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Global Supply Chain Design

A detailed analysis of manufacturing and distribution strategy design for Europe, considering cost estimates, risks, and supply chain optimizations. Recommendations focus on locating manufacturing in China and placing distribution centers in Eastern Europe. The study emphasizes the importance of minimizing transportation costs and leveraging sea travel. Final proposal suggests manufacturing in Shanghai and distribution centers in Lille, Nancy, and Marseille for optimal cost efficiency.

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Global Supply Chain Design

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  1. Global Supply Chain Design John H. Vande Vate Spring 2005

  2. EU Ports Case Where to manufacture? Asia EU Central EU Eastern EU Which ports to use? Where to locate DCs? Basics of SC Design

  3. Almost Greenfield study Fixed pool points Aggregate study Demand aggregated to pool points by population and per capita income Products aggregated to a single product Time Growth? Seasonality? Life cycle? Labor rates? Context

  4. Recommend a high-level supply chain design Provide estimates of costs for comparisons and to weigh risks Identify where to focus effort in more detailed assessment Our Job

  5. Hierarchy of costs? Questions

  6. Hierarchy of costs Raw Materials ~ €1.5 billion Inventory costs ~ € 30 million VAT ~ € 10 million In-bound freight (RM) ~ € 1 – 33 million Out-bound freight (FG) ~ € 1 – 28 million Labor ~ € 1.5 – 15 million Plant and DC leases ~ € 0.2 – 3 million Questions

  7. Hierarchy of confidence/indifference What data are you most sure of or care the least about Questions http://www.isye.gatech.edu/~jvandeva/Classes/6203/HW1

  8. Summary of Results • Chosen Option is S/No 1. • Based on the limited scenario given, the cost is the lowest, the distribution network from the heart of Europe had been long established and is also the most reliable one.

  9. DC Inventory Costs • Average Inventory Formula The reasoning behind this formula is the basic b*h/2 formula for the area of a triangle. Our period is 3 days long here, so each triangle gets 1/3 of a period. Q1/(3*2) + Q2/(3*2) + Q3/(3*2)

  10. Picture of the Inventory Model

  11. Single DC Result Minimum Cost is to have a single DC in Antwerp. Cost = 12,292,656 Top 3 options as follows:

  12. Two DC Result Minimum Cost is to have DCs in Antwerp (serve Milton Keynes, Paris, Madrid, Bern, Antwerp, Frankfurt) and Brno (serve Milan, Graz, Malmo) Cost = 14,657,246

  13. Material flow map of proposed solution

  14. Supply chain costs of the proposed solution

  15. Comparison to alternatives considered

  16. Reflections: It is most cost effective to place the manufacturing in China. This is due to lower wages, land cost, building cost, and transportation from suppliers to manufacturers. The benefits gained from having the manufacturing in China outweigh the transportation cost to the European DCs. This does not take into account the lead time, since if the demand is constant, shipments will be made in advance considering the longer transportation times. All ports used for this model have a yearly capacity (in TEU) much larger than what is being shipped to them, although any delays in moving the products from/to ships are not factored into this analysis. Of the possible locations for DCs, the model shows that it is more economical to place the DC's in Eastern Europe, where the land and labor are cheaper. The model also places the DCs as close as it can to the customers, to minimize transportation cost. The transportation cost via sea is less expensive per mile than by land, and therefore the model tries to maximize sea travel, while minimizing land travel. If a network of operations was to be set for this case, we would recommend placing the manufacturing in Shanghai, and EDCs in Lille, Nancy, and Marseille. This would result in a total cost of 13.5 million Euros. Project Results Summary

  17. To Manufacturing To DC To Port To Costumer Scenario 4a

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