Lyceum of the Philippines University, Manila

College of International Hospitality and Tourism Management

A CASE STUDY ON:

NETWORK DESIGN FOR HOUSEHOLD GOODS

In partial fulfillment of the requirements for the course

Supply Chain Management in Hospitality Industry

Submitted to:

MR. ESPIRITU, MARK JAY M. MBA

Submitted by:

ABREU, KRISHA RAE

DOSOL, KELSEY LIJE
SANTOS, STACEY NICHOLE
TABES, REGEL SISON
TAN, MCKENZIE
UMALI, KATHLEEN JOY

DATE:
May 2, 2025
 I.​ Brief Summary

A manufacturer of household goods experienced growth and acquisitions that

caused their supply chain network to become more inefficient (cookware, bakeware,
dinnerware, and tools). The already existing network was in fact suboptimal, as shifts
in the customer base accompanied those changes in the manufacturing and
distribution locations. The complete supply chain was fully redesigned by the
company in order to address this and also improve service and cost efficiency. A
special project team was formed to manage and execute the redesign, supported by
consulting firm Establish. A business case development projected over 10% annual
supply chain operating costs reduction with improved customer service. The new
network design was also easier for one to manage and simpler for one to use.
Established application with a multi-step methodology. Their three decade
experience along with a top-tier network modeling tool helped them to do it. The
project began with defining scope, planning, as well as identification of several key
contacts. Following different site visits, comprehension of the then current state in
operations was very much helped including particular customer service
requirements, specific product groups, and various storage needs. A number of
quick fixes were identified and also implemented without delay during these visits.
The cost-saving benefits offset a number of project expenses because of this.
Sufficient data collection and analysis were exhaustively completed to validate the
supply chain design using a model against operating costs that were factual. As the
case study shows, meaningful cost savings as well as service improvements can
result from a calculated redesign of a supply chain.

II.​ Time Contexts

the highlighted passage, which points out at least two instances where timing
plays a role in the company’s optimized supply chain network. One key factor is the
firm’s extensive experience in the industry, boasting over 30 years, along with the
various scheduled site visits that took place during the optimization process. These
visits likely spanned several months to just over a year.
 The firm’s experience is a vital element in refining the supply chain network. It
shows that they’ve tackled similar challenges for other companies and have
successfully provided practical, actionable solutions that have led to impressive
outcomes. This track record is a reassuring sign for the company in question, giving
them confidence that they’re in capable hands.

Regarding the planned site visits, these are also essential for optimizing the
supply chain network. They help the firm and the company oversee the optimization
process and identify areas where the new methods are performing well, all without
needing further adjustments.

III.​ Theoretical Underpinnings

Network design in logistics pertains to the strategic planning and development

of the structure of a supply chain, including the number, locations, and functions of
the facilities, such as warehouses, distribution centers, and transportation routes.
That applies to household goods: sourcing, storage, and final destination delivery, to
realize the effect of on-time and cost-effective deliveries to customers.

The theory for designing a network can be derived from the perspectives of
supply chain management, operations research, and systems engineering. The
ideas could range as follows:

●​ Supply Chain: Optimization entails a minimum cost while fulfilling a

predefined level of service. It uses mathematical models to determine the
optimal network configuration.
●​ Hub-and-Spoke Model: The model is pertinent in household goods logistics
in regard to consolidation and minimization of transport costs.
●​ Inventory Management Theory proposes that the cost of holding inventory
influences the amount of inventory to keep and the placement where it is kept
according to service levels and lead times.
 ●​ Transportation Modeling: Linear programming techniques and simulation for
household goods delivery help determine the routing and scheduling
efficiency.
●​ Location Theory: Various parameters such as proximity to demand centers,
cost, and infrastructure will involve optimal location decisions for warehouses
and facilities.

All these principles allow the company to be in tune with market demand, control
costs, and quality of service presented to customers.

