How do you incorporate demand uncertainty and variability in distribution network design?

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Demand uncertainty and variability are key factors that affect the performance and cost of distribution networks. They refer to the unpredictability and fluctuation of customer demand and the impact they have on inventory, transportation, and service levels. In this article, you will learn how to incorporate demand uncertainty and variability in distribution network design, using some practical tools and methods.

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Mario Eisa

Supply Chain Director

1 Demand forecasting

The first step to incorporate demand uncertainty and variability in distribution network design is to estimate the future demand for each product and location. Demand forecasting is the process of using historical data, market trends, customer feedback, and other sources of information to predict the demand patterns and volumes. Demand forecasting can help you to plan your inventory, transportation, and capacity requirements, as well as to identify potential risks and opportunities.

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Mario Eisa

Supply Chain Director
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This area is manageable by having a robust S&OP in place where by Sales and Operations are aligned, our strategy and vision definitely puts us ahead of everyone in the same field. The priority here also is our customers and we want to make sure that last parcel is on the way.

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Rajan Pillay

Supply Support Officer at Bridgestone NZ Ltd
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Scenario Analysis: Model various demand scenarios for flexibility. Safety Stock Planning: Factor in buffer inventory to handle demand spikes. Dynamic Warehousing: Design adaptive storage to accommodate fluctuating stock levels. Flexible Transportation: Employ scalable transportation options for variable demand. Real-time Data Analytics: Use AI and analytics to continuously monitor and adjust network design based on changing demand patterns.

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Federico Figueroa, Jr., DBA, ME, Top Logistics Voice

Consultant and Trainer, Supply Chain, Business Research and Management
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Begin by understanding demand uncertainty and variability. It involves obtaining historical data, past and current demand cycles in evaluating future customer demand, performing the process of forecasting and planning in meeting the demand for the product, using statistics analysis, adopting best practices, and fulfilling consumer's order on time and in full. Occurring in the supply chain, establishing distribution network design, setting up a good transport system, tracking system, packaging and design system, and system to take back the goods from the trade or point of consumption.

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2 Demand variability analysis

The second step is to analyze the demand variability, which is the degree of deviation from the average or expected demand. Demand variability can be caused by various factors, such as seasonality, promotions, product life cycles, customer preferences, and external events. Demand variability analysis is the process of measuring and evaluating the variability of demand, using statistical methods such as standard deviation, coefficient of variation, and service level. Demand variability analysis can help you to determine the appropriate safety stock levels, reorder points, and replenishment policies.

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Mario Eisa

Supply Chain Director
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We listen to our customers and definitely we build our forecast on historical data but also our customers voice is very important at HelloMolly, we never failed to achieve customers satisfaction.

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3 Demand uncertainty modeling

The third step is to model the demand uncertainty, which is the degree of confidence or accuracy of the demand forecast. Demand uncertainty can be influenced by the quality and availability of data, the complexity and volatility of the market, and the reliability and frequency of the forecasting methods. Demand uncertainty modeling is the process of using probabilistic or stochastic models to represent the range and likelihood of different demand scenarios. Demand uncertainty modeling can help you to evaluate the trade-offs and sensitivities of different distribution network design alternatives.

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Mario Eisa

Supply Chain Director
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Hellomolly definitely has the best of all, our technology is way ahead of our competitors, well positioned for current and future growth, we have no doubt that what was built is here for long time.

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4 Distribution network design optimization

The fourth step is to optimize the distribution network design, which is the configuration and allocation of facilities, resources, and flows in the network. Distribution network design optimization is the process of using mathematical or simulation models to find the optimal or near-optimal solution that minimizes the total cost or maximizes the total profit of the network, subject to various constraints and objectives. Distribution network design optimization can help you to select the best locations, capacities, and modes of distribution facilities, as well as to assign the optimal routes, schedules, and quantities of shipments.

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Mario Eisa

Supply Chain Director
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Hellomolly distribution centres well positioned around the globe to serve our customers with thier choice of service level, we paretnered with the best in the last mile service providers to deliver the best experience to our client.

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5 Distribution network design evaluation

The fifth step is to evaluate the distribution network design, which is the assessment and comparison of the performance and outcomes of the network. Distribution network design evaluation is the process of using quantitative and qualitative measures to monitor and analyze the efficiency, effectiveness, and robustness of the network, as well as to identify the strengths, weaknesses, opportunities, and threats. Distribution network design evaluation can help you to validate and improve the network design, as well as to benchmark and communicate the results.

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Mario Eisa

Supply Chain Director
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Hellomolly distribution strategy is well ahead of the rest in the game, we built our state of the art DC in LA to serve our customers, our vision is the automation of our distribution centres across the world, we do listen to our customers and we have to keep up with today technology to ease our customers experience.

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6 Distribution network design adaptation

The sixth step is to adapt the distribution network design, which is the adjustment and modification of the network in response to changes in demand uncertainty and variability. Distribution network design adaptation is the process of using feedback and learning mechanisms to update and revise the network design, as well as to implement and execute the changes. Distribution network design adaptation can help you to cope with and exploit the demand uncertainty and variability, as well as to enhance the agility and resilience of the network.

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Mario Eisa

Supply Chain Director
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Hellomolly built state of the art DC as well as capacity to accommodate future demands, our dedicated teams working around the clock to achieve the best our industry can deliver and ensure we are promoting sustainable future for rhe business at all levels.

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7 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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How do you incorporate demand uncertainty and variability in distribution network design?

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1 Demand forecasting

2 Demand variability analysis

3 Demand uncertainty modeling

4 Distribution network design optimization

5 Distribution network design evaluation

6 Distribution network design adaptation

7 Here’s what else to consider

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