Supply chain management ch05 chopra
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Transcript of Supply chain management ch05 chopra
© 2007 Pearson Education
Chapter 5Network Design in the Supply
Chain
Supply Chain Management(3rd Edition)
5-1
© 2007 Pearson Education
Outline
A strategic framework for facility location Multi-echelon networks Gravity methods for location Plant location models
5-2
© 2007 Pearson Education
Network Design Decisions
Facility role Facility location Capacity allocation Market and supply allocation
5-3
© 2007 Pearson Education
Factors InfluencingNetwork Design Decisions
Strategic Technological Macroeconomic Political Infrastructure Competitive Logistics and facility costs
5-4
© 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
© 2007 Pearson Education
Service and Number of Facilities
Number of Facilities
ResponseTime
5-6
© 2007 Pearson Education
Customer
DC
Where inventory needs to be for a one week order Where inventory needs to be for a one week order response time - typical results --> 1 DCresponse time - typical results --> 1 DC
© 2007 Pearson Education
Customer
DC
Where inventory needs to be for a 5 day order Where inventory needs to be for a 5 day order response time - typical results --> 2 DCsresponse time - typical results --> 2 DCs
© 2007 Pearson Education
Customer
DC
Where inventory needs to be for a 3 day order Where inventory needs to be for a 3 day order response time - typical results --> 5 DCsresponse time - typical results --> 5 DCs
© 2007 Pearson Education
Customer
DC
Where inventory needs to be for a next day order Where inventory needs to be for a next day order response time - typical results --> 13 DCsresponse time - typical results --> 13 DCs
© 2007 Pearson Education
Customer
DC
Where inventory needs to be for a same day / next Where inventory needs to be for a same day / next day order response time - typical results --> 26 DCsday order response time - typical results --> 26 DCs
© 2007 Pearson Education
Costs and Number of Facilities
Costs
Number of facilities
Inventory
Transportation
Facility costs
5-12
© 2007 Pearson Education
Percent Service Percent Service Level Within Level Within
Promised TimePromised Time
TransportationTransportation
Cost Buildup as a Function of FacilitiesC
ost
of O
per
atio
ns
Cos
t of
Op
erat
ion
s
Number of FacilitiesNumber of Facilities
InventoryInventory
FacilitiesFacilities
Total CostsTotal Costs
LaborLabor
5-13
© 2007 Pearson Education
A Framework forGlobal Site Location
PHASE ISupply Chain
Strategy
PHASE IIRegional Facility
Configuration
PHASE IIIDesirable Sites
PHASE IVLocation Choices
Competitive STRATEGY
INTERNAL CONSTRAINTSCapital, growth strategy,existing network
PRODUCTION TECHNOLOGIESCost, Scale/Scope impact, supportrequired, flexibility
COMPETITIVEENVIRONMENT
PRODUCTION METHODSSkill needs, response time
FACTOR COSTSLabor, materials, site specific
GLOBAL COMPETITION
TARIFFS AND TAXINCENTIVES
REGIONAL DEMANDSize, growth, homogeneity,local specifications
POLITICAL, EXCHANGERATE AND DEMAND RISK
AVAILABLEINFRASTRUCTURE
LOGISTICS COSTSTransport, inventory, coordination
5-14
© 2007 Pearson Education
Conventional Network
CustomerCustomerStoreStore
MaterialsMaterialsDCDC
ComponentComponentManufacturingManufacturing
VendorVendorDCDC
Final Final AssemblyAssembly
FinishedFinishedGoods DCGoods DC
ComponentsComponentsDCDC
VendorVendorDCDC PlantPlant
WarehouseWarehouse
FinishedFinishedGoods DCGoods DC
CustomerCustomerDCDC
CustomerCustomerDCDC
CustomerCustomerDCDC
CustomerCustomerStoreStore
CustomerCustomerStoreStore
CustomerCustomerStoreStore
CustomerCustomerStoreStore
VendorVendorDCDC
5-15
© 2007 Pearson Education
Tailored Network: Multi-Echelon Finished Goods Network
RegionalRegionalFinishedFinished
Goods DCGoods DC
RegionalRegionalFinishedFinished
Goods DCGoods DC
Customer 1Customer 1DCDC
Store 1Store 1
NationalNationalFinishedFinished
Goods DCGoods DC
Local DCLocal DCCross-DockCross-Dock
Local DC Local DC Cross-DockCross-Dock
Local DCLocal DCCross-DockCross-Dock
Customer 2Customer 2DCDC
Store 1Store 1
Store 2Store 2
Store 2Store 2
Store 3Store 3
Store 3Store 3
5-16
© 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
dFD
dFyDd
FDd
FxD
yyxxd
n
n
y
n
n
x
nn
1
1
1
1
22 )()(
Min FDd nn n
5-17
© 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
© 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
jij
j
n
iij
n
i
m
jijij
ni
mj
ts
Min
5-19
© 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
ii
ii
n
jij
j
n
iij
n
i
m
jijiji
n
ii
k
ni
mj
ts
Min
5-20
© 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
jij
n
iij
n
i
m
jijiji
n
ii
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© 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