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Supply Chain Network Design Decisions for Managers

Learn about facility location, capacity allocation, and demand forecasting in supply chain design. Understand models and decision-making processes for optimizing supply chains.

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Supply Chain Network Design Decisions for Managers

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  1. OUTLINE • Questions? Comments? • Quiz • Go over Quiz • Next Homework • Questions on current Homework? • Wednesday’s Homework discussion • Cities Article • Your choice of product • How did you arrive at the costs • Example projects • Rejected innovations • Chapter 5

  2. Example projects from previous classes • Example projects • a mechanical pencil grip that also stores lead inside. • Prepared food delivery to students • Smart Lens is unique because it provides the wearer with zoom capabilities for long range targets, night vision, recording capabilities, autofocusing capabilities, and image projection. • FitFone, a cross between a phone accessory and a workout enhancement

  3. Performance – Uncertainties – Rate of innovation What do you think Western Union thought of the telephone in 1876? ______________________________________________ 1981 – Bill Gates thought ________  memory ought to be enough for anybodyEngineer’s comment at the Advanced Computing Systems Division of IBM, 1968, about the microchip________________ A Yale University management professor: “The concept of reliable overnight delivery service is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." Who do you think had written that paper?_____________  ”We don't like their sound, and guitar music is on the way out." - Decca Recording Co. rejecting the __________________, 1962. How long do you think it took the inventor of xerography to convince a company to develop a commercial copier?________

  4. Performance – Uncertainties – Rate of innovation This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." - Western Union internal memo, 1876.“640K ought to be enough for anybody." - Bill Gates, 1981."But what . . . is it good for?" - Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip. The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." - A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.)  ”We don't like their sound, and guitar music is on the way out." - Decca Recording Co. rejecting the Beatles, 1962.Chester A. Carlson 1938 to 1957 (Haloid to what became Xerox)

  5. Network Design - goal • A manager's goals when locating facilities and allocating capacity and demand should be: • maxi­mize the overall profitability of the supply chain • provide customers with the appropriate responsiveness

  6. Network Design – Location and capacity • Models of supply chains are used to decide on: • locations where facilities will be established • the capacity to be assigned to each facility • which market each facility should service • Managers must make this decision considering a time horizon over which locations and capacities will not be altered (typically in years).

  7. Network Design – Demand Allocation • Models of supply chains are also used to decide on: • assigning current demand to the available facili­ties • identifying lanes along which product will be transported • Managers must con­sider this decision at least on an annual basis as demand, prices, and tariffs change

  8. Network Design – Required Information Location of supply sources and markets Location of potential facility sites Demand forecast by market Facility, labor, and material costs by site Transportation costs between each pair of sites Inventory costs by site as well as a function of quantity Sale price of product in different regions Taxes and tariffs as product is moved between locations Desired response time and other service factors

  9. Example – Capacity and Selection

  10. Gravity location model

  11. Network optimization model

  12. Taxes Corporations in the US (and most countries) pay federal income taxes Depending on which state you are incorporated in, you also pay state income tax State Income tax is a deductible expense for calculating federal tax, but not the other way around. (now only for corporations) Look up state taxes on line Look at your ISE460 text for federal taxes but use the new ones (what do you think of them?)

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