Business Logistics was contracted by a large postal services organization to identify the optimum locations for its distribution centers in the United States. This client operated under various federal, state, and local constraints that needed to be considered in developing an optimized distribution network.
Our strategy called for developing a database of shipment activities for this client, including branches and major offices served using a zip code geographic concept. We “geocoded” this information using a latitudinal and longitudinal algorithmic formula that was used to generate a visual depiction of the client’s operations that we plotted on U.S. maps.
Using a weighted center-of-gravity approach we identified major business activity “clusters” for the client. These “clusters” represent hubs, or centers of activity that fed outlying locations and customers. By rolling these clusters up to a higher-level analysis we identified key distribution points that could serve as primary distribution centers for the organization.
We calculated shipment and delivery costs from the proposed primary distribution centers to the hub locations, creating an optimized logistics services model with cost projections. This information was enhanced by demographic information pertaining to the proposed distribution center cities, including labor availability, labor costs, housing availability an costs, environment, schools, and other quality and cost of life factors.
We submitted recommendations for distribution location improvements to our client and they were adopted. The client’s estimated savings as a result of our work was over 16% of total logistics costs, for an annual savings of over $4 million.