Supply Chain Management (3rd Edition)

Chapter 5 Network Design in the Supply Chain

2007 Pearson Education

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Network Design Decisions

Facility role What role? Which processes are performed at
the facility?

Facility location Where to locate? Capacity allocation How much capacity to allocate to
each facility?

Market and supply allocation What markets to

serve? Which suppliers to source from?

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Factors Influencing Network Design Decisions

Strategic Focus on Cost or Responsiveness? Technological High tech or Low tech facility required? Macroeconomic Tariffs, Taxes (SEZ), Exchange rates
(Hedging)

Political Stability of country/states Infrastructure Roads, Telecom, Power, Water Competitive - Location of competitors? Logistics and facility costs Impact of number of
facilities on Inventory, Facilities, Transport costs
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A Framework for Global Site Location

Competitive STRATEGY GLOBAL COMPETITION INTERNAL CONSTRAINTS Capital, growth strategy, existing network PRODUCTION TECHNOLOGIES Cost, Scale/Scope impact, support required, flexibility

PHASE I Supply Chain Strategy

TARIFFS AND TAX INCENTIVES

COMPETITIVE ENVIRONMENT

PHASE II Regional Facility Configuration

REGIONAL DEMAND Size, growth, homogeneity, local specifications POLITICAL, EXCHANGE RATE AND DEMAND RISK

PHASE III Desirable Sites

PRODUCTION METHODS Skill needs, response time FACTOR COSTS Labor, materials, site specific

AVAILABLE INFRASTRUCTURE

PHASE IV Location Choices

LOGISTICS COSTS Transport, inventory, coordination

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Conventional Network
Vendor DC Materials DC

Finished Goods DC

Customer DC

Customer Store

Vendor DC

Component Manufacturing Plant Warehouse Components DC Customer DC

Customer Store Customer Store

Customer Store Customer DC Customer Store
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Vendor DC Final Assembly

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Finished Goods DC

Tailored Network: Multi-Echelon Finished Goods Network

Regional Finished Goods DC Local DC Cross-Dock Customer 1 DC Local DC Cross-Dock Customer 2 DC Local DC Cross-Dock Store 1 Store 1 Store 2 Store 2 Store 3 Store 3

National Finished Goods DC

Regional Finished Goods DC

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