Optimization Modeling Eliminates an Entire Warehouse — Without Compromising Service
How combined optimization and simulation proved one facility could exit the network with no loss of customer service
The Situation
This manufacturer operated multiple warehouses across its distribution network and knew the configuration wasn't optimal. Customer order patterns had shifted over the years, product mix had evolved, and the warehouse footprint that made sense a decade ago no longer matched the company's actual distribution requirements.
Management wanted to rationalize the network using customer order pattern data. The key question: how should SKUs be stocked across the warehouse network to minimize cost while maintaining service levels? The answer might mean not every warehouse was necessary — but shutting down a warehouse is a high-stakes decision. Get the stocking reallocation wrong and you trade facility cost savings for service failures, stockouts, and damaged customer relationships. The company needed analytical proof, not a hunch.
What ADecTec Delivered
ADecTec built a combined optimization and simulation model of the client's entire warehouse network, capturing customer order patterns, demand variability by SKU and location, transportation costs between facilities and customers, and service-level requirements by account. The optimization component determined the lowest-cost stocking policy for each SKU across each warehouse. The simulation component then stress-tested the optimized configuration against demand variability to verify that service levels would hold under realistic operating conditions — not just average-case assumptions.
The analysis produced a clear finding: one warehouse could be eliminated entirely. The SKUs it held could be redistributed across the remaining network without any degradation in customer service, provided that stocking policies were reconfigured according to the optimized model.