IV.​ Situation Analysis/ Scope

This case study addresses the design of a logistics network for a company
engaged in the distribution of household goods, such as furniture, appliances,
cleaning supplies, etc. The main challenge for the business within the regional setup
is the extraordinarily expensive transportation costs with delays in deliveries and
warehousing being rendered inefficient.

The Existing Situation:

●​ The company maintains two major warehouses in an extended geographical

area.
●​ Because of improper routing of transportation, the delivery times have
become inconsistent leading to longer hauls.
●​ Inventory is skewed in various locations causing stockouts of products in
demand and excess stock in others.
●​ The complaints from customers regarding delays in deliveries and availability
of products have increased.

The scope of the case study:

●​ Include an assessment of the existing logistics network and determining the

bottlenecks.
●​ Application of network design theory in an attempt to come up with an
optimized layout.
 ●​ Assessing the feasibility of opening new distribution centers near
high-demand locations.
●​ Recommendations are made for improvements in transportation routing and
inventory placement.
●​ Cost-benefit analysis on the implementation of proposed changes.

The case study deals only with the domestic distribution network; no mention is
made about international sourcing or manufacturing logistics. It deals with
medium-sized companies in the household goods sector operating in a single
country.

V.​ Statement of Minor/ Critical Concerns

Minor Concerns

●​ Data collection and validation are mentioned, but neither the quality of the
data nor the difficulties encountered during data collection are discussed in
detail. Two factors that are frequently crucial in such projects are addressed in
detail.
●​ The use of a "best-in-class" network modeling tool is mentioned, but neither
the tool's name nor its impact on decision-making are explained.
●​ It is challenging to assess the project's execution rigor because no precise
project timeline, KPIs, or milestones are given.
●​ Does not address potential risks or change management strategies involved
in the transition to the redesigned network, despite the fact that some quick
fixes were put into place right away.

Critical Concerns

●​ The supply chain developed naturally and as a result of acquisitions without

good enough strategic planning. A complete network redesign was necessary
as a result of the inefficiencies caused by this unplanned expansion.
 ●​ The supply chain's yearly operating costs were high prior to the redesign.
Potential savings of more than 10% were discovered during the redesign,
proving the previous system's extreme inefficiency.
●​ Poor customer service performance was mentioned, which may have an
immediate impact on both long-term company viability and customer
satisfaction.
●​ The initial network was complicated and challenging to administer, which
affected operational responsiveness and agility.

VI.​ Areas of Consideration

VII.​ Implications

The case study on network design for the cookware manufacturer provides
several key implications regarding supply chain optimization, particularly in terms of
cost management, service performance, and operational efficiency. Here are some
of the main implications seeked based from the case study:

Impact of Organic Growth and Acquisitions on Network Design

When companies grow organically or via acquisitions, it is common for their
supply chain networks to develop in an inefficient, fragmented fashion. In this case,
the expanded footprint of the manufacturer created an imperfect network, which was
identified as a potential constraint on operational efficiency. In which reinforces the
importance of continuously reviewing supply chain structures as a company is
growing.

Need for Network Redesign

The company recognized the inadequacy of its supply chain which highlighted
the need for regular redesigns depending on new business needs and market
changes. Redesign of the network structure that is not only changing the particulars
of the number and location of distribution centers (or manufacturing plants) to match
the structure against customer needs, costs objective, and service level
performance.

Cost Reduction and Service Improvement

The redesigned network was expected not only to reduce operating costs by
more than 10 percent, while at the same time, improving service levels through
management. This, again, indicates the on-going balancing act of cost management
with service level. Since cost management does not necessarily define a
well-constructed supply chain. As the organization strives to cut costs they may also
be able to deliver poorly managed supply chain responses to customer demands
efficiently; this is the one dominant driving force behind creating sustainable
competitive advantage.
Simplicity and Manageability

The redesigned network based on the case, gave the organization a simpler
system to manage which will likely provide better scalability and flexibility as the
organization grows. It is my view that in order to support operational speed and
decision making in organizations, it is also important to have a simple network
design, particularly as organizations experience increasing complexity.

