Logistics Network Planning for Diageo

Logistics Network Planning for Diageo

Assessment of logistic network configurations for the expanded network of customers. We were also asked to show and prove the ways to decrease logistic costs by improving of inventory management. The model was used to evaluate the systemic effect of increasing forecast accuracy. Our client — Diageo — one of top-3 alcoholic distributors in Russia.

Period: January 2013 – July 2013
Industry: Wholesale and Retail
Client / Partner: Diageo / LFA Rus

Project objective

  • Choose logistic network configuration for the expanded client network
  • Show and prove the ways to decrease logistic costs

The main stages of work and characteristics of the model

  • Simulation task definition
  • The simulation model concept development
  • Development of the simulation model on the AnyLogic 6 platform
  • Model validation on historical data
  • Preparation of scenarios and scenario analysis plan
  • Scenario analysis (experimenting with simulation model)
  • Aggregation and analysis of simulation experiments results
  • Business recommendations preparation
  • Model usage training for client’s personnel

Model input data

  • Sales plan and forecast till year 2017
  • Distribution network structure (54 Russian regions, up to 5 distribution centers, 5 options of network configuration, 3 plants)
  • Transportation routes parameters (modality, speed of transportation, etc.)
  • Existing and prospective replenishment planning algorithms and their parameters

The main structural elements of the model

  • Input data file in MS Excel format
  • Simulation model with interactive presentation and batch launch mode for fast scenario comparison
  • Data aggregation module that allows to generate MS Excel files with graphs and charts for scenarios comparison

Model output data

  • Warehouses capacities utilization
  • Dependency between service level, target stock level and logistic costs for every network configuration option
  • Service level and cost of goods sold (COGS) for every client type and product

Project result

  • Distribution network configuration is selected. The selected option provides 7% decrease in COGS even with fast growth and client network expansion
  • The model has demonstrated the attainability of the target service level even with a 20% reduction in the current stock