A major HVAC company with growing market share in 4 business units was looking to reduce order shipment time (i.e., increase service level) and on-hand inventory through network optimization and consolidation of facilities serving 250 branches.

Our approach started with collection of distribution data from 4 separate ERP systems, followed by current state process assessment and creation of a customized database. Working collaboratively with the client subject matter experts, our consultants developed viable scenarios and applied algorithms to quantify solution options. Our analysis described the relationship between objectives, variables and constraints to build an understanding many decisions necessary to choose the best solution.

Our joint team presented analysis and the optimal distribution network, showing the itemized impacts on facility, labor, inventory carrying and transportation costs, and service levels. Sensitivity analysis demonstrated annual savings ranging from $11m to $24m and a decrease in days to serve from 2.1 to 1.32. Real estate costs was the largest savings opportunity with headcount savings from consolidation. Inventory carrying cost savings were $3M and transportation cost savings from order consolidation and mode conversion was $4.5M.