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Chapter 5 Network Design in the Supply Chain

Chapter 5 Network Design in the Supply Chain. Supply Chain Management. 5- 1. Network Design Decisions. Facility role Facility location Capacity allocation Market and supply allocation. Factors Influencing Network Design Decisions. Strategic Technological Macroeconomic Political

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Chapter 5 Network Design in the Supply Chain

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  1. Chapter 5Network Design in the Supply Chain Supply Chain Management 5-1

  2. Network Design Decisions • Facility role • Facility location • Capacity allocation • Market and supply allocation Factors InfluencingNetwork Design Decisions • Strategic • Technological • Macroeconomic • Political • Infrastructure • Competitive • Logistics and facility costs 5-2

  3. A Framework forGlobal Site Location GLOBAL COMPETITION Competitive STRATEGY PHASE I Supply Chain Strategy INTERNAL CONSTRAINTS Capital, growth strategy, existing network TARIFFS AND TAX INCENTIVES PRODUCTION TECHNOLOGIES Cost, Scale/Scope impact, support required, flexibility REGIONAL DEMAND Size, growth, homogeneity, local specifications PHASE II Regional Facility Configuration COMPETITIVE ENVIRONMENT POLITICAL, EXCHANGE RATE AND DEMAND RISK PHASE III Desirable Sites AVAILABLE INFRASTRUCTURE PRODUCTION METHODS Skill needs, response time PHASE IV Location Choices FACTOR COSTS Labor, materials, site specific LOGISTICS COSTS Transport, inventory, coordination 5-3

  4. Network Optimization Models • Allocating demand to production facilities • Locating facilities and allocating capacity • Key Costs: • Fixed facility cost • Transportation cost • Production cost • Inventory cost • Coordination cost Which plants to establish? How to configure the network? 5-4

  5. 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 • Dn : Annual tonnage to delivery location n • Fn: cost of shipping one unit for one mile to location n Min 5-5

  6. 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 Demand Allocation Model 5-6

  7. 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 5-7

  8. 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 5-8

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