case ― 麥當勞

1Network Planning

Case ― 麥當勞物料取得之問題

本地供應商產品及進口物料的整合→品質檢驗→儲貨 ( 乾貨、冷藏品及冷凍品 ) → 訂單管理→載運送貨…

運作方式桃園南崁及彰化大城各設一配銷中心，處理金

流、物流及資訊流桃園南崁→苗栗以北、花蓮彰化大城→苗栗以南、台中到墾丁

2Network Planning

物流網路問題 1

網路設計該蒐集哪些資料？

市場需求的分佈情況產品特性應該有多少廠房、倉庫區位的規劃運輸模式服務水準

如何設計規劃？

3Network Planning

物流網路問題 2

存貨定位儲存點 vs. 製造商直送各儲存點之存貨政策為何？

資源配置不同產品的製造和包裝之設施來源策略為何？每一設施之產能規劃案例

國＊汽車中壢廠產能不足的因應策略…

4Network Planning

Why Network Planning?Find the right balance between

inventory, transportation and manufacturing costs,

Match supply and demand under uncertainty by positioning and managing inventory effectively,

Utilize resources effectively by sourcing products from the most appropriate manufacturing facility

5Network Planning

Three Hierarchical Steps1

1 、 Network design (3.2)Number, locations and size of

manufacturing plants and warehousesAssignment of retail outlets to warehousesMajor sourcing decisions Typical planning horizon is a few years.

6Network Planning

Three Hierarchical Steps2

2 、 Inventory positioning (3.3) Identifying stocking points Ex.

Selecting facilities that will produce to stock and thus keep inventory

Facilities that will produce to order and hence keep no inventory

Related to the inventory management strategies (chapter 2)

7Network Planning

Three Hierarchical Steps3

3 、 Resource allocation (3.4) Determine whether production and

packaging of different products is done at the right facility

What should be the plants sourcing strategies?

How much capacity each plant should have to meet seasonal demand?

8Network Planning

問題討論泡麵 vs. 三明治第三方物流 vs. 顧客直送

9Network Planning

3.2 Network Design

Physical configuration and infrastructure of the supply chain.

A strategic decision with long-lasting effects on the firm.

Decisions relating to plant and warehouse location as well as distribution and sourcing

10Network Planning

案例討論＊＊龍擴充產品線組合

文具皮件鐘錶女性珠寶問題：

鐘壞了零件需自香港調貨，請等候一個月！文具與女性珠寶的顧客群是否相同？是否應設

置不同屬性之門市？

11Network Planning

Reevaluation of InfrastructureChanges in:

demand patternsproduct mixproduction processessourcing strategies cost of running facilities.

Mergers and acquisitions may mandate the integration of different logistics networks

12Network Planning

Key Strategic Decisions Determining the appropriate number of

facilities such as plants and warehouses. Determining the location of each facility. Determining the size of each facility. Allocating space for products in each facility. Determining sourcing requirements.

Which plant/vendor should produce which product

Determining distribution strategies Which warehouses should service which

customers

13Network Planning

Network Design: ObjectiveThe objective of designing logistics

network: minimize annual system-wide costsProduction/ purchasing costs

Inventory carrying costs

Facility costs (handling and fixed costs)

Transportation costs

Subject to a variety of service level requirements.

14Network Planning

問題討論花蓮地區的麥當勞由桃園南崁或彰化大城

之配銷中心負責配送？※ 陽 vs. ※ 瑞的供應商策略…

15Network Planning

The Impact of Increasing the Number of Warehouses

Improve service level due to reduction of average service time to customers

Increase inventory costs due to a larger safety stock

Increase overhead and set-up costs

Reduce transportation costs in a certain range

Reduce outbound transportation costs

Increase inbound transportation costs

16Network Planning

Industry Benchmarks:Number of Distribution Centers

Sources: CLM 1999, Herbert W. Davis & Co; LogicTools

Avg.# ofWH 3 14 25

Pharmaceuticals Food Companies Chemicals

- High margin product- Service not important (or easy to ship express)- Inventory expensiverelative to transportation

