Week 4 Flashcards
What is a Supply Network?
A supply network, also known as a supply chain, consists of all companies involved in fulfilling a customer request.
Supply Network Components:
Manufacturers, suppliers, transporters, warehouses, retailers, and customers
Supply Network Functions within a company:
Product development, marketing, operations, distribution, finance, and customer service.
Why is it Important to Manage the Supply Network?
Statistics:
The grocery industry could save $30 billion by using effective logistics strategies.
A typical box of cereal takes 104 days from factory to supermarket.
Compaq lost up to $1 billion due to poor supply chain management.
Key Point: Managing the supply network helps in optimizing cost and improving efficiency.
Supply Network for Jeans
Components:
Cotton production
Steel production (for zippers/buttons)
Fabric manufacturing
Garment manufacturing
Distribution centers
Retail stores
Parcel delivery
Different Sales Channels: Traditional selling vs. Online selling.
Benefits of Looking at the Whole Supply Chain
Helps to understand competitiveness.
Helps identify significant links in the network.
Helps focus on long-term issues.
Strategic Design Decisions
Network Configuration: How should the network be structured?
Location Decisions: Where should each part of the network be located?
Capacity Management: What physical capacity should each part of the network have?
Why Consider the Whole Supply Network?
Key Decisions:
Business partner choices (who to partner with).
Location of partners (e.g., supplier location).
Closeness to the end customer (e.g., direct selling vs. intermediaries).
Outsourcing in Supply Networks
Outsourcing Decision:
Should activities be outsourced or kept in-house?
Considerations include whether the company has specialized knowledge, the importance of the activity, and whether significant performance improvements can be achieved.
Outsourcing and Performance Objectives
In-house:
Benefits: Better quality control, easier communication, more flexibility.
Drawbacks: Risk of complacency, higher costs for low volume.
Outsourcing:
Benefits: Cost reductions, expertise from suppliers.
Drawbacks: Communication issues, external prioritization.
Key Idea - Configuring the Supply Network
Network Configuration: Choosing business partners, locations, closeness to customers.
Outsourcing: Deciding how much to outsource and which activities should remain in-house.
Location Decisions in Supply Networks
Factors Influencing Location:
Investment size.
Changes in customer demand.
Availability of labor and suppliers.
Transportation and infrastructure.
Site Selection: Deciding on the region, country, or city for the operations.
Supply-Side and Demand-Side Factors in Location Decisions
Supply-Side: Labor costs, land costs, energy costs, transportation costs.
Demand-Side: Labor skills, customer convenience, image, and proximity to customers.
Factors Affecting Location Decisions
Macro Factors: Economic conditions, political constraints, market access, currency fluctuations.
Micro Factors: Infrastructure, proximity to suppliers, availability of staff, cost considerations.
Qualitative Methods for Location Decisions
SWOT Analysis:
Strengths: Internal advantages like location or reputation.
Weaknesses: Limitations such as competition or space constraints.
Opportunities: External opportunities like tourism or collaborations.
Threats: Risks like economic downturns or regulatory changes.
Example of SWOT Analysis - QFT in Belfast
Strengths: Prime location, cultural significance, accessibility, and funding.
Weaknesses: Limited parking and space constraints.
Opportunities: Growth in tourism, collaboration with educational organizations.
Threats: Competition from streaming services and other entertainment options.
Factor-Rating Method
Purpose: Used for selecting a location by evaluating a set of factors.
Steps:
List relevant factors that affect the decision (e.g., cost, transportation, labor, government incentives).
Assign a weight to each factor based on its importance.
Rate each potential location on each factor (e.g., 1-5 scale).
Multiply the rating for each factor by its weight.
Sum the weighted ratings for each location to determine the best location.
Example:
Factors: Cost, Transportation, Infrastructure.
Assign weights based on priority, rate each location, and calculate the total scores.
Weighted Factor-Rating Method
Purpose: Refines the Factor-Rating Method by incorporating more detailed quantitative analysis.
Steps:
Similar to the Factor-Rating Method but with a focus on applying specific numerical weights to factors.
This allows for a more nuanced decision that can better reflect the relative importance of each factor.
Key Difference: Weights for factors are carefully assigned to reflect how much impact each factor has on the final decision.
Centre of Gravity Method
Purpose: Finds the optimal location for a facility (like a warehouse or store) based on minimizing transportation costs.
Steps:
Plot all potential locations on a map.
Assign weights to each location based on factors like demand or shipment volume.
Calculate the geometric center (or “centre of gravity”) by finding the weighted average of the coordinates.
This point minimizes the overall distance (and transportation costs) from each location to the market or other relevant points.
The Formula are the coordinates of each point.
Example: If you’re deciding where to place a distribution center, you plot all possible locations and use demand weights to find the center of gravity that minimizes transportation costs.
Hybrid Location Model
Purpose: A combination of multiple decision-making techniques for more comprehensive decision-making.
Considerations:
Objective factors: These could include costs, infrastructure, and proximity.
Subjective factors: These include community support, labor availability, and the business environment.
Application: Useful when decision-making requires balancing both qualitative and quantitative factors.
Example: Combining the Factor-Rating Method with qualitative assessments like ease of doing business or local government support.
