Week 3: Network planning and Facility location Flashcards
What are the three main issues of network planning?
- Pick the optimal number, location, and size of plants and/or warehouses
- Determine optimal sourcing strategy (which plant/vendor should produce which product)
- Determine best distribution channels (warehouse – customer relation)
What are the three steps of network planning?
- Network design
- Inventory positioning
- Resource allocation
What are the main elements of network design?
- Assign product assortment to plant
- Facility and distribution planning
- Planning horizon: long (few years)
What are the main considerations of resource allocation in network planning?
- Is production / packaging of products done at the right facility
- What should be the plants sourcing strategies?
- How much capacity for each plant to meet seasonal demand?
Name the key strategic decisions in network planning?
- Assortment per facility
- Appropriate number of facilities
- Location of each facility
What are the key tactical decisions in network planning?
- Size of each facility
- Production/storage technology
- Sourcing requirements
- Distribution strategies, i.e. allocation of customers to warehouse
What is the objectve of network planning?
design the logistics network in order to minimize annual system-wide cost subject to service requirements.
What are the trade-offs between minimizing costs and service requirements?
- Production / purchasing costs
- Inventory carrying costs
- Facility costs (handling and fixed costs)
- Transportation costs
What are the key elements of inventory positioning?
- Identify stocking points
- Facilities that will produce to stock
- Facilities that will produce to order - Consider a two-tier supply chain
- Items shipped from manufacturing to primary warehouses
- Shipped to secondary warehouses and finally retail outlets - Optimally positioning inventory in the chain
- SKU positioned at both primary and secondary warehouses
- SKU positioned at either primary or secondary warehouses
When should products be stored close to supplier or close to customer?
Products with low volume and high demand volatility Store close to supplier (centrally – primary warehouses)
Products with high volume and low demand volatility Store close to customer (locally – secondary warehouses)
What are the six teps of the factor-rating method?
- Develop list of relevant factors
- Assign weight to each factor
- Develop rating scale for each
- Score each location on rating scale
- Multiply score by weight for each factor
- Recommend location with highest point score
What are the two criteria of the median location method?
- Sum of weights of x-coordinates less than x* is less than half the total sum of weights AND
- Adding weight of x* to previous sum results in value greater than/equal to half the total sum of weights
What is the northwest corner rule as a transportation model?
- Exhaust supply of each row before moving down to next
- Exhaust requirement of each value before moving to next column on the right
- Cross out that row/column that is exhausted
- Check to insure all supplies and demand are met
