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Freight optimisation initiative could lead to stockouts… be careful.
Most Supply Chain teams working on cost reduction initiatives look at the freight incurred on finished goods logistics as a major component of supply chain cost. A common fallacy in reducing it is to change routing… bye-pass RDC and send materials directly from factories to CFAs.
While it seems to reduce freight on paper, it does take away our ability to respond quickly to demand shifts. I have also seen several cases where frequency of lane servicing is compromised to go for bigger trucks.
Such initiatives are developed assuming the demand is deterministic. When the rubber meets the road and we realize that demand patterns are actually stochastic in nature, we face the harsh reality of sales loss, as we have compromised our agility on the way.
Cost reduction by compromising on agility backfires in a stochastic demand scenario.
Be careful…