[Product: Paradox Routing Tool]
This study involves a mid-size retailer operating stores grouped into three main divisions. All three divisions offer an extensive assortment of retail merchandise including both hardlines (toys, health and beauty aids, housewares, furniture, sporting goods, snacks, etc.) and softlines (clothing, accessories, jewelry, etc.).
Being a 50+ year old company the retailer grew through acquisitions but has always operated from their only distribution center in North Carolina. Store deliveries were made with their private fleet. As they extended to the South West, it became obvious that all stores cannot be delivered from the location in North Carolina. Some of the stores were over thousand miles from the distribution center adding to transportation cost in form of driver wages and assets tied up on long hauls. The question then was where the second distribution center should be located.
The retailer turned to KEOGH Consulting, a Supply Chain consulting provider, for this analysis. Needing a quick turnaround, KEOGH reached out to Paradox to use Paradox Routing Tool (PART). The objective of the study was to identify the candidate location, evaluate reduction in transportation cost, and then weigh it against costs of operating the second facility.
Armed with store locations and average week delivery volumes, KEOHG used PART's center-of-gravity model to identify the second facility. The center-of-gravity model works to minimize weighted distance across the network. It conducts an exhaustive search for required facilities and selects those that result in least aggregated product of distance and demand of each store from its assigned distribution center. This analysis led to identifying Birmingham, Alabama as the location for the second facility. With this as the second facility and assigning each store to its nearest distribution center, all stores were within 500 miles from their assigned distribution center and the average distance of store from distribution center was cut in half from about 400 miles to less than 200 miles.