouses. Make sure to not be narrow minded by borders, existing modells or other "maybe" restrictions.

Cost is usually first and foremost factor which motivates organizations to start network optimization, but be carefull. Cost alone optimization will lead to designs which are risk prone. Even in case you still consider minimum service levels. I have seen a electronics retail chain in CEE which optimized their network from 3 regional DCs to single large scale DC with e-commerce fulfillment capabilities. This was cost effective, this worked well in business as usual situations, but it proved to be fragile once a fire broke and made the site inoperable for a period of time.

Transportation costs: Consider transportation expenses for inbound and outbound logistics, aiming for cost-effective solutions. Warehouse costs: Evaluate warehouse expenses, including labor, storage, and handling, to minimize overall costs. Inventory carrying costs: Optimize inventory levels and locations to reduce carrying costs.

Market access: Choose locations that provide strategic market access, potentially giving a competitive edge. Speed to market: Design a network that allows for quick responses to market changes and customer demands. Flexibility: Ensure the network design is adaptable to changing business conditions and market dynamics.

Green transportation: Opt for eco-friendly transportation methods to reduce the carbon footprint. Energy-efficient facilities: Choose locations with energy-efficient warehouses and distribution centers. Sustainable practices: Integrate sustainable practices in the supply chain to meet corporate social responsibility goals.

The type of goods being moved is key as how they are transported can be regulated and influence type of logistics network design. Products like explosives/military equipment may require special handling. Some medicines may be affected by handling conditions or are prohibited in some countries etc

1?? Check, or forecast, customer prefences (in example expected store locations) within 2-3 years perspective minimum! Implementing changes in the network will take time. It's at least couple of months to open DC. You should not optimize versus current situation only! 2?? Contigency scenarios - when creating a network always ask yourself what will happen if a node will become inoperable - don't overfit your network! Make sure business continuity plans for new set ups have the same or better level of feasibility as current set up. 3?? Return On Investment in the network. A good way to test returns on network changes is to start a cooperation with 3PL instead of opening own location. When the set up proves you will optimize within.