- Low margin product- Service very important- Outbound transportationexpensive relative to inbound

17Network Planning

A Typical Location Model

There may be an upper bound on the distance between a distribution center and a market area served by it

A set of potential location sites for the new facilities was identified

Costs: Set-up costs Transportation cost is proportional to the

distance Storage and handling costs Production/supply costs

18Network Planning

Network Design Tools:Major Components

Mapping Mapping allows you to visualize your supply chain and

solutions Mapping the solutions allows you to better understand

different scenarios Color coding, sizing, and utilization indicators allow for

further analysis Data

Data specifies the costs of your supply chain The baseline cost data should match your accounting data The output data allows you to quantify changes to the

supply chain Engine

Optimization Techniques

19Network Planning

Mapping Allows You to Visualize Your Supply Chain

20Network Planning

Displaying the Solutions Allows you To Compare Scenarios

21Network Planning

Data Collection1

Locations of customers, retailers, existing warehouses and distribution centers, manufacturing facilities, and suppliers.

All products, including volumes, and special transport modes (e.g., refrigerated).

Annual demand for each product by customer location.

Transportation rates by mode.

22Network Planning

Data Collection2

Warehousing costs, including labor, inventory carrying charges, and fixed operating costs.

Shipment sizes and frequencies for customer delivery.

Order processing costs.Customer service requirements and

goals.Production and sourcing costs and

capacities

23Network Planning

Steps of data collection

Data aggregationTransportation ratesMileage estimationWarehouse costsWarehouse capacitiesPotential warehouse locationsService level requirementsFuture demand

24Network Planning

Data aggregation

Aggregating Customers問題

2005 年，麥當勞於台灣有 355 家分店…2009 年 3 月， 7-11 於台灣有 4816 家店…

Product grouping問題： Sun Rise vs. 智利紅酒 vs. 紅酒 vs.

酒類…

25Network Planning

Aggregating Customers1

Customers located in close proximity are aggregated using a grid network or clustering techniques. All customers within a single cell or a single cluster are replaced by a single customer located at the centroid of the cell or cluster.

Five-digit or three-digit zip code based clustering.

26Network Planning

Aggregating Customers2

We refer to a cell or a cluster as a customer zone.

If customers are classified according to their service levels or frequency of delivery, they will be aggregated together by classes.例如，家樂福 vs. 7-11

27Network Planning

A Strategy for Product Aggregation Distribution pattern

All products picked up at the same source and destined to the same customers are aggregated together.

Within each of the source-groups, aggregate the SKU’s (stock keeping unit) by similar logistics characteristics

Weight Volume Holding Cost

Product type Variations in product models and style Same products are packaged in many sizes These products are typically aggregated together.

28Network Planning

案例 科學麵、肉燥麵… 罐裝啤酒、一手、一箱…

29Network Planning

Replacing Original Detailed Data with Aggregated Data

Technology exists to solve the logistics network design problem with the original data― 例如 POS 系統…

HoweverData aggregation still useful because

forecast demand is significantly more accurate at the aggregated level

Aggregating customers into about 150-200 zones usually results in no more than a 1% error in the estimation of total transportation costs

30Network Planning

General Rules for Aggregation Aggregate demand points into at least 200

zones Holds for cases where customers are classified

into classes according to their service levels or frequency of delivery

Make sure each zone has approximately an equal amount of total demand Zones may be of different geographic sizes.

