Incorporating service levels in Network design

In a Network design context, service levels are usually measured by transit time or distance. So for example, if you plan to provide same day delivery, you can translate this into distance. Assuming that the max drive time will be 8 hours per day and the average speed is 50 miles per hour, the distance is 50 X 8= 400 miles. Hence, in a Network design exercise, you should put a constraint that none of your customers should be more than 400 miles from the DC they are assigned to. Commercial Network design packages let you enforce this in more than one way. For example, in Llamasoft Supply Chain Guru, you can use your sourcing policies table “Max sourcing distance” field to enforce such constraints.

If your Network design scenarios does not require this constraint and you don’t plan to enforce service levels prior to the optimization run (maybe because you want the model to make optimal decisions ), you can still visualize your service areas (in terms of distance from your DCs), if your network design software has that capability. Below is a screenshot from Llamasoft Supply Chain Guru that shows service areas for a Network Optimization output.


As you can see above, it helps you visualize which demand nodes fall within 100 miles, 250 miles and 500 miles from their assigned DCs. Even if your Network design software does not have this capability, you can use the output from your Network design tool to generate these areas in another visualization tool like Tableau.



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