Chopra4 Ppt Ch05

7/31/2019 Chopra4 Ppt Ch05

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Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Chapter 5

NetworkDesign in theSupply Chain

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Outline

The Role of Network Design in the Supply Chain

Factors Influencing Network Design Decisions

Framework for Network Design Decisions

Models for Facility Location and Capacity

Allocation

The Role of IT in Network Design

Making Network Design Decisions in Practice

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Network Design Decisions

Facility role

Facility location

Capacity allocationMarket and supply allocation

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Factors InfluencingNetwork Design Decisions

Strategic

Technological

MacroeconomicPolitical

Infrastructure

Competitive

Logistics and facility costs

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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

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Service and Number of Facilities

Number of Facilities

Response

Time

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7/23Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Costs and Number of Facilities

Costs

Number of facilities

Inventory

Transportation

Facility costs

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Percent Service

Level Within

Promised Time

Transportation

Cost Buildup as a Function of Facilities

CostofOpe

rations

Number of Facilities

Inventory

Facilities

Total Costs

Labor

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Framework for Network DesignDecisions

Phase ISupply Chain Strategy

Phase IIRegional Facility Configuration

Phase IIIDesirable Sites

Phase IVLocation Choices

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A Framework forNetwork Design Decisions

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, supportrequired, flexibility

COMPETITIVE

ENVIRONMENT

PRODUCTION METHODS

Skill needs, response time

FACTOR COSTS

Labor, materials, site specific

GLOBAL COMPETITION

TARIFFS AND TAX

INCENTIVES

REGIONAL DEMANDSize, growth, homogeneity,

local specifications

POLITICAL, EXCHANGE

RATE AND DEMAND RISK

AVAILABLEINFRASTRUCTURE

LOGISTICS COSTS

Transport, inventory, coordination

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Conventional Network

Customer

Store

Materials

DC

ComponentManufacturing

Vendor

DC

Final

Assembly

Finished

Goods DC

Components

DC

Vendor

DC Plant

Warehouse

Finished

Goods DC

Customer

DC

Customer

DC

Customer

DC

CustomerStore

Customer

Store

Customer

Store

Customer

Store

Vendor

DC

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Tailored Network: Multi-EchelonFinished Goods Network

Regional

Finished

Goods DC

RegionalFinished

Goods DC

Customer 1

DC

Store 1

National

Finished

Goods DC

Local DC

Cross-Dock

Local DCCross-Dock

Local DC

Cross-Dock

Customer 2

DC

Store 1

Store 2

Store 2

Store 3

Store 3

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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 deliverylocation n

k

n n

n

k

n n

nn

k

n n

n

k

n n

n

n

n

dFD

dFyD

dFD

dFx

D

yyxxd

n

ny

n

nx

nn

1

1

1

1

22

)()(

Min FDd nn n

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Models for Facility Location andCapacity Allocation

Phase II

Capacitated Plant location model

Phase III

Gravity location models

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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

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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

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Plant Location with Multiple Sourcing

yi = 1 if plant is located

at site i, 0 otherwise

xij = Quantity shipped

from plant site i tocustomer j

}1,0{;

,...,1,

,...,1,

..

1

1

1

1 11

yy

yKx

Dx

xcyf

i

m

ii

ii

n

j ij

j

n

iij

n

i

m

jijiji

n

ii

k

ni

mj

ts

Min

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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, 0otherwise

}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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The Role of IT in Network Design

IT systems help with network design by:

1. Making the modeling of the network design

problems easier

2. Containing high-performance optimizationtechnologies

3. Allowing for what-if scenarios

4. Interfacing with planning and operationalsoftware

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Making Network Design Decisions InPractice

Do not underestimate the life span of facilities

Do not gloss over the cultural implications

Do not ignore quality of life issues

Focus on tariffs and tax incentives when

locating facilities

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SOCIO ECONOMIC FACTORS IN CHOICE OFFACILITY LOCATION

What role do socio-economic factors play in

the selection of the facility location?

How do state policies aimed at promoting

balanced regional development, shape the

supply chain network designs?


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JAIPUR RUGS

How has Jaipur Rugs knitted together the

traditional skills of widely dispersed rural

workforce, through innovative adaptation of

supply chain practices that best fit the Indiansocio economic conditions to bring quality

products to the international market and ensure

fair returns to the artisans?


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Copyright 2010 Pearson Education Inc Publishing as Prentice Hall

Summary of Learning Objectives

What is the role of network design decisions inthe 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 allocationdecisions?

Gravity methods for location

Network optimization models

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