Place aggregated points at the center of the zone

Aggregate products into 20 to 50 product groups

31Network Planning

問題這個月 17 吋鋁圈車款 250 部、開天窗車款

120 部、紅色車款 250 部… vs. 這個月轎車需求 3000 部…

32Network Planning

顧客需求量歷史資料

年 1992 1993 1994 1995 1996 1997 1998 顧客 1 22,346 28,549 19,567 25,457 31,986 21,897 19,854 顧客 2 17,835 21,765 19,875 24,346 22,876 14,653 24,987 加總 40,181 50,314 39,442 49,803 54,862 36,550 44,841

Example1

33Network Planning

 顧客需求量歷史資料彙總

平均年需求量 年需求標準差 變異係數 (δ/μ) 顧客 1 24,237 4,658 0.192

顧客 2 20,905 3,427 0.173

加總 45,142 6,757 0.150

Example2

彙整後的變異較個別變異之加總來得小

34Network Planning

Customer Aggregation Based on 3-Digit Zip Codes

Total Cost:$5,796,000Total Customers: 18,000

Total Cost:$5,793,000Total Customers: 800

Cost Difference < 0.05%

35Network Planning

Product Aggregation

Total Cost:$104,564,000Total Products: 46

Total Cost:$104,599,000Total Products: 4

Cost Difference: 0.03%

36Network Planning

Transportation Rates

An important characteristic of a class of rates for truck, rail, UPS and other trucking companies is that the rates are quite linear with the distance but not with volume 例如，一個人搭 Taxi 到機楊與 4 個人搭 Taxi

到機場的價錢一樣…Differences between internal rate and

external rate

37Network Planning

Internal Transportation Rate

For company-owned trucks Data Required:

Annual costs per truckAnnual mileage per truckAnnual amount deliveredTruck’s effective capacity

Calculate cost per mile per SKU.

38Network Planning

External Transportation RateTwo Modes of Transportation1

Truckload, TL(整車貨件 ) Country sub-divided into zones. One

zone/state except for: Big states, such as Florida or New York (two

zones) Zone-to-zone costs provides cost per mile

per truckload between any two zones.

TL cost from Chicago to Boston = Illinois-Massachusetts cost per mile X Chicago-Boston distance

TL cost structure is not symmetric 例如，上山 vs. 下山；逆風 vs. 順風…

39Network Planning

Less-Than-Truckload, LTL(零擔貨件 )指託運的貨物裝不滿一個運貨卡車或是託運貨

品的重量未達到一般運貨卡車業所指一車的滿載量。如達滿載量，通常會給貨主一個折扣價。LTL 運輸費率有三種：等級 (class) 、例外

(exception)及大宗貨品 (commodity)

External Transportation RateTwo Modes of Transportation2

40Network Planning

Less-Than-Truckload, LTL(零擔貨件 )Class rates1

standard rates for almost all products or commodities shipped.

Classification tariff ( 分類價格表 ) system that gives each shipment a rating or a class.

Factors involved in determining a product’s specific class include:

product density, ease or difficulty of handling and transporting, and liability for damage.

External Transportation RateTwo Modes of Transportation3

41Network Planning

Less-Than-Truckload, LTL(零擔貨件 )Class rates2

After establishing rating, identify rate basis number (評等基礎數目 ).

Approximate distance between the load’s origin and destination.

With the two(Classification tariff 、 rate basis number), determine the specific rate per hundred pounds (hundred weight, or cwt) from a carrier tariff table (i.e., a freight rate table).

External Transportation RateTwo Modes of Transportation4

42Network Planning

Less-Than-Truckload, LTL(零擔貨件 )Exception rates provides less

expensive ratesCommodity rates are specialized

commodity-specific rates

External Transportation RateTwo Modes of Transportation5

43Network Planning

Mileage Estimation

Street NetworkStraight line distances

44Network Planning

Straight-line Distances Estimation1

lona: longitude of point a

lata: latitude of point a

Dab: straight-line distance in miles from a to b

(lona, lata)

(lonb, latb)

Dab

45Network Planning

Straight-line Distances Estimation2

2 269 ( ) ( ) ab a b a bD lon lon lat lat

Short distances (does not take into account the curvature of the earth)

美國地區美國地區 11 個經緯度之大約英哩數：個經緯度之大約英哩數： 6969

46Network Planning

Straight-line Distances Estimation2

1 2 22(69)sin (sin( )) cos( ) cos( ) (sin( ))2 2

a b a b

ab a b

lat lat lon lonD lat lat

Long distances (correct for the earth’s curvature)

47Network Planning

Circuity Factor(迂迴係數 ), ρ

Equations underestimate the actual road distance.

