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Supply chain management ch05 chopra
The document discusses network design in supply chain management, including factors influencing network design decisions, frameworks for facility location, and optimization methods. It covers the roles of facility location, capacity allocation, market allocation, and supply allocation in network design. Optimization methods addressed are gravity methods for location modeling and network models for allocating demand to facilities, locating facilities, and configuring networks while minimizing costs.
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Supply chain management ch05 chopra
- 1. © 2007 PearsonEducation Chapter 5 Network Design in the Supply Chain Supply Chain Management (3rd Edition) 5-1
- 2. © 2007 PearsonEducation Outline A strategic framework for facility location Multi-echelon networks Gravity methods for location Plant location models 5-2
- 3. © 2007 PearsonEducation Network Design Decisions Facility role Facility location Capacity allocation Market and supply allocation 5-3
- 4. © 2007 PearsonEducation Factors Influencing Network Design Decisions Strategic Technological Macroeconomic Political Infrastructure Competitive Logistics and facility costs 5-4
- 5. © 2007 PearsonEducation 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 PearsonEducation Service and Number of Facilities Number of Facilities Response Time 5-6
- 7. © 2007 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation Costs and Number of Facilities Costs Number of facilities Inventory Transportation Facility costs 5-12
- 13. © 2007 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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 PearsonEducation 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