Australia, Companies, Features, Logistics

Why network design matters

Network design

Freight and network design is a crucial but too-often overlooked factor for businesses. Prological’s Peter Jones explains what it is and why Network Design is essential for ensuring end-customer satisfaction.

Because businesses develop gradually and organically – sometimes even haphazardly – they rarely begin their lives with a thoroughly thought-out approach to freight and network design.

But in an ever more competitive world, a carefully planned out freight and network design can often make the difference between success and failure, or less dramatically, but more likely, market leadership or market chaser.

Even so, many people still aren’t sure what it is. Fortunately, Peter Jones, Managing Director of Prological, is here to help. 

“Network design is the process of determining the correct location for all the nodes within our supply chain network,” Peter begins. He underscores the two pivotal questions for every node: ‘What should its function be?’ and ‘Where should it be located?’

“Determining the function primarily concerns those without a manufacturing component, such as importers and distributors,” Peter says.

“However, when there’s a manufacturing facet, location takes precedence due to the intricate nature of both inbound and outbound supply chain operations.” 

In manufacturing based scenarios, inbound supply chain issues majorly influence the optimal location. On the other hand, with standalone warehouses, the focus narrows down to outbound costs, balanced with service requirements, considerably streamlining the decision-making process.

“Your network design, especially the number of nodes, should directly relate to your customer service promise,” Peter emphasises.

This concept becomes evident in examples like hot water heater manufacturers. If a company produces these heaters from a central location in Australia, ensuring timely delivery across diverse regions becomes a logistical hurdle. 

“If someone’s water heater fails, they won’t be inclined to endure a long wait for a replacement,” Peter points out. Such challenges necessitate a broad network to guarantee immediate product accessibility to customers.

Conversely, for items like nails or bolts, where swift delivery isn’t paramount, a more straightforward network with minimal nodes is more suitable. 

“It’s evident that there’s no universal network template that caters to all,” he observes. Every network needs customisation, tailored to the particular objectives of a business. 

The freight strategy, in parallel, must resonate with both customer service goals and the network design.

Highlighting the interconnectedness of the network and freight strategy, Peter elaborates: “If you can deliver from Sydney to Adelaide overnight in a cost-effective manner, you might sidestep the need for an Adelaide facility.

But if this isn’t feasible and the Adelaide market holds significance, having a local node becomes essential to stock up and retain competitiveness.”

In essence, the onus rests on businesses to ascertain the requisite number of nodes, their optimal locales, and their distinct functions. Concomitantly, the freight mechanism needs crafting, establishing links between the network and its stakeholders.


While freight and network design are integral components of supply chain management, not all companies approach these considerations with a strategic lens. As Peter notes of the current industry landscape: “Many companies don’t approach this systematically.

Often, network design decisions are influenced by sales and property teams, whereas freight considerations are left in the hands of logistics or warehouse management. Unfortunately, the essential collaboration between these teams isn’t always optimal.”

A significant challenge that exacerbates this disjointed approach is the lack of comprehensive tools available to businesses. 

“Currently, there isn’t a single network modelling tool available globally that offers the flexibility to include detailed freight modelling,” he says, adding that even high-end models from reputable firms fall short because “they can’t  model freight accurately.”

This challenge isn’t merely theoretical. Illustrating the real-world implications, Peter shares an experience: “We’re collaborating with a major consulting firm on a project for a major Australian agricultural entity. They initially requested a single freight number from us.”

Highlighting the complexities and potential pitfalls of such a request, he continues, “We demonstrated that relying on a single number could result in overestimations or underestimations of up to 100 per cent in various scenarios.

“When the base line freight spend is many $10’s of millions per annum, the importance of detailed freight modelling becomes very important, indeed, decision critical.”

Recognising the gaps in their methodology, the agricultural entity opted for a rethink. “The approach was re-evaluated,” he says. “We suggested handling the freight calculations separately and then manually inputting the figures into their model, bypassing the tool’s limitations on freight modelling.” 

It is evident that for companies to harness the true potential of their supply chain, a more integrated approach to freight and network design is imperative.


There is a definite trend towards viewing nodes and functions in networks from an interconnected perspective.  

“For example, you could make adjustments to your network that either decrease or increase freight costs,” Peter says.

“There are implications to consider, such as the more nodes in your network, the higher the inventory levels you’ll carry. But higher inventory isn’t necessarily a drawback. With higher inventory, a business can maintain more safety stock. With the right freight strategy, this means fewer stockouts and a higher order fulfillment rate.” 

It’s a symbiotic relationship where increased inventory can lead to goods being closer to the customer, translating into enhanced fulfillment rates, better service and market leadership – as well as lower carbon emissions. 

The challenge is to strike the right balance: “Speedier fulfilment and lower emissions are great, but they must always be weighed against factors like customer service requirements, business maturity and budgetary constraints.” 


Technology has introduced a new dimension to freight and network design, even though its potential has not been fully realised, Peter says. 

“Modern transport (TMS) and freight management systems (FMS) allow companies to collect the necessary data for quality frameworks,” Peter says. “Though these systems have become more prevalent, most companies are still not using them to their full potential. The challenge remains in transforming this abundance of data into actionable information.

“You need individuals with extensive experience across a broad spectrum of scenarios,” to get the most out of the technology, but “that combination of talents is quite rare.” 

Regardless, staying static is not an option. Technology will progress regardless, and it’s incumbent on businesses to start developing their technological capabilities lest they be left behind. 


For companies taking the plunge into freight and network design or reimagining their existing structures, the question often arises: Where should one begin? 

The first step, according to Peter, isn’t diving headlong into logistics or debating about the existing departmental silos. Instead, he emphasises starting with the heart of any business: its customers. 

“Where we start is by bringing the right stakeholders to the table to define the customer service promise requirements,” Peter explains. This customer-centric approach ensures that logistical decisions align with the company’s promise to its customers.

Such considerations help determine essential decisions, from the mode of transport to proximity to customers. Drawing an example from the Australian context, Peter points out, “If we’re sending nuts, bolts, and nails, we’re not going to airfreight them – they’d go by road or perhaps rail.”

This pragmatic approach, rooted in understanding the nature of goods and the transportation modes suited to them, ensures optimal logistics choices.

But it’s not just about the nature of the goods. Distance, geography, and infrastructure play a pivotal role. As Peter outlines, in Australia, “road freight capabilities of covering up to a 1000 kilometres in 24 hours is achievable.” Such metrics offer a lens into how businesses can promise and deliver timely services to their customers. 

While the process of network design sounds complex – and indeed it is – Peter simplifies it into a progression of steps. The journey begins with understanding the service promise to the customers.

This is then aligned with the capabilities of the freight industry and the maturity of the business to manage bespoke freight strategies (faster, more reach and lower cost, but complex)  or less mature requiring industry standard offerings (less reach, higher cost, but relatively simple).

This leads to a high-level or “macro” plan. It’s this plan that acts as the springboard into a more granular analysis, adjusting nodes based on real estate, inventory, systems and population centres.

“In comparison to areas like North America and Europe, Australia’s network options  are somewhat straightforward due to fewer large population centres and a predominantly importer-distributor nature. Nevertheless, the principles remain consistent wherever you are.

“Begin with your customer promise, understand your landscape and capabilities, and then iteratively refine until the network design aligns seamlessly with both logistical efficiency and customer satisfaction.”

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