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1、Facility Decisions,Network Design in a Supply Chain,Outline,A strategic framework for facility location Multi-echelon networks Gravity methods for location Plant location models,Network Design Decisions,Facility role Facility location Capacity allocation Market and supply allocation,Factors Influenc

2、ing Network Design Decisions,Strategic Technological Macroeconomic Political Infrastructure Competitive Logistics and facility costs,The Cost-Response Time Frontier,Local FG,Mix,Regional FG,Local WIP,Central FG,Central WIP,Central Raw Material and Custom production,Custom production with raw materia

3、l at suppliers,Cost,Response Time,Hi,Low,Low,Hi,Service and Number of Facilities,Number of Facilities,Response Time,Customer,DC,Where inventory needs to be for a one week order response time - typical results - 1 DC,Customer,DC,Where inventory needs to be for a 5 day order response time - typical re

4、sults - 2 DCs,Customer,DC,Where inventory needs to be for a 3 day order response time - typical results - 5 DCs,Customer,DC,Where inventory needs to be for a next day order response time - typical results - 13 DCs,Customer,DC,Where inventory needs to be for a same day / next day order response time

5、- typical results - 26 DCs,Costs and Number of Facilities,Costs,Number of facilities,Percent Service Level Within Promised Time,Transportation,Cost Build-up as a function of facilities,A Framework for Global Site Location,PHASE I Supply Chain Strategy,PHASE II Regional Facility Configuration,PHASE I

6、II Desirable Sites,PHASE IV Location Choices,Competitive STRATEGY,INTERNAL CONSTRAINTS Capital, growth strategy, existing network,PRODUCTION TECHNOLOGIES Cost, Scale/Scope impact, support required, flexibility,COMPETITIVE ENVIRONMENT,PRODUCTION METHODS Skill needs, response time,FACTOR COSTS Labor,

7、materials, site specific,GLOBAL COMPETITION,TARIFFS AND TAX INCENTIVES,REGIONAL DEMAND Size, growth, homogeneity, local specifications,POLITICAL, EXCHANGE RATE AND DEMAND RISK,AVAILABLE INFRASTRUCTURE,LOGISTICS COSTS Transport, inventory, coordination,Tailored Network: Multi - Echelon Finished Goods

8、 Network,Store 1,Store 1,Store 2,Store 2,Store 3,Store 3,Gravity Methods for Location,Ton Mile-Center Solution x,y: Warehouse Coordinates xn, yn : Coordinates of delivery location n dn : Distance to delivery location n Fn : Annual tonnage to delivery location n,Min,Excel File,Network Optimization Mo

9、dels,Allocating demand to production facilities Locating facilities and allocating capacity,Which plants to establish? How to configure the network?,Key Costs: Fixed facility cost Transportation cost Production cost Inventory cost Coordination cost,Demand Allocation Model,Which market is served by w

10、hich plant? Which supply sources are used by a plant? xij = Quantity shipped from plant site i to customer j,Applichem Demand Allocation,Applichem,Applichem Demand Allocation (1982),Demand,30,32,26,11,Venezuela,220,Capacity,37,45,470,185,50,45,115,200,36,115,185,Annual Cost = $74,252,000,Plant Locat

11、ion with Multiple Sourcing,yi = 1 if plant is located at site i, 0 otherwise xij = Quantity shipped from plant site i to customer j,Applichem Production Network 1982 (with duties),Venezuela,Annual Cost = $72,916,400,Applichem Production Network 1982 (without duties),Mexico,Canada,Venezuela,Frankfurt

12、,Gary,Sunchem,Mexico,Canada,Latin America,Europe,U.S.A,Japan,Annual Cost = 66,328,100,1981 Network (Optimal),Mexico,Canada,Venezuela,Frankfurt,Gary,Sunchem,Mexico,Canada,Latin America,Europe,U.S.A,Japan,Annual Cost = $79,598,500,1981 Network (Sunchem Closed),Mexico,Canada,Venezuela,Frankfurt,Gary,Su

13、nchem,Mexico,Canada,Latin America,Europe,U.S.A,Japan,Annual Cost = $82,246,800,Cash Flows From Sunchem Plant,Value of Adding 0.1 Million Pounds Capacity (1982),Should be evaluated as an option and priced accordingly.,Evaluating Facility Investments: AM Tires,U.S. Demand = 100,000; Mexico demand = 50

14、,000 1US$ = 9 pesos,Demand goes up or down by 20 percent with probability 0.5 and exchange rate goes up or down by 25 per cent with probability 0.5.,AM Tires,AM Tires,Four possible capacity scenarios: Both dedicated Both flexible U.S. flexible, Mexico dedicated U.S. dedicated, Mexico flexible For ea

15、ch node solve the demand allocation model.,AM Tires: Demand Allocation for RU = 144; RM = 72, E = 14.06,100,000,44,000,6,000,Profit = $649,360,Facility Decision at AM Tires,Capacity Investment Strategies,Speculative Strategy Single sourcing Hedging Strategy Match revenue and cost exposure Flexible S

16、trategy Excess total capacity in multiple plants Flexible technologies,Summary,Factors influencing facility decisions A strategic framework for facility location Gravity methods for location Network optimization models Value capacity as a real option,Location Allocation Decisions,Plants,Warehouses,1

17、,2,Which plants to establish? Which warehouses to establish? How to configure the network?,Markets,Plant Location with Single Sourcing,yi = 1 if plant is located at site i, 0 otherwise xij = 1 if market j is supplied from plant site i, 0 otherwise,Conventional Network,Customer Store,Component Manufacturing,Final Assembly,Customer Store,Customer Store,Customer Store,Customer Store,Gravity Methods for Location,Ton-Center Solution x,y:

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