Supply chain modelling using world leading software

A dairy company wanted to assess the method of supplying milk to multiple retailers. When a retailer obtains supplies from a large number of dairies, they may obtain low inbound transport costs but do not obtain the benefits of working a small number of dairies to their maximum capacity. Concentrating supply on a small number of dairies increases transport costs, but gives lower unit costs of production as the dairies reach capacity and their fixed costs are spread over the maximum output.

We used the Infor Network Design tool to evaluate this trade off between production and transport economics. Transport cost models were built from vehicle schedules produced with Paragon, which reflected the level of service that retailers require. We built a series of models, each of which was focussed on a particular multiple retailer. The models were each a microcosm of the industry, as they included dairies that were not owned by our client, in order to produce the best result from the retailers' perspective.

The models indicated that the production benefits far outweighed the additional transport cost. In some scenarios, many millions of pounds per annum were available from a fundamental change in supply policy.