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Distribution center allocation set at network launch rarely matches the demand geography two years later. A Distribution Center Allocation Playbook reads demand patterns by region, lead time data, and outbound cost to rebalance SKU placement so inventory sits closest to where it ships.
The Challenge
When the network was set up, each SKU was placed at the DC closest to its expected demand. Demand patterns have shifted since: new regions, new customers, retiring product lines. The allocation rarely gets re-baselined, and inventory keeps shipping from the wrong DC at outbound-cost penalty.
A network-level outbound cost number hides the per-SKU per-region misallocation that drives it. Without a per-flow view, the planning team cannot see that 12 SKUs ship from DC A to region B more frequently than from DC B (which holds the same SKUs at higher inventory cost but lower outbound cost).
Network changes feel large and get held for an annual review. In the meantime, the misallocation persists for months at full operational cost. The rebalancing that could ship continuously stays stuck in a once-a-year planning event.
How eyko Solves It
A Distribution Center Allocation Playbook reads demand patterns by SKU and region, current DC inventory positions, outbound transportation costs, lead time data, and inbound replenishment economics to compute the optimal SKU placement across the DC network. It surfaces the current misallocations, ranks them by total cost savings, and recommends rebalancing moves that can ship continuously rather than wait for the annual network review.
The Playbook analyzed 12 months of demand and shipment data across 4 DCs and 4,200 SKUs. 384 SKUs are misallocated by current DC vs optimal DC, representing $1.4M in annualized outbound cost above the optimal placement. The top 50 misallocations alone account for $640K. Rebalancing the top 50 over the next 2 quarters projects an 18% improvement in average ship-from-distance.
| Metric | Current | Benchmark | Status |
|---|---|---|---|
| Primary indicator | Flagged | Target | Action needed |
| Secondary indicator | Monitoring | Within range | On track |
| Trend direction | Declining | Stable | Review required |
Distribution Center Allocation computes the optimal SKU placement across the DC network based on current demand geography, outbound costs, lead times, and inbound economics. The Playbook surfaces the misallocated SKUs by total cost impact, recommends rebalancing moves that can ship continuously rather than wait for annual review, and shows the operational economics of the current vs optimal placement so leadership sees where the inventory should sit and why.
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FAQ
Everything you need to know about DC Allocation Optimization.
Distribution Center Allocation is an AI-driven optimization of SKU placement across the DC network. The Playbook reads demand patterns by SKU and region, current DC inventory positions, outbound costs, lead times, and inbound economics to compute the optimal placement, surfaces the current misallocations ranked by total cost impact, and recommends rebalancing moves that can ship continuously rather than wait for the annual network review.
The Playbook reads from your ERP or warehouse management system (DC inventory positions, SKU master data), transportation management system (outbound shipment data, lane costs, lead times), sales system (demand by SKU and region, customer geography), and inbound procurement system (replenishment economics, supplier lead times). At least 12 months of shipment data anchors the optimization in real demand geography.
Network design studies are large, episodic, and focus on facility location and capacity. Distribution Center Allocation works within the existing facility footprint and optimizes which SKUs sit at which DC, continuously. The two are complementary: network design reshapes the footprint occasionally, allocation keeps the inventory inside the footprint matched to demand month by month.
Yes. Each rebalancing recommendation pairs the SKU move with an inbound replenishment plan adjustment so the receiving DC builds stock before the source DC depletes. The Playbook also surfaces the SKUs where rebalancing would temporarily increase service risk and recommends a slower transition cadence for those cases so the customer experience is protected throughout the rebalance.
Join the enterprises replacing weeks of manual analysis with a single prompt. See what eyko Playbooks can do with your data.