Data-Based Decision Making

Moreover, It is also vital for data to gather and analyze supply chain costs and
analyze operational complexity, which is at the core of effective decision making. The
case notes stress that data is key to redesigning networks and making changes
based on facts instead of assumptions.

Continuous Improvement and Adaptation

The redesign process was iterative and involved ongoing meetings, feedback
loops, and data validation; thus, network optimization may be more of a process than
a project. The case notes indicate that supply chains should be reviewed and
changed regularly in order to be competitive.

Strategically Aligning with a Business Strategy

The project team's ability to connect the redesigned supply chain to the
overall business goals of the company (cost savings, improved customer service,
simplified management) highlights the importance of network design as a strategic
supportive means. It emphasizes that supply chain decisions cannot be made in
isolation, but rather as part of a larger business strategy to produce the best overall
result.
VIII.​ Alternative Course of Action

1. Keep the Current Network with Some Change.

Instead of a full redesign, the company should keep everything intact with the
supply chain setup and make several minor improvements. These changes should
include improving communications between teams, adding better tracking tools, or
changing the routes to decrease transportation time. Even though some time and
money could be saved up front, it might be a less effective change over time to
generate the significant cost savings or service improvements of an overall redesign
compared to a minor change.

2. Full Outsourcing for Redesign to a Third-party Consultant.

Startup companies can incur risk by not managing the redesign themselves
with help from Establish. The company should outsource the entire redesign process
to a third-party consultant allowing the company to keep its focus on day-to-day
operations while experts handle the network optimization. This could be more
expensive to implement but to solidify the company's decision, it would risk a loss to
company specific knowledge that internal teams can deliver.

3. Just Focus on the Quick Fixes

After the first visits to the site discovered some quick and readily actionable
items, the firm could have decided to only act on these items or they could have
decided to not act at all on the quick fixes. If the firm had decided to only act on the
quick fixes, the firm would still see some quick wins and some small gains in cost
and service, but behind the scenes the firm would still be fighting an uphill battle with
better cost performance, complexity and inefficiencies over time.

4. Implement Changes Slowly Over Time

The firm should apply a gradual change management approach rather than a
big bang, one time redesign. This approach could make it easier for teams to adapt
and deal with the changes, and it may not have disrupted business continuity as
much, but it would have taken longer to realize all of the benefits (i.e. projected cost
reduction of 10%), and it would make it harder to track the benefits of the changes
and how the changes worked together.
5. Redesign the Network by Customer Segment
The firm might take an approach to customize parts of the network to suit the
type of customer ordering (i.e., as opposed to serving every type such as online
retailers versus department stores). Therefore taking a segmented approach could
allow the firm to improve some service levels within a group of customers, but as
service level improved for one group, it may have added complexity to operations or
made managing the network more difficult if not managed properly.

IX.​ Decision

The cookware and household goods manufacturer decided that it must

completely redesign its entire supply chain network. This decision arose from a
realization that their supply chain had become inefficient and overly complex due to
growth and multiple acquisitions. These physical changes had also caused a
mismatch between manufacturing, distribution centers, and the customer base,
thereby driving up operating costs while also lowering customer service levels.

After assessing the situation, the company realized little improvements would not be
enough; therefore, a complete redesign would need to tackle:

●​ Supply chain operating costs must be reduced by over 10% per annum.
●​ Customer service levels and responsiveness need to improve.
●​ A network that would be easy to manage and scale.

This was, in itself, a strategic decision to enhance operational performance,

eliminate inefficiencies, and synergize their logistic systems within the framework of
their long-term goals.
 X.​ Strategy Formulation and Implementation

Formulation:

1. Situation Analysis
● Massive growth only served to dislocate the supply chain network.
● The sites of distribution centers and factories far removed from the requirements of
the customer.
● The reports have suggested excellent operational costs with the slowness of
customer service response time.
● The intricacy of the supply chain did not help its manageability either.

