Network Design in the Supply Chain

1. Network Design in the Supply Chain Prepared By: ‘Izzaty Bte Mohamad Hamid Wan Siti Noorashikin Bte Wan Kamaruzaman Siti Norfarina Bte Abd Rahman Farahana Bte Hanib

2. Outline • A strategic framework for facility location • Multi-echelon networks • Gravity methods for location • Plant location models

3. Network Design Decisions • Facility role • Facility location • Capacity allocation • Market and supply allocation

4. Factors InfluencingNetwork Design Decisions • Strategic • Technological • Macroeconomic • Political • Infrastructure • Competitive • Logistics and facility costs

5. Network Design • Determine the physical configuration and infrastructure of the supply chain. • Is a strategic decision that has a long-lasting effect on the firm. • Involves decisions relating to plant and warehouse location as well as distribution and sourcing. • Needs to be reevaluated due to changes in the demand patterns, product mix, production processes, sourcing strategies, or the cost of running facilities.

6. Key Strategic decisions • Determining the appropriate number of facilities such as plants and warehouses • Determining the location of each facility • Determining the size of each facility • Allocating space for products in each facility • Determining the production requirements in each plant • Determining sourcing requirements • Determining distribution strategies

7. Data collection • A typical network configuration problems involved large amounts of data, including information on : • Location of customers, retailers, existing warehouses and distribution centers, manufacturing facilities, and suppliers. • All products, including volumes and special transport modes (e.g., refrigerated) • Annual demand for each product by customer location • Transportation rates by mode

8. Warehousing costs, including labor, inventory carrying, charge and fixed operating costs • Shipments sizes and frequencies for customer delivery • Order processing costs • Customer service requirements and goals • Production and sourcing costs and capacities

9. Potential facility location • Identify potential locations for new plants and warehouses. Typically these locations must satisfy a number of conditions. a) Geographic and infrastructure conditions b) Natural resources and labor availability c) Local industry and tax regulations d) Public interest • As a result, only a limited number of locations would meet all the requirements.

10. Key features of a network configuration DSS • One of the key requirements of any DSS network design is flexibility. • Flexibility as the ability of the system to incorporate a large set of preexisting network characteristics. • At one end of this spectrum is the complete reoptimization of the existing network. • This means that each warehouse can be either open or closed and all transportation flows can be redirected.

11. Figure 1-dss screen representing data prior to optimization

12. Conventional Network Materials DC Customer DC Finished Goods DC Vendor DC Customer Store Component Manufacturing Vendor DC Customer DC Customer Store Plant Warehouse Components DC Customer Store Vendor DC Finished Goods DC Customer DC Final Assembly Customer Store Customer Store 5-12

13. Tailored Network: Multi-Echelon Finished Goods Network Local DC Cross-Dock Store 1 Regional Finished Goods DC Customer 1 DC Store 1 Local DC Cross-Dock National Finished Goods DC Store 2 Customer 2 DC Local DC Cross-Dock Store 2 Regional Finished Goods DC Store 3 Store 3 5-13

14. Thank you…