A US based games retailer was undergoing restructuring to reduce operating costs as part of their business strategy. One of the management directives was to reduce last mile logistics cost for their stores fulfilment network. The distribution network consisted of 3 DCs (Distribution Centers) that serviced 3000 stores across US, primarily using parcel methods. In future, client had decided to close down 1 DC and serve their store network using a 2 DC network. This change required them to identify new optimal assignments between Stores and DCs. At the same time, they wanted to understand opportunities to reduce last mile logistics costs.
Client collaborated with Lambda SCS to design an optimal distribution network for the near future while identifying ways to reduce last mile logistics costs. Optiflow, our AI powered digital twin platform was used to create a baseline model that captured historical flows and costs. Three scenarios were created to assess: 1.Optimal Store – DC assignments 2.Impact from zone skipping 3.Impact from load consolidation and use of multi-weight rates
Last mile cost reduction of 30% was identified leveraging optimal assignments, zone skipping and load consolidation. Model outputs are being used to guide implementation of these strategies in their distribution network Brands can improve last mile performance, in terms of delivery speed and costs, by creating digital twins to optimize inventory and transportation in the networks.