Chapter 5 Flashcards
Supply Chain network decisions include
the assignment of facility role;
location of manufacturing-, storage-, or transportation-related facilities;
and the allocation of capacity and markets to each facility
Facility role
what role should each facility play?
what processes are performed at each facility?
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 service?
which supply sources should feed each facility?
network design decisions have a significant impact on performance because
they determine the supply chain configuration and set constraints within which the other supply chain drivers can be used either to decrease supply chain cost or to increase responsiveness.
Facility location decisions have a long-term impact on a supply chains performance because
it is expensive to shut down a facility or move it to a different location. A good location decision can help a supply chain be responsive while keeping its costs low.
Capacity allocation can be altered more easily than location, but
capacity decisions do tend to stay in place for several years.
Allocating too much capacity to a location results in
poor utilization and as a result, higher costs.
Allocating too little capacity results in
poor responsiveness if demand is not satisfied or high cost if demand is filled from a distant facility.
Allocation of supply sources and markets to facilities has a significant impact on performance because
it affects total production, inventory, and transportation costs incurred by the supply chain to satisfy customer demand.
this decision should be reconsidered on a regular basis so the allocation can be changed as production and transportation costs, market conditions, or plant capacities change.
A fundamental decision firms must make is
whether to locate their facilities close to or far from competitors.
The form of competition and factors such as raw material or labor availability influence this decision.
Positive externalities occur when
the collocation of multiple firms benefits all of them.
Positive externalities leads to competitors locating close to each other.
Positive externalities example
Retail stores tend to locate close to each other because doing so increases overall demand, thus benefiting all parties. By locating together in a mall, competing retail stores make it more convenient for customers, who need drive to only one location, to find everything they are looking for. This increases the total number of customers who visit the mall, increasing demand for all stores located there.
What impact does competition have on attempting to minimize average customer travel distance?
The result of competition is for both firms to locate close together, even though doing so increases the average distance to the customer.
Objective of Phase I:
Define a Supply Chain Strategy/Design
define a firm’s broad supply chain design. This includes determining the stages in the supply chain and whether each supply chain function will be performed in-house or outsourced.
Objective of Phase I:
Define a Supply Chain Strategy/Design
define a firm’s broad supply chain design. This includes determining the stages in the supply chain and whether each supply chain function will be performed in-house or outsourced.
Phase I starts with a clear definition of the firm’s competitive strategy as the set of customer needs that the supply chain aims to satisfy.
The supply chain strategy then specifies what capabilities the supply chain network must have to support the competitive strategy.
Phase I:
Define a Supply Chain Strategy/Design
- Clearly defined competitive strategy
- forecast likely evolution of global competition
- identify constraints
- determine growth strategy
Objective of Phase II:
Define the Regional Facility Configuration
identify regions where facilities will be located, their potential roles, and their approximate capacity.
Phase II:
Define the Regional Facility Configuration
- Forecast demand by country or region;
- Economies of scale or scope
- Identify demand risk, exchange-rate risk, political risk, tariffs, etc.
- Identify competitors
Objective of Phase III:
Select a Set of Desirable Potential Sites
select a set of desirable potential sites within each region where facilities are to be located.
Phase III:
Select a Set of Desirable Potential Sites
Sites should be selected based on an analysis of infrastructure availability to support the desired production methodologies.
–Hard and soft infrastructure requirements
Hard Infrastructure Requirements
include the availability of suppliers, transportation services, communication, utilities, and warehousing facilities.
Soft Infrastructure requirements
include the availability of a skilled workforce, workforce turnover, and the community receptivity to business and industry.
Objective of Phase IV: Location Choices
select, from among the potential sites, a precise location and capability allocation for each facility.
A managers goal when locating facilities and allocating capacity should be to
maximize the overall profitability of the resulting supply chain network while providing customers with the appropriate responsiveness.
-A manager must consider many trade-offs during network design
Managers use network design models in two situations.
- decide on locations and capacities
2. assign current demand to facilities.
