designing the supply chain nsupply chainetwork3936
TRANSCRIPT
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
1/23
Designing the Supply Chain
Network
Models from Chapter 4, 5 of Chopra & Meindl
Byung-Hyun [email protected]
mailto:[email protected]:[email protected] -
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
2/23
Outline
Designing the Distribution Network in Supply Chain Factors Influencing Distribution Network Design
Design Options for Distribution Network
Selecting Distribution Network Design
Models for Facility Location and Capacity Allocation
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
3/23
Designing Distribution Network
Factors Influencing Distribution Network Design Customer needs that are met
Cost of meeting customer needs
Required
Number ofFacilities
Response Time
Number of Facilities
Cost Inventory
Transportation
Facility
Response Time
Total Logistics Costs
Number of Facilities
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
4/23
Designing Distribution Network
Elements of customer service influenced by networkstructure
Response time
Product variety
Product availability Customer experience
Ease with which customer can place and receive order
Order visibility Ability of customer to track their order from placement to
delivery
Returnability Ease with which customer can return unsatisfactory merchandise
and ability of logistics network to handle such returns
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
5/23
Designing Distribution Network
Supply chain costs affected by network structure Inventories
Transportation
Facilities and handling
Information infrastructure
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
6/23
Design Options for Distribution Network
Possible distribution network design Manufacturer storage with direct shipping
Manufacturer storage with direct shipping and in-transit merge
Distributor storage with carrier delivery
Distributor storage with last mile delivery Manufacturer or distributor storage with consumer pickup
Retail storage with consumer pickup
Customers walking into store or ordering online
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
7/23
Design Options for Distribution Network
Manufacturer storage with direct shipping Drop-shipping, demand aggregation, postpone customization
Slow-moving/low-demand/high-value items
Manufacturer
Retailer
Customers
Product Flow Information Flow
Inventory
Transportation
Facilities and handling
Information
L
H
L
H
Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability
H
H
H
M
L
L
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
8/23
Design Options for Distribution Network
Manufacturer storage with direct shipping and in-transit merge
e.g. PC from Dell along with Sony monitor
low- to medium-demand and high-value items
Factories
Retailer In-Transit Merge by Carrier
Customers
Product Flow Information Flow
Inventory
Transportation
Facilities and handling
Information
L
M
M
H
Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability
H
H
H
H
L
L
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
9/23
Design Options for Distribution Network
Distributor storage with carrier delivery High-level inventory at distributor
Medium- to fast-moving items at distributor, loss of aggregation
Factories
Customers
Warehouse Storage byDistributor/Retailer
Product Flow Information Flow
Inventory
Transportation
Facilities and handling
Information
M
L
M
M
Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability
M
M
M
H
M
M
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
10/23
Design Options for Distribution Network
Distributor storage with last mile delivery Delivering to customers home instead of using package carrier
e.g. grocery industry, water, bag of rice at dense city
Factories
Customers
Distributor/Retailer
Warehouse
Product Flow Information Flow
Inventory
Transportation
Facilities and handling
Information
H
H
H
M
Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability
L
L
L
H
M
M
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
11/23
Design Options for Distribution Network
Manufacturer or distributor storage with consumerpickup
Reusing existing pick-up site, customer participation
Factories
Retailer
Pickup Sites
Cross Dock DC
Customer Flow
Customers
Product Flow Information Flow
Inventory
Transportation
Facilities and handling
Information
?
L
?
