Changing Customer Shipment Patterns Impacting Existing Network Efficiency
Original hub network was efficient and served customers well. Over time, however, new customers came on board and existing customers’ needs changed, resulting in higher costs than necessary. The management team suspected some of the hubs were in sup-optimum locations. However, quantifying the problem, and finding the solution, remained elusive, even after working with outside experts. Specifically:
- Reduced competitiveness: Greater distance between customers and hubs increased shipping time
- Operational inefficiency: Trucks and drivers were servicing longer than optimal routes, increasing the need for both
- Reduced profitability: Longer shipment times increased costs in the face of competitive price constraints
- Daunting mathematics: The toughest challenge was to effectively quantify the location problem to make it possible to optimize the hub locations.