Brief Discussion

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Network Design in the Supply Chain

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Chopra and Meindl Supply Chain Management, 5e

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Learning Objectives

Understand the role of network design in a supply chain.

Identify factors influencing supply chain network design decisions.

Develop a framework for making network design decisions.

Use optimization for facility location and capacity allocation decisions.

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Notes:

Network Design Decisions

Facility role

What role, what processes?

Facility location

Where should facilities be located?

Capacity allocation

How much capacity at each facility?

Market and supply allocation

What markets? Which supply sources?

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Facility- Closing of Netflex DC due to Video Streaming, Amazon increase in DC.

Factors Influencing Network Design Decisions

Strategic factors

Technological factors

Macroeconomic factors

Tariffs and tax incentives

Exchange-rate and demand risk

Freight and fuel costs

Political

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Strategic Factors : What is the strategic Factor of Costco in regard to the facility . What is the strategic factors- Looking at Cost. – Look for labor cost is low in other countries.

Technological Factors: How much automation in system. Software

Macro- economic- government negotiations for local market. Currencies fluctuation. Oil prices

Political-

Infrastructure:

Factors Influencing Network Design Decisions

Infrastructure factors

Competitive factors

Positive externalities between firms

Locating to split the market

Customer response time and local presence

Logistics and facility costs

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Positive externalities between firms- E.g. Everyone is in a mall where everyone benefits based on the location

E.g. Melbourne – Embrarer opened facilities which then allowed more aviation companies to locate in that location

Locating to split the market: E.g. Maximize market share if they are closer together. So like Walt Disney and Universal studios.

Customer response time and local presence: BJ’s Customer less time sensitive. Starbuks- Location not far from customers

Logistics and Facility Cost- E.g. Blue Nile and Zales

Competitive Factors

Positive externalities between firms

Collocation benefits all

Locating to split the market

Locate to capture largest market share

Figure 5-1

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Framework for Network Design Decisions

Figure 5-2

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PHASE 1- Macro – Supply chain strategy

PHASE 2- Regional Facility Configuration- Identify regions where the facilities can be located.

PHASE 3- Desirable Sites where facilities are to be located

Hard Infrastructure: Availability of Suppliers, Transportation services, communication network , utilities,

Soft Infrastructure: skilled workforce, workforce turnover, community receptivity to business and industry

PHASE 4: Location choices=select precise locations and give a more quantifiable measurement of the regions selected of facility cost while still looking an non – quantifiable measurements to determine the best locations.

Framework for Network Design Decisions

Phase I: Define a Supply Chain Strategy/Design

Clear definition of the firm’s competitive strategy

Forecast the likely evolution of global competition

Identify constraints on available capital

Determine growth strategy

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Framework for Network Design Decisions

Phase II: Define the Regional Facility Configuration

Forecast of the demand by country or region

Economies of scale or scope

Identify demand risk, exchange-rate risk, political risk, tariffs, requirements for local production, tax incentives, and export or import restrictions

Identify competitors

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Framework for Network Design Decisions

Phase III: Select a Set of Desirable Potential Sites

Hard infrastructure requirements

Soft infrastructure requirements

Phase IV: Location Choices

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Models for Facility Location and Capacity Allocation

Maximize the overall profitability of the supply chain network while providing customers with the appropriate responsiveness

Many trade-offs during network design

Network design models used to decide on locations and capacities and to assign current demand to facilities

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Summary of Learning Objectives

Understand the role of network design in a supply chain

Identify factors influencing supply chain network design decisions

Develop a framework for making network design decisions

Use optimization for facility location and capacity allocation decisions

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Notes:

FORECAST DEMAND

https://www.youtube.com/watch?v=ozZY6z483Yw

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.

Printed in the United States of America.

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