Chapter 2

Question 1

The two major types of facilities are

Answer 1

➢production sites, and
➢distribution sites (warehouses, distribution centers, etc.).

Question 2

Facilities are a key driver of supply chain performance in terms of responsiveness and efficiency.

Answer 2

Companies can gain economies of scale when a product is manufactured or 5 stored in only one location: centralization increases efficiency.

Question 3

Decreasing the number of facilities

Answer 3

increases efficiency but decreases responsiveness, as many of a company’s customers may be located far from the production facility.

Question 4

Supply Chain Network Design Decisions

Answer 4

• Facility role: What role each facility will play? What processes are performed in each facility?
• Facility number: How many facilities should be opened?
• Facility location: Where should facilities be located?
• Capacity allocation: How much capacity should be allocated to each facility?
• Market and supply allocation: What markets should each facility serve? Which supply sources should feed each facility?

Question 5

The objective is to

Answer 5

design or reconfigure the logistics network so as to minimize system-wide costs

Question 6

Network design decisions are

Answer 6

strategic decisions that have a long-lasting effect on a supply chain’s performance.

Question 7

Facility Role:

Answer 7

• For production facilities, firms must decide whether they will be
  ➢process-focused (with flexible capacity),
  ➢product-focused (with dedicated capacity),
  ➢or a combination of the two.
• Flexible capacity can be used for many types of products but is often less efficient.
• Dedicated capacity can be used for only a single type of product or just a limited number of products but is more efficient.

Question 8

Facility Number and Facility Location:

Answer 8

• A basic trade-off here is
  ➢whether to centralize in order to gain economies of scale or
  ➢to decentralize to become more responsive by being closer to the
  customer.

Question 9

Capacity Allocation:

Answer 9

• A large amount of excess capacity allows the facility to be very flexible and to respond to large variations in the demands placed on it.
  ➢Excess capacity, however, costs money and therefore can
  decrease efficiency.
• A facility with little excess capacity will likely be more efficient per unit of product it produces than one with a lot of unused capacity.
  ➢The high-utilization facility, however, will have difficulty in
  responding to demand fluctuations.

Question 10

Logistics Costs

Answer 10

• inventory holding costs
• transportation costs
• facility costs

Question 11

As the number of facilities in a supply chain increases,

Answer 11

the inventory and resulting inventory holding costs also increase.