Redesigning the Supply Chain to Improve Profitability
- Ryan C. Brown
- Jul 29
- 1 min read
With the help of linear optimization, an international supplier maximizes profit margins while seeding future growth opportunities.
Challenge
The North American division was becoming progressively more capacity constrained due to bottlenecks in its distribution network, while product demand in key regional markets was growing in disproportion to the regional plant’s ability to supply. It was a key priority for the CEO to address in order to increase profitability.
However, due to the complexity of the distribution network and trade-offs between economic drivers, it was not a simple “back-of-the-envelope” exercise to quantify the opportunity and the costs of these constraints, nor was it simple to assess the impact of future greenfield markets on overall profitability.
Discovery
The Next Level team used a framework to help client executives assess the objectives for the model that would identify potential opportunities for growth without neglecting current performance. The project’s objectives were therefore twofold:
Identify and value strategic network opportunities
Provide visibility on future month-by month system constraints (ex: material shortages, rail car availability, silo capacity)
The results of this analysis indicated specifically where to save 5% in landed costs and the opportunity costs of critical bottlenecks worth $5 million more. Just as importantly, we also helped to clarify which markets to expand into to accommodate future planned capacity upgrades.
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