A simulation model based on current and future production enabled our client to make informed decisions about the long-term profitability of a centralised distribution hub.
Our client supplies raw materials originating from power generation for various applications. In addition to a strategically located distribution centre, it operates various smaller storage facilities on local sites. Some of these local sites faced closure as they were unable to meet the efficiency levels required by the Energy Agreement for Sustainable Growth in the Netherlands. Their closure had consequences for our client’s supply chain with regard to transport and storage. It raised the question of how profitable it would be to keep the distribution centre in operation.
Simulation model predicts future OPEX
The Supply Chain & Operations team at Royal HaskoningDHV was asked to develop a simulation model to map and analyse the new situation. Based on the expected annual production of the plants and the demand from the various markets, the tool makes decisions on routes and storage locations from the plants to the markets.
What was special about our solution was that it did not simply model transportation routes and costs but drew in random and unpredictable influences to decide which production facility delivers to which market, and whether to use the distribution centre or deliver direct.
We were able to predict future OPEX with and without a central distribution centre in operation. This enabled our client to make the decision whether or not to keep the distribution centre in operation, saving substantial costs.