Multiply Dab by ρ. Typical values:

ρ = 1.3 in metropolitan areasρ = 1.14 for the continental United States

48Network Planning

Chicago-Boston Distance lonChicago = -87.65 latChicago = 41.85 lonBoston = -71.06 latBoston = 42.36 DChicago, Boston = 855 miles Multiply by circuity factor = 1.14 Estimated road distance = 974 miles Actual road distance = 965 miles

GIS systems provide more accuracy However,slows down the systems

Above approximation good enough!

49Network Planning

Warehouse Costs Handling costs

Labor and utility costs Proportional to annual flow through the

warehouse. Fixed costs

All cost components not proportional to the amount of flow

Typically proportional to warehouse size (capacity) but in a nonlinear way.

Storage costs Inventory holding costs Proportional to average positive inventory levels.

50Network Planning

Determining Storage Costs

Multiply average inventory level by holding cost = annual storage costs

Inventory turnover ratio=Annual sales

Average inventory level

51Network Planning

Warehouse Capacity Average inventory level =

Annual flow through warehouse/Inventory turnover ratio

Space requirement for item = 2*Average Inventory Level

Multiply by factor to account for access and handling aisles, picking, sorting and processing facilities AGVs(automatic guided vehicles)

Typical factor value = 3

52Network Planning

Warehouse Capacity ExampleAnnual flow = 1,000 units Inventory turnover ratio = 10.0Average inventory level = 100 units Assume each unit takes 10 sqft. of

space Required space for products = 2,000

sqft. (1002 10)Total space required for the warehouse

is about 6,000 square feet (2000 3)

53Network Planning

Potential warehouse Locations

Geographical and infrastructure conditions.例如，工業區

Natural resources and labor availability.Local industry and tax regulations.Public interest.

54Network Planning

Service Level RequirementsSpecify a maximum distance between

each customer and the warehouse serving it

Proportion of customers whose distance to their assigned warehouse is no more than a given distance 95% of customers be situated within 200

miles of the warehouses serving them Appropriate for rural or isolated areas (it is

harder to provide the same level of service, 例如，花蓮 ...)

55Network Planning

Future Demand

Strategic decisions have to be valid for 3-5 years

Consider scenario approach and net present values to factor in expected future demand over planning horizon

56Network Planning

Model and Data Validation1

Reconstruct the existing network configuration using the model and collected data

Compare the output of the model to existing data

Compare to the company’s accounting informationOften the best way to identify errors in the

data, problematic assumptions, modeling flaws.

57Network Planning

Model and Data Validation2

Make local or small changes in the network configuration to see how the system estimates impact on costs and service levels. Positing a variety of what-if questions.

通常管理者對系統中小的改變所造成的影響較能精準掌握，而對整個系統大幅度再設計後所產生的結果較無法確認。

58Network Planning

Model and Data Validation3

Answer the following questions:Does the model make sense?Are the data consistent?Can the model results be fully explained?Did you perform sensitivity analysis?

59Network Planning

Solution Techniques

Mathematical optimization techniques:

1. Exact algorithms: find optimal solutions

2. Heuristics: find “good” solutions, not necessarily optimal

Simulation models: provide a mechanism to evaluate specified design alternatives created by the designer.

60Network Planning

Heuristics and the Need for Exact Algorithms1

Single product Two plants p1 and p2

Plant p1 has an annual capacity of 200,000 units. Plant p2 has an annual capacity of 60,000 units.

