Ch11-Network Design-Supply Chain Management
- 1. Chapter Eleven: Network Design Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 2. Redesigning the Product for Postponement • Example: HP Printers • HP produces its products for consumption around the world • While the inkjet printer for the most part is basically the same, there are two features that differentiates destination: instruction manual and the power supplies • Produce inkjet printers that are largely complete except they lack a power supply and printed instructions • These are then shipped to regional warehouses • When orders are received, generic printers are withdrawn from stock and paired with the appropriate power supply and manual. • Postponement was able to reduce 25% of stock Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 3. Supply Chain Networks • Facility Location • Vehicle Routing • The Role of Software Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 4. Factors Affecting Industrial Location • Desired customer service level • Access to transportation • Freight rates • Tax rates and tax breaks • Real estate: costs, quality, availability • Employment quality and availability • Climate, livability • Regional culture • Duty and duty drawback laws (if global) Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 5. • Spatial/Temporal Integration • Framework for Total Cost Implementation Network Design Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 6. Gaining and Maintaining a Systems Perspective DEFINITION OF SYSTEMS ANALYSIS • A set of interrelationships designed to achieve the desired objective • Total integrated effort to accomplish the desired objective Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 7. TRANSFORMATIONS OUTPUTS FEEDBACK INPUTS Input/Output System Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 8. • Total system performance is singularly important • Components or parts of system need not have optimum construction • A functional relationship exists between components called trade-off which may enhance or hinder system performance • Components linked together in a balanced system will produce greater end results than the sum of individual components Integration Principles Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 9. • Cost to Cost Example – More Transportation for Less Inventory • Cost to Service Example – More Cost for Increased Revenue Key Trade-Offs Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 10. Supply Chain Design Questions • Where should the manufacturing plants be located and which products should they produce? • How many distribution centers should the firm use, and where should they be located? • What customers or market areas should be serviced from each distribution center? • Which product lines should be produced or stocked at each plant or distribution center? • What is the role of master or regional distribution centers relative to field or local distribution centers? • What sourcing and marketing channels should be used to source material and serve international markets? • What combination of public and private warehouse facilities should be used? and • What service providers and value added services should be used meet market requirements? • What is the impact of increases in fuel prices? Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 11. • Economy-of-Scale • Economy-of-Scope • Generalized Relationship Manufacturing/Distribution Integration Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 12. • Transportation Cost Integration (Spatial) • Inventory Cost Integration (Temporal) • Total Cost-Service Integration Facility Network Integration Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 13. • Basic Economies • Economy of Size • Economy of Distance • Transportation Economies • Quantity Discount • Tapering Principle • Generalized Relationship Transportation Cost Integration (Spatial) Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 14. Transport Cost Number of Distribution Locations Outbound Inbound Total Transport Transport Cost As A Function Of Distribution Locations Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 15. Network Transportation Cost Minimization Transportation Cost as a Function of the Number of Warehouse (Network) Locations
- 16. • Basic Economies • Single Location • Multiple Location • Generalized Relationship Inventory Cost Integration (Temporal) Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 17. INVENTORY INVESTMENT SERVICE LEVEL % 100 95 90 80 70 Service Level versus Inventory Cost Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 18. Transit Inventory Safety Stock Inventory Inventory Network Locations Graphical Illustration of Locational Impact of Inventory Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 19. Total Cost Network Locations Total Transportation Cost Inventory Cost Total Cost Total Cost Logistical Network Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 20. Supply Chain Design Criteria • Design to minimize landed cost • Design to maximize asset utilization • Design to maximize competitive positioning (relevancy) • Design to minimize risk • Design to maximize control Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 21. Logistics System Design Requirements Commodity Integrated Service Customized Service • Direct bulk or crossdock delivery • Limited product requirements • Unique information requirements and capabilities • Precise management requirements • Delivery to customer DC • Broad product offering • Range of information requirements and capabilities • Accept more generic strategies • Delivery in small quantities • Select products • Tracking of individual behavior • Individual focused strategies
- 22. Mass Merchant Comparison • Target • New and unique product offerings • Maintain inventory responsibility • Maintain forecasting • Wal*Mart • Low cost product • Shift inventory management to vendor • Collaborative forecasting Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
- 23. Trend of Diesel Price Per Gallon 0 1 2 3 4 5 6 Mar 21, 1994 Mar 21, 1995 Mar 21, 1996 Mar 21, 1997 Mar 21, 1998 Mar 21, 1999 Mar 21, 2000 Mar 21, 2001 Mar 21, 2002 Mar 21, 2003 Mar 21, 2004 Mar 21, 2005 Mar 21, 2006 Mar 21, 2007 Mar 21, 2008 Mar 21, 2009 Mar 21, 2010 Mar 21, 2011 Mar 21, 2012 Mar 21, 2013 Mar 21, 2014 Mar 21, 2015 Weekly Diesel Fuel Prices $/gallon Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.