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What are the steps to develop a cost-effective distribution analysis framework?

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Distribution cost analysis is a vital process for logistics managers who want to optimize their supply chain performance and reduce their operational expenses. It involves evaluating the current and potential costs of transporting goods from the source to the destination, taking into account various factors such as distance, mode, frequency, volume, service level, and customer requirements. By conducting a distribution cost analysis, logistics managers can identify the best distribution channels, networks, and strategies for their business goals and market conditions. In this article, we will outline the steps to develop a cost-effective distribution analysis framework that can help you make informed decisions and improve your logistics efficiency.

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Leonardo Campos

Diretor Geral, Logística e Supply Chain (LinkedIn Creator 2023)

1 Define your objectives

The first step to develop a cost-effective distribution analysis framework is to define your objectives and scope. What are you trying to achieve with your distribution cost analysis? Do you want to compare different distribution scenarios, evaluate the impact of changes in demand or supply, or find the optimal trade-off between cost and service? How comprehensive and detailed do you want your analysis to be? What are the key performance indicators (KPIs) that you will use to measure your results? By answering these questions, you can set the direction and boundaries of your distribution cost analysis and ensure that it aligns with your business strategy and customer expectations.

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Leonardo Campos

Diretor Geral, Logística e Supply Chain (LinkedIn Creator 2023)
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Demand plan nos dias atuais, tanto na industria como no varejo é um estudo/analise indispensavel para aumento de vendas, libera??o de caixa e nivel de servi?o no atendimento aos clientes! Atualmente existem ferramentar super assertivas com machine learn e IA para fazer todo este levantamento, mas lembre-se que um banco de dados sadio e rico é preponderante para o bom funcionamento!

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Subas, CSCP

Logistics | Supply Chain | Customer Service | Inventory Management
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Define the scope and objectives of the analysis, clarifying what aspects of distribution costs you aim to evaluate and optimize. Next,gather relevant data. Utilize this data to identify cost drivers and potential areas for improvement.Analyze the current distribution network structure to identify inefficiencies .Consider factors such as geographic coverage, transportation modes, and facility locations. Thn, assess alternative distribution strategies and technologies, such as route optimization software or warehouse automation, to determine their potential cost-saving benefits. Finally, develop a comprehensive plan for implementing recommended changes, considering factors like implementation costs, timeline, and potential risks.

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Veera Baskar K

End to end supply chain solutions to reduce cost, optimise inventory, improve customer satisfaction, smarter processes and capability building | Founder & CEO - 7th Mile Shift | Ex-TVS Motor Company - AVP Logistics.
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Taking on a distribution analysis? Pinpoint your endgame first. Think about a time you worked on a project and - at the onset - the goal wasn't clear going in. It resulted in a lot of backtracking, right? You were zigzagging all over the place. No matter if you're trying to lessen expenses, cut down delivery times or both, your endgame helps set the course. It's like plugging in the address in your navigation app. Without it, you're just out for a drive. Once you identify the endgame, make it your own: smaller lead times? Cheaper transportation? Better customer satisfaction? Use that picture to drive your analysis but to ensure every member of your team is also pulling for the same goal.

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2 Collect and organize data

The next step is to collect and organize the data that you will need for your distribution cost analysis. This may include data on your current and projected demand, supply, inventory, transportation, warehousing, handling, packaging, and customer service costs. You may also need data on your competitors, suppliers, distributors, and customers, as well as external factors such as fuel prices, tariffs, regulations, and market trends. Depending on the availability and quality of your data, you may need to use various sources and methods to gather and validate it, such as surveys, interviews, observations, historical records, or simulations. You should also organize your data in a consistent and logical format that facilitates your analysis, such as spreadsheets, databases, or software tools.

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3 Analyze and model data

The third step is to analyze and model your data to understand your current distribution cost structure and explore alternative scenarios. You can use various techniques and tools to perform your analysis, such as descriptive statistics, regression analysis, benchmarking, or optimization models. You should also consider the different factors that affect your distribution costs, such as fixed and variable costs, economies of scale, economies of scope, network design, mode selection, routing and scheduling, inventory management, and service level agreements. By analyzing and modeling your data, you can identify the drivers and components of your distribution costs, evaluate the trade-offs and sensitivities of different options, and estimate the potential savings and benefits of each scenario.

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Leonardo Campos

Diretor Geral, Logística e Supply Chain (LinkedIn Creator 2023)
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analise de dados seja ela olhando cenários reais passados ou projetando vis?es futuras deve ser feita com os dados bem definidos e com uma modelagem adequada à resposta que voce quer ter. Informa??es sobre concorrencia, custo de frete, armazenagem , lead-times de fabrica??o, nivel de servi?o pretentido, rentabilidade e custo operacional s?o necessários para que o modelo desenhado tenha exito!

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4 Evaluate and compare scenarios

The fourth step is to evaluate and compare the scenarios that you have generated from your analysis and modeling. You should use your predefined objectives and KPIs to assess the performance and feasibility of each scenario, as well as the risks and uncertainties involved. You should also consider the qualitative aspects of each scenario, such as the customer satisfaction, competitive advantage, environmental impact, and strategic alignment. By evaluating and comparing the scenarios, you can rank them according to your preferences and criteria, and select the best one or a combination of them for your distribution cost analysis.

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5 Implement and monitor scenario

The final step is to implement and monitor the scenario that you have chosen for your distribution cost analysis. You should develop an action plan that outlines the steps, resources, timelines, and responsibilities for executing your scenario. You should also communicate and coordinate with your internal and external stakeholders, such as your employees, suppliers, distributors, and customers, to ensure a smooth and successful implementation. Moreover, you should monitor and measure the results and outcomes of your scenario, using your objectives and KPIs as the basis. You should also review and update your scenario periodically, to account for any changes in your business environment or customer needs.

By following these steps, you can develop a cost-effective distribution analysis framework that can help you optimize your logistics operations and enhance your profitability. A distribution cost analysis is not a one-time exercise, but a continuous process that requires regular review and improvement. Therefore, you should always seek to learn from your experience and feedback, and adapt your framework accordingly.

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Leonardo Campos

Diretor Geral, Logística e Supply Chain (LinkedIn Creator 2023)
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No Demand Plan bem desenhado e modelado, o PDCA deve ser implementando. Todo cenário proposto deve ser testado e avalidado do ponto de vista de retorno financeiro, cobertura de estoque, nivel de servi?o e este controle , acompanhamento e redesenho necessários deve ser monitorado para mudan?as de rotas. KPI's bem elaborados e acompanhamentos constantes s?o base para o sucesso.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the steps to develop a cost-effective distribution analysis framework?

1

2

3

4

5

6

1 Define your objectives

2 Collect and organize data

3 Analyze and model data

4 Evaluate and compare scenarios

5 Implement and monitor scenario

6 Here’s what else to consider

Logistics Management

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What are the steps to develop a cost-effective distribution analysis framework?

1

2

3

4

5

6

1 Define your objectives

2 Collect and organize data

3 Analyze and model data

4 Evaluate and compare scenarios

5 Implement and monitor scenario

6 Here’s what else to consider

Logistics Management

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