Chapter 12 - Network Design Flashcards
**Design requirements are from…
Design requirements are from integrated procurement, manufacturing and customer accommodation strategies
Logistics requirements are satisfied by achieving total cost and service trade-offs
**Spectrum of location decisions exists but chapter focus is on selecting warehouse locations. WHY?
- Transportation services link locations into an integrated logistical system
- Selection of individual locations represents competitive and cost-related logistical decisions
- -Manufacturing plant locations may require several years to fully deploy
- Warehouses can be arranged to use only during specified times
- Retail locations are influenced by marketing and competitive conditions
- Warehouse locations are flexible and easy (compared to manufacturing)
- We don’t locate to suppliers because he could change suppliers or suppliers could change locations
**Local presence: An obsolete paradigm
Local presence paradigm
- Transportation services started out erratic with few choices
- Customers felt that inventory within the local market area was needed to provide consistent delivery
Contemporary view
- Transportation services have expanded
- Shipment arrival times are dependable and consistent
- Information technology
- Provides faster access to customer requirements
- Enables tracking of transport vehicles
**Warehouses specialize in ____ or ____ facing services
Warehouses specialize in supply or demand facing services
- Facilities used for inbound materials are supply facing warehouses
- Facilities used for customer accommodation are demand facing warehouses
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Functionality and justification are different based on facilities support role
- Procurement drivers
- Manufacturing drivers
- Customer accommodation drivers
**1. Procurement drivers help purchase materials and components at the lowest total inbound cost
- Limited number of deeper relationships with suppliers
- Life cycle considerations
- E.g. material purchase, reclamation, and disposal of unused materials
- Seasonality of selected supplies
- Opportunities to purchase at reduced prices
- Rapid accommodation of manufacturing fluctuations
- Facilities placing more emphasis on sorting and sequencing materials
**2. Manufacturing drivers help consolidate finished product for outbound customer shipment
manufacturing strategies…
- Provide customers full-line product assortment on a single invoice at truckload transportation rates
- Choice of manufacturing strategy is primary driver
- Make-to-plan (MTP)
- Requires substantial demand facing warehousing
- Make-to-order (MTO)
- Requires supply facing support, but little demand warehousing
- -Assemble-to-order (ATO) **Subway
- Requires some demand warehousing as product and components may be assembled to a degree using postponement principle
- Make-to-plan (MTP)
**Warehouse positioning justification is based on providing a service or cost advantage from their location
Service advantage
- Inventory storage to support customized orders
- On-time delivery
- Cost advantage
- Same service level at lowest cost
- Lowest total assembly cost
- Mixing facilities to support flow-through and cross-dock sorting
- *Key design questions to ask when developing a logistics network
How many and what kinds of warehouses should a firm establish? Where should they be located? What services should they provide? What inventories should they stock? Which customers should they service?
**Transport cost as a function of distribution locations
(figure)
optimize # of distribution locations with inbound and outbound shipments
- *Supply chain design criteria
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- Design to minimize landed cost
- Design to maximize asset utilization
- Design to maximize competitive positioning
- Design to minimize risk
- Design to maximize control