H
Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability
L
H
H
L
H
H
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
12/23
Selecting Distribution Network Design
Comparative performance 1: best performance
Manufacturer
storage with
direct
shipping
Manufacturer
storage with
direct
shipping and
in-transitmerge
Distributor
storage with
carrier
delivery
Distributor
storage with
last mile
delivery
Manufacturer
or distributor
storage with
consumerpickup
Retail
storage with
consumer
pickup
Inventory
Transportation
Facilities and handling
Information
Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability
1
4
1
4
4
1
1
4
5
5
1
3
2
4
4
1
1
3
4
5
2
2
3
3
3
2
2
2
3
4
3
5
4
2
2
3
3
1
2
3
1
1
5
5
4
1
1
5
6
2
4
1
6
1
1
4
4
5
1
1
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
13/23
Selecting Distribution Network Design
Performance for different product/customer char. +2: Very suitable, , -2: very unsuitable
Manufacturer
storage with
directshipping
Manufacturer
storage with
direct
shipping andin-transit
merge
Distributor
storage with
carrierdelivery
Distributor
storage with
last miledelivery
Manufacturer
or distributor
storage with
consumerpickup
Retail
storage with
consumerpickup
High-demand product
Medium-demand product
Low-demand product
Very low-demand productMany product source
High product value
Quick desired response
High product variety
Low customer effort
-2
-1
+1
+2-1
+2
-2
+2
+1
-1
0
0
+1-1
+1
-2
0
+2
0
+1
+1
0+2
+1
-1
+1
+2
+1
0
-1
-2+1
0
+1
0
+2
-1
0
+1
+10
-1
-2
+2
-1
+2
+1
-1
-2+1
-1
+2
-1
-2
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
14/23
Network Design in the Supply Chain
A framework for network design decision
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, support
required, flexibility
COMPETITIVE
ENVIRONMENT
PRODUCTION METHODS
Skill needs, response time
FACTOR COSTS
Labor, materials, site specific
GLOBAL COMPETITION
TARIFFS AND TAX
INCENTIVES
REGIONAL DEMAND
Size, growth, homogeneity,
local specifications
POLITICAL, EXCHANGE
RATE AND DEMAND RISK
AVAILABLE
INFRASTRUCTURE
LOGISTICS COSTS Transport,
inventory, coordination
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
15/23
Phase I: Supply Chain Strategy
A companys competitive strategy Defining set of customer needs that it seek to satisfy through its
products and services
Value chain perspective
Product development strategy/marketing and sales strategy Supply chain strategyand achieving strategic fit
e.g. Wal-Mart, McMaster Carr, Dell
New
Product
Development
Marketing
and
Sales
Operations Distribution Services
Finance, Accounting, Information Technology, Human Resources
The Value Chain in a Company
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
16/23
Network Optimization Models
Useful tools for both Phase II and Phase IV
Questions for Phase II: What regions to source
demand in and how to configure network? given,
Regional demand, tariffs, economics of scale, aggregate factor
costs Not necessary to go to detail of specific plant locations
Need to also consider less quantifiable factors such as political
and regulatory climate, competition
Phase IV involves selecting specific facilities andallocating capacity within those selected, given,
Fixed facility cost, transportation cost, production cost, inventory
cost, coordination cost
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
17/23
Phase II: Regional Facility Configuration
Capacitated plant location model Example: SunOil, a global energy company
The world is divvied into 5 different regions: N. America, S. America,
Europe, Asia, Africa
SunOil has regional demand figures, transport costs, facility costs
and capacities We will ignore tariffs and exchange rate fluctuations for now, and
assume all demand must be met (so we can focus on minimizing
costs)
Question:
Where to locate facilities to service their demand What size to build in the region (small or large), should they locate a
facility there
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
18/23
Phase II: Regional Facility Configuration
Capacitated plant location model n: number of potential plant location
As we are considering two different type
plants (small, large) for each region, n= 10
m: number of markets
Dj: demand from marketj
Ki: capacity of plant i
fi: fixed cost of keeping plant i open
cij: variable cost of sourcing marketj
from plant i
yi = 1 if plant is located at site i,
= 0 otherwise
xij: quantity shipped from plant i to
marketj niy
niyKx
mjDx
ts
xcyf
i
ii
m
jij
j
n
i
ij
n
i
m
j
ijij
n
i
ii
,,1for}1,0{
,,1for
,,1for
..
min
1
1
1 11
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
19/23
Phase II: Regional Facility Configuration
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
20/23
Phase III: Desirable Sites
Gravity methods for location x,y: Warehouse Coordinates
xn,yn: Coordinates of delivery location n
Dn: Quantity to be shipped to delivery location n
Fn:Annual tonnage to delivery location n
k
n
nnn
nnn
FDd
yyxxd
1
22
min
)()(
Limitions?
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
21/23
Phase IV: Location Choices
Network optimization model Example: TelecomOne merged with High Optic
They have plants in different cities and service several regions
Supply cities
Baltimore (capacity 18K), Cheyenne (24K), Salt Lake City (27K),
Memphis (22K) and Wichita (31K)
Monthly regional demands
Atlanta (demand 10K), Boston (6K), Chicago (14K), Denver
(6K), Omaha (7K)
They will consider consolidating facilities
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
22/23
Phase IV: Location Choices
Network optimization model n: number of plant location
m: number of markets
Dj: demand from marketj
Ki: capacity of plant i
cij: variable cost of sourcing
marketj from plant i
xij: quantity shipped from plant i to
marketj
0
,,1for
,,1for
..
min
1
1
1 1
ij
i
m
jij
j
n
i
ij
n
i
m
j
ijij
x
niKx
mjDx
ts
xc
-
7/29/2019 Designing the Supply Chain NSupply chainetwork3936
23/23
Phase IV: Location Choices
Considering additional layers: simultaneouslylocating plants and DCs
suppliers plantsDCs
customer1
customer2
customer3
..
min1 11 11 111
ts
xcxcxcyfyft
e
m
j
ejej
n
i
t
e
ieie
l
h
n
i
hihi
t
e
ee
n
i
ii