Week 4 Flashcards
Why is it important to manage the supply network?
Managing the supply network improves competitiveness, identifies key links, and helps focus on long-term strategic issues
How much can the grocery industry save by using effective logistics strategies?
$30 billion, which is 10% of operating costs
How long does a typical box of cereal spend getting from factory to supermarket?
104 days
How long does a new car typically take to travel from the factory to the dealership?
15 days
What are the key players in a jeans supply network?
Raw material suppliers (cotton, steel for zippers), fabric manufacturers, garment manufacturers, distributors, and retailers.
What are the main benefits of analyzing the whole supply chain?
Understanding competitiveness, identifying key links, and focusing on long-term improvements
Why is Levi’s more successful than Diesel?
They may have a stronger supply network, better production strategies, or superior distribution centers
What are the three strategic design decisions for a supply network?
1) How should the network be configured?
2) Where should each part of the network be located?
3) What physical capacity should each part have?
What are key factors in choosing business partners and suppliers?
Fewer key business partners, close proximity to end customers, strong relationships with competitors, and outsourcing considerations
How did Dell revolutionize its supply network?
1 computer maker
By cutting out the middleman and using direct selling methods, making them the
What is outsourcing in supply networks?
Hiring external companies to perform specific operations or processes
What factors determine whether an activity should be outsourced?
Is the activity strategically important?
Does the company have specialized knowledge?
Is the company’s operational performance superior?
Can performance be significantly improved by outsourcing?
What are the advantages of keeping activities in-house (make it)?
Better quality control, easier synchronization of schedules, and internal prioritization
What are the advantages of outsourcing (buy it)?
Cost reduction, access to supplier expertise, and increased flexibility
What are potential risks of outsourcing?
Communication barriers, quality concerns, transportation delays, and dependency on external suppliers
What are the key location decision factors?
Investment size, customer demand changes, supply chain changes
What are the supply-side factors affecting location decisions?
Labor costs, land costs, energy costs, transportation costs, community factors
What are the demand-side factors affecting location decisions?
Labor skills, site suitability, company image, customer convenience
What macroeconomic factors influence location decisions?
Political constraints, new market opportunities, technology developments, currency fluctuations
What microeconomic factors influence location decisions?
Infrastructure, supplier proximity, staff availability, government policies, business climate
What are common location decision methods?
Qualitative Methods: SWOT analysis, Factor Rating Method.
Quantitative Methods: Optimization, heuristics, simulations
Hybrid Methods: Combination of qualitative and quantitative.
How does SWOT analysis help in location decisions?
It evaluates strengths, weaknesses, opportunities, and threats of a location to determine suitability
What are the steps of the Factor Rating Method for location decisions?
Identify key location factors.
Assign total score points.
Allocate min/max points to each factor.
Score each location factor.
Calculate average scores.
Repeat for all factors.
Sum up location scores.
Choose the highest-scoring location
What are the steps of the Factor-Rating Method?
1) Develop a list of relevant location factors.
✅ 2) Assign a weight to each factor.
✅ 3) Develop a scale for each factor.
✅ 4) Score each location for each factor.
✅ 5) Multiply scores by weights for each factor for each location.
✅ 6) Calculate sums for scores for each location.
✅ 7) Recommend the location with the highest point score.
ow does the Weighted Factor-Rating Method differ from the regular Factor-Rating Method?
The weighted method assigns different levels of importance to each factor, making it more precise in decision-making.
What is the key assumption of the Weighted Factor-Rating Method?
That some factors are more critical than others and should carry more weight in the decision process.
What kind of scales can be used for the Weighted Factor-Rating Method?
Scales can range from 1 to 100, 1 to 10, or even 0 (if a location does not meet a criterion at all).
What is the Centre of Gravity Method used for?
To determine the optimal location that minimizes transportation costs by considering the weighted coordinates of suppliers and customers.
What assumptions does the Centre of Gravity Method make?
The company knows important existing locations and their coordinates.
The company knows how much product needs to be shipped to and from each location.
Why is the Centre of Gravity Method beneficial?
It minimizes transport costs and optimizes distribution efficiency
What does the Hybrid Model combine in location analysis?
It integrates qualitative, quantitative, and critical factors to provide a more comprehensive location decision
What are critical factors in the Hybrid Model?
Factors that determine whether a location is immediately eliminated or considered further (e.g., availability of water for a beverage factory).
What are the advantages of qualitative location methods?
Simple and easy to use.
Can incorporate expert judgment and experience.
Useful when numerical data is limited.
What are the disadvantages of qualitative location methods?
Subjective and prone to bias.
Lacks mathematical precision.
Hard to compare multiple locations objectively.
What are the advantages of quantitative location methods?
Objective and data-driven.
Can handle complex calculations.
Provides precise recommendations.
What are the disadvantages of quantitative location methods?
Requires accurate numerical data.
Can be computationally intensive.
May overlook qualitative factors like culture or politics.
What are the advantages of the Hybrid Model?
Combines both qualitative and quantitative approaches.
Accounts for both subjective and objective factors.
Considers critical factors to eliminate unsuitable locations early.
What are the disadvantages of the Hybrid Model?
More complex than individual methods.
Requires extensive data collection.
Needs careful weighting of factors for accuracy.
What are the advantages of quantitative location models?
Objective and data-driven – reduces bias in decision-making.
Mathematically precise – allows for accurate location comparisons.
Handles large amounts of data efficiently.
Helps minimize costs and optimize performance.
Can be used for complex decision-making scenarios.
Provides a structured, repeatable process.
Useful for large-scale logistics and supply chain decisions.
Integrates well with software and optimization tools.
Enables forecasting and scenario planning.
Can be automated for real-time decision-making.
What are the disadvantages of quantitative location models?
Requires extensive data collection – accurate input data is critical.
Computationally intensive – may require specialized software.
May not account for qualitative factors like culture, politics, or brand reputation.
Assumptions may not always reflect real-world conditions.
Data inaccuracies can lead to incorrect results.
Not always flexible for dynamic market conditions.
Difficult to use for small businesses with limited resources.
Can be costly to implement and maintain.
Some models lack adaptability to sudden business changes.
May require expert interpretation to make the right decision.
What are the advantages of hybrid location models?
Combines both qualitative and quantitative approaches.
Balances subjective and objective decision factors.
Accounts for both financial and non-financial elements.
Eliminates unsuitable locations early using critical factors.
More adaptable to real-world complexities.
Provides a comprehensive decision-making framework.
Useful for industries with both logistical and customer-service priorities.
Helps identify risks that purely quantitative models might miss.
Allows for expert judgment alongside data-driven insights.
Can improve decision accuracy by considering multiple perspectives.
What are the disadvantages of hybrid location models?
More complex than individual models.
Requires more data collection and analysis.
Needs careful weighting of factors for accuracy.
May take longer to implement compared to simple models.
Finding the right balance between qualitative and quantitative factors can be difficult.
Heavily reliant on the quality of expert judgment.
Potential for subjectivity in assigning weights to different factors.
Can be expensive due to multiple analysis layers.
May require specialized software for implementation.
Not always suitable for time-sensitive decision-making.