2. Problem identification and objective setting

● The company had seemingly made up its mind that the current supply chain
setting is not operative anymore.
● They wanted other solutions rather than just reducing costs, that would streamline
the supply chain function to become more efficient, responsive, and
customer-focused.
● Objectives were set: reduce costs, increase service, reduce complexity, and create
a network that is scalable and manageable.

3. Team forming and planning

● An intricate project team was formed with internal experts, whilst others were
external specialists from the firm Establish.
● Establish brought over 30 years of consulting experience in supply chain capability
and a proven methodology.
● The team clearly defined the project scope, the timeline, and key deliverables, in
turn ensuring unambiguous expectations.

4. Tools and Technology

● A first-rate network modeling tool was picked to simulate the different network
design scenarios.
● Although the case does not identify the tool, it played an essential role in the
analysis of the cost, service, and operational performance.
● The tool allowed the team to make decisions based on facts rather than
assumptions.

5. Site Visits and Data Collection

● Site visits were carried out to get an understanding of how operations were
different at various facilities.
● These visits supported quick wins and areas that needed immediate improvement.
● This was followed by a large data collection and validation effort, including cost
data, product flow, storage needs, and customer requirements.
● Therefore, having clean and reliable data was the prerequisite for modeling and
designing accurately.

Implementation :

1. Immediate Improvement
● Some of the quick fixes were identified through site visit and all were implemented
immediately.
● Immediate actions thus provided cost savings and improvement services in parts.
● Reduced expenses have taken care of part of the project costs needed to make
the project cheaper from the start.

2. Redesign Network Implementation

● Several scenarios were created and analyzed to find the optimal structure by the
modeling tool.
● The final model of the network managed to provide the balance between cost cut,
service improvement, and simplicity.
● This pattern included the revised convenient place for manufacturing and
distribution points to ensure effectiveness in customer service.
3. Change Management
● It is structured to facilitate a good approach to change management so that its
implementation goes smoothly.
● Resistance was minimized by training employees and involving them in the
process.
● Communication has been improved within departments to accommodate the new
design.

4. Phased Implementation
● The phase approach ensured the implementation happened without huge
disruption.
● The progress of each phase was tracked to evaluate and adjust as necessary.
● Thus, the company was operated during the implementation of the new network.

5. Surveillance and Improvement in the Process

● Measuring with Key Performance Indicators (with regard to bottom-line savings,
service level improvements, and operational efficiency).
● Feedback and assessments occur at regular intervals to analyze performance.
● This was considered as a project, not a one-time project but instead an ongoing
endeavor to optimize the supply chain design and adapt to forthcoming challenges.

XI.​ Outcomes

Game-Changing Supply Chain Overhaul A manufacturer of consumer goods

set into action a stand-alone, full-scale plan for overhauling its entire supply chain
network. And amazing results followed. The company had partnered with a
well-experienced consulting firm and used sophisticated network modeling tools that
resulted in: Reduced overall annual supply chain operating costs for 10% Enhanced
customer service levels Much simplified and streamlined supply chain structure
Strategic Decision, Tangible Gains

All-in-all change was not incremental, but this was a clear game-change as it
allowed the company to work on some of the inefficiencies that were created during
very rapid growth and acquisitions but was also an investment in future success.

Quick Wins-with Phased Implementation

The project team implemented quick fixes on-site visits demonstrating value
right away and allowing defraying upfront project costs and stimulating internal
momentum. A phase-deployment technique made running business operations
easier to incorporate less pain.

Supply Chains For The Future

The new supply chain network is now better aligned with customer demand,
more cost-efficient, and ready for future change. This transformation clearly
exemplified that well-defined logistics redesign can open up a big value pot and
success in business.