What is supply chain network design?
Supply chain network design is the process of deciding how many facilities (plants, warehouses, cross-docks) you need, where they should be, what each should do, and how product flows between suppliers, facilities and customers, in order to meet service goals at the lowest total cost and acceptable risk.
It sits between strategy and daily operations: the choices made here lock in most of your cost structure and your ability to absorb disruption for years.
A six-step framework
1. Define the objective and constraints
Decide what you are optimizing: total landed cost, service level, resilience, or carbon. Write down hard constraints such as lead-time promises, capacity limits, capital budget and regulatory requirements before touching any model.
2. Collect and clean the data
Gather demand by location and product family, current facility and transport costs, lead times, inventory policies, and capacities. Poor data is the most common reason a network study fails, so validate it against actuals.
3. Build a baseline model
Model today's network and confirm it reproduces last year's costs and service within a few percent. A trusted baseline makes every later scenario credible to finance and operations.
4. Run scenarios
Test realistic alternatives: consolidating or adding facilities, changing sourcing, shifting modes, and demand growth or disruption cases such as port closures or tariff changes.
5. Evaluate trade-offs
Compare scenarios on cost, service, risk and sustainability together. The cheapest network is rarely the most resilient, so make the trade-off explicit for decision makers.
6. Plan the transition
Phase the change, size the one-time costs, assign owners, and define the metrics you will track after go-live. Revisit the design at least annually or after a major shift in demand or sourcing.
Frequently asked questions
How often should a network be redesigned?
Most companies run a full study every two to three years and a lighter refresh annually, or sooner after mergers, major demand shifts, new regulation or significant disruptions.
What data do I need?
Demand by location and product, facility and transport costs, lead times, capacities, inventory policies, and service requirements.
Which tools are used?
Teams use optimization and simulation software, digital twins, or spreadsheets for early-stage work. GSCC is vendor-neutral and does not endorse specific tools.
Discuss it with peers
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