Supply chain management ch05 chopra
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Supply chain management ch05 chopra
- 1. © 2007 Pearson Education Chapter 5 Network Design in the Supply Chain Supply Chain Management (3rd Edition) 5-1
- 2. © 2007 Pearson Education Outline A strategic framework for facility location Multi-echelon networks Gravity methods for location Plant location models 5-2
- 3. © 2007 Pearson Education Network Design Decisions Facility role Facility location Capacity allocation Market and supply allocation 5-3
- 4. © 2007 Pearson Education Factors Influencing Network Design Decisions Strategic Technological Macroeconomic Political Infrastructure Competitive Logistics and facility costs 5-4
- 5. © 2007 Pearson Education The Cost-Response Time Frontier Local FG Mix Regional FG Local WIP Central FG Central WIP Central Raw Material and Custom production Custom production with raw material at suppliers Cost Response Time HiLow Low Hi 5-5
- 6. © 2007 Pearson Education Service and Number of Facilities Number of Facilities Response Time 5-6
- 7. © 2007 Pearson Education Customer DC Where inventory needs to be for a one week orderWhere inventory needs to be for a one week order response time - typical results --> 1 DCresponse time - typical results --> 1 DC
- 8. © 2007 Pearson Education Customer DC Where inventory needs to be for a 5 day orderWhere inventory needs to be for a 5 day order response time - typical results --> 2 DCsresponse time - typical results --> 2 DCs
- 9. © 2007 Pearson Education Customer DC Where inventory needs to be for a 3 day orderWhere inventory needs to be for a 3 day order response time - typical results --> 5 DCsresponse time - typical results --> 5 DCs
- 10. © 2007 Pearson Education Customer DC Where inventory needs to be for a next day orderWhere inventory needs to be for a next day order response time - typical results --> 13 DCsresponse time - typical results --> 13 DCs
- 11. © 2007 Pearson Education Customer DC Where inventory needs to be for a same day / nextWhere inventory needs to be for a same day / next day order response time - typical results --> 26 DCsday order response time - typical results --> 26 DCs
- 12. © 2007 Pearson Education Costs and Number of Facilities Costs Number of facilities Inventory Transportation Facility costs 5-12
- 13. © 2007 Pearson Education Percent ServicePercent Service Level WithinLevel Within Promised TimePromised Time TransportationTransportation Cost Buildup as a Function of Facilities CostofOperationsCostofOperations Number of FacilitiesNumber of Facilities InventoryInventory FacilitiesFacilities Total CostsTotal Costs LaborLabor 5-13
- 14. © 2007 Pearson Education A Framework for Global Site Location PHASE I Supply Chain Strategy PHASE II Regional Facility Configuration PHASE III Desirable Sites PHASE IV Location Choices Competitive STRATEGY INTERNAL CONSTRAINTS Capital, growth strategy, existing network PRODUCTION TECHNOLOGIES Cost, Scale/Scope impact, support required, flexibility COMPETITIVE ENVIRONMENT PRODUCTION METHODS Skill needs, response time FACTOR COSTS Labor, materials, site specific GLOBAL COMPETITION TARIFFS AND TAX INCENTIVES REGIONAL DEMAND Size, growth, homogeneity, local specifications POLITICAL, EXCHANGE RATE AND DEMAND RISK AVAILABLE INFRASTRUCTURE LOGISTICS COSTS Transport, inventory, coordination 5-14
- 15. © 2007 Pearson Education Conventional Network CustomerCustomer StoreStore MaterialsMaterials DCDC ComponentComponent ManufacturingManufacturing VendorVendor DCDC FinalFinal AssemblyAssembly FinishedFinished Goods DCGoods DC ComponentsComponents DCDC VendorVendor DCDC PlantPlant WarehouseWarehouse FinishedFinished Goods DCGoods DC CustomerCustomer DCDC CustomerCustomer DCDC CustomerCustomer DCDC CustomerCustomer StoreStore CustomerCustomer StoreStore CustomerCustomer StoreStore CustomerCustomer StoreStore VendorVendor DCDC 5-15
- 16. © 2007 Pearson Education Tailored Network: Multi-Echelon Finished Goods Network RegionalRegional FinishedFinished Goods DCGoods DC RegionalRegional FinishedFinished Goods DCGoods DC Customer 1Customer 1 DCDC Store 1Store 1 NationalNational FinishedFinished Goods DCGoods DC Local DCLocal DC Cross-DockCross-Dock Local DCLocal DC Cross-DockCross-Dock Local DCLocal DC Cross-DockCross-Dock Customer 2Customer 2 DCDC Store 1Store 1 Store 2Store 2 Store 2Store 2 Store 3Store 3 Store 3Store 3 5-16
- 17. © 2007 Pearson Education Gravity Methods for Location Ton Mile-Center Solution – x,y: Warehouse Coordinates – xn, yn : Coordinates of delivery location n – dn : Distance to delivery location n – Fn : Annual tonnage to delivery location n ∑ ∑ ∑ ∑ −− = = = = = = += k n n n k n n nn k n n n k n n nn n d FD d FyD d FD d FxD yyxxd n n y n n x nn 1 1 1 1 22 )()( Min ∑ FDd nn n 5-17
- 18. © 2007 Pearson Education Network Optimization Models Allocating demand to production facilities Locating facilities and allocating capacity Which plants to establish? How to configure the network? Key Costs: • Fixed facility cost • Transportation cost • Production cost • Inventory cost • Coordination cost 5-18
- 19. © 2007 Pearson Education Demand Allocation Model Which market is served by which plant? Which supply sources are used by a plant? xij = Quantity shipped from plant site i to customer j 0 ,...,1, ,...,1, .. 1 1 1 1 ≥ =≤ == ∑ ∑ ∑∑ = = = = x Kx Dx xc ij i m j ij j n i ij n i m j ijij ni mj ts Min 5-19
- 20. © 2007 Pearson Education Plant Location with Multiple Sourcing yi = 1 if plant is located at site i, 0 otherwise xij = Quantity shipped from plant site i to customer j }1,0{; ,...,1, ,...,1, .. 1 1 1 1 11 ∈≤ =≤ == + ∑ ∑ ∑ ∑∑∑ = = = = == yy yKx Dx xcyf i m i i ii n j ij j n i ij n i m j ijiji n i i k ni mj ts Min 5-20
- 21. © 2007 Pearson Education Plant Location with Single Sourcing yi = 1 if plant is located at site i, 0 otherwise xij = 1 if market j is supplied by factory i, 0 otherwise }1,0{ ,...,1, ,...,1,1 .. , 1 1 1 11 ∈ =≤ == + ∑ ∑ ∑∑∑ = = = == yx yKxD x xcDyf ij nij mj ts jMin i ii n j ij n i ij n i m j ijiji n i i 5-21
- 22. © 2007 Pearson Education Summary of Learning Objectives What is the role of network design decisions in the supply chain? What are the factors influencing supply chain network design decisions? Describe a strategic framework for facility location. How are the following optimization methods used for facility location and capacity allocation decisions? – Gravity methods for location – Network optimization models 5-22
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