TOPIC 3:

DESIGNING THE
SUPPLY CHAIN
PRESENTED BY: NICOLE S. ANDIT (BATCH 5)
 DEFINING SUPPLY CHAIN
NETWORK DESIGN
Designing the supply chain is the process of creating a network of
suppliers, manufacturers, warehouses, and distributors that can
efficiently and effectively deliver products to customers. It involves
making decisions about the following:
1. Where to source raw materials and components
2. Where to locate manufacturing facilities
3. Where to build warehouses and distribution centers
4. How to transport goods between different stages of the supply
chain
5. How to manage inventory levels
6. How to fulfill customer orders
The goal of designing the supply chain is to minimize costs,
maximize customer service, and mitigate risks.
 HERE ARE SOME OF THE KEY FACTORS TO
CONSIDER WHEN DESIGNING THE SUPPLY CHAIN:

✓ CUSTOMER DEMAND
✓ PRODUCT CHARACTERISTICS
✓ COST
✓ RISK
Here are some examples of how companies have used supply
chain design to improve their performance:
Amazon - The company has a network of warehouses and
distribution centers located all over the world, which allows it to
quickly deliver products to customers
Apple - The company works closely with its suppliers to ensure
that they meet its high standards for quality and reliability.
SUPPLY CHAIN DESIGN PLAYS A VITAL ROLE IN DETERMINING THE FINANCIAL
PERFORMANCE, SERVICE LEVELS, AND RISK AND RESILIENCY OF A COMPANY'S
OPERATIONS.

FINANCIAL SERVICE LEVELS:

PERFORMANCE: An optimized supply chain
network enables faster order
By optimizing the network design, fulfillment, accurate order
companies can minimize costs tracking, and on-time delivery,
associated with transportation, leading to improved customer
inventory, and warehousing. satisfaction and loyalty.

RISK AND RESILIENCY:

By diversifying suppliers, locating facilities in different regions, and implementing
contingency plans, companies can mitigate the impact of disruptions like natural
disasters or geopolitical events.
 TAKE AWAY…
To achieve the best outcomes in financial
performance, service levels, and risk and
resiliency, companies should consider various
factors such as demand patterns, customer
preferences, market dynamics, and regulatory
requirements during the supply chain design
process.
By leveraging advanced analytics, simulation
models, and optimization techniques, companies
can make informed decisions and design a
supply chain network that aligns with their
strategic objectives.
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 SUBTOPIC: DISTRIBUTION
NETWORK DESIGN
ROLE OF DISTRIBUTION:
Distribution – steps taken to move and store a product from the supplier
stage to the customer stage in a supply chain

MANUFACTU-
SUPPLIER RER
DISTRIBUTOR RETAILER CUSTOMER

What is a Distribution Network?

A distribution network :
• can be seen as the flow of goods from a producer or supplier to an end
consumer.
• consists of storage facilities, warehouses, and transportation systems that
support the movement of goods until they reach the end consumer.
• process of ensuring the consumer receives the product from the
manufacturer is done through direct sales or by following a retail network.
6
DISTRIBUTION
NETWORK
DESIGN
FACTORS
FACTORS TO CONSIDER IN TERMS
OF CUSTOMER SERVICE :
Response Product
Time Variety

Product Customer
Availability Experience

Time to Order
Market visibility

Returnability
FACTORS TO CONSIDER IN TERMS
OF SUPPLY CHAIN COST:

Inventories Transportation

Facilities and
Information
Handling
TWO KEY
DECISIONS:
1. DELIVERED / PICKED UP BY THE CUSTOMER?
2. INTERMEDIATE LOCATION?

SIX DISTRIBUTION NETWORK DESIGN

1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and in-transit merge
3. Distributor storage with carrier delivery
4. Distributor with last-mile delivery
5. Manufacturer/distributor storage with customer pickup
6. Retail storage with customer pickup
 1. MANUFACTURER STORAGE
WITH DIRECT SHIPPING
COST FACTOR
Inventory lower
Transportation increase
Facilities and
lower
Handling
Information higher
SERVICE FACTOR
Response Time longer
Product Variety higher
Product Availability higher
Customer Experience depends
Time to Market slight negative
Order Visibility challenging
20XX Returnability difficult 11
 2. MANUFACTURER STORAGE WITH DIRECT
SHIPPING AND IN-TRANSIT MERGE
COST FACTOR
Inventory slightly higher
Transportation slight lower
Facilities and
slightly higher
Handling
Information slightly higher
SERVICE FACTOR
Response Time longer
Product Variety higher
Product Availability higher
Customer Experience going better
Time to Market slight negative
Order Visibility challenging
Returnability difficult
20XX 12
 3. DISTRIBUTOR STORAGE WITH CARRIER
DELIVERY
COST FACTOR
Inventory higher
Transportation lower
Facilities and Handling increases

Information lower
SERVICE FACTOR
Response Time longer
Product Variety higher
Product Availability higher
Customer Experience slightly better

Time to Market higher

Order Visibility higher
Returnability difficult
20XX 13
4. DISTRIBUTOR WITH LAST-MILE DELIVERY
COST FACTOR
Inventory higher
Transportation higher
Facilities and increases
Handling
Information slightly lower
SERVICE FACTOR
Response Time shorter
Product Variety depends
Product Availability depends
Customer good
Experience
Time to Market quick
Order Visibility better
Returnability easier
14
5. MANUFACTURER/DISTRIBUTOR STORAGE
WITH CUSTOMER PICKUP
COST FACTOR
Inventory slightly higher
Transportation lower
Facilities and lower
Handling
Information slightly higher
SERVICE FACTOR
Response Time slightly longer
Product Variety depends
Product Availability depends
Customer Experience lower
Time to Market quick
Order Visibility better
Returnability easier
15
 6. RETAIL STORAGE WITH CUSTOMER PICKUP
COST FACTOR
Inventory Higher than all options
Transportation Lower than all other options
Facilities and Higher than other options. The increase in handling cost at the pick-up site
Handling can be significant for online and phone orders

Information Some investment in infrastructure required for online and phones orders.

SERVICE FACTOR
Response Time Same-day (immediate) pickup possible for items stored locally at pick-up
site
Product Variety Lower than all other options
Product Availability More expensive to provide than all other options
Customer Related to whether shopping is viewed as a positive or negative
Experience experienced by customer.
Time to Market Highest among distribution options
Order Visibility Trivial for in-store order. Difficult, but essential, for online and phone orders.

Returnability Easier than other options because retails store can provide a substitute. 16
DISTRIBUTION NETWORKS IN
PRACTICE
1. The ownership structure of the distribution
network can have a big as an impact as the
type of distribution network
2. it is important to have an adaptable
distribution network
3. product price, commoditization, and
criticality affect the type of distribution system
preferred by customers
4. integrate the internet with the existing
physical network.
 TAKE AWAY…
Distribution networks transform over time as businesses
expand and aim to reach more consumers. Therefore, they need to
be set up in a way that allows for long-term optimization.
In order to determine the ideal and efficient distribution
network and supply chain, the satisfaction of customer demand
comes into play. Satisfying overall customer demand has to be done
at low costs and required service levels. It requires strategic
planning and specialized supply chain management and planning.
With the best use of the proper Distribution Network, you
will be able to enjoy many benefits such as accuracy, efficiency,
business time management, analyzing your workflow for any
problems or issues, and you will be able to stand one in this
competitive world.

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THANK YOU
Nicole S. Andit
MBA – Batch 5
Logistics, Operations and Supply Chain Management
Prof. Norman B. Ramos