The two plants have the same production costs. There are two warehouses w1 and w2 with

identical warehouse handling costs. There are three markets areas c1,c2 and c3 with

demands of 50,000, 100,000 and 50,000, respectively.

ExampleExample

61Network Planning

Heuristics and the Need for Exact Algorithms2

ExampleExample

Facility

Warehouse p1 p2 c1 c2 c3

W10 4 3 4 5

w2 5 2 2 1 2

Distribution costs per unit

62Network Planning

Why Optimization Matters?

D = 50,000

D = 100,000

D = 50,000

Cap = 60,000

Cap = 200,000

$4

$5

$2

$3

$4

$5

$2

$1

$2

Production costs are the same, warehousing costs are the same

$0

ExampleExample

63Network Planning

Traditional Approach #1:Assign each market to closet WH. Then assign

each plant based on cost.

D = 50,000

D = 100,000

D = 50,000

Cap = 60,000

Cap = 200,000

$5 x 140,000

$2 x 60,000

$2 x 50,000

$1 x 100,000

$2 x 50,000

Total Costs = $1,120,000

ExampleExample

64Network Planning

Traditional Approach #2:Assign each market based on total landed cost1

D = 50,000

D = 100,000

D = 50,000

Cap = 60,000

Cap = 200,000

$4

$5

$2

$3

$4

$5

$2

$1

$2

$0

P1 to WH1 $3P1 to WH2 $7P2 to WH1 $7P2 to WH 2 $4

P1 to WH1 $4P1 to WH2 $6P2 to WH1 $8P2 to WH 2 $3

P1 to WH1 $5P1 to WH2 $7P2 to WH1 $9P2 to WH 2 $4

ExampleExample

65Network Planning

Traditional Approach #2:Assign each market based on total landed cost2

D = 50,000

D = 100,000

D = 50,000

Cap = 60,000

Cap = 200,000

$4

$5

$2

$3

$4

$5

$2

$1

$2

$0

P1 to WH1 $3P1 to WH2 $7P2 to WH1 $7P2 to WH 2 $4

P1 to WH1 $4P1 to WH2 $6P2 to WH1 $8P2 to WH 2 $3

P1 to WH1 $5P1 to WH2 $7P2 to WH1 $9P2 to WH 2 $4Market #1 is served by WH1, Markets 2 and 3

are served by WH2

ExampleExample

66Network Planning

Traditional Approach #2:Assign each market based on total landed cost3

D = 50,000

D = 100,000

D = 50,000

Cap = 60,000

Cap = 200,000

$5 x 90,000

$2 x 60,000

$3 x 50,000

$1 x 100,000

$2 x 50,000

$0 x 50,000

P1 to WH1 $3P1 to WH2 $7P2 to WH1 $7P2 to WH 2 $4

P1 to WH1 $4P1 to WH2 $6P2 to WH1 $8P2 to WH 2 $3

P1 to WH1 $5P1 to WH2 $7P2 to WH1 $9P2 to WH 2 $4

Total Cost = $920,000

ExampleExample

67Network Planning

Linear programming model1

pwijwmjk

Let:x the flow from plant i to warehouse jx the flow from warehouse j to market k

ExampleExample

68Network Planning

Linear programming model2

pw pw pw pw wm wm1,1 1,2 2,1 2,2 1,1 1,2

wm wm wm wm1,3 2,1 2,2 2,3

pw pw2,1 2,2pw pw wm wm wm1,1 2,1 1,1 1,2 1,3pw pw wm wm wm1,2 2,2 2,1 2,2 2,3wm wm1,1 2,1

min: 0x 5x 4x 2x 3x 4x 5x 2x x 2xs.t.x x 60,000x x x x xx x x x xx x 50,0

wm wm1,2 2,2wm wm1,3 2,2

00x x 100,000x x 50,000All flows non-negative

ExampleExample

工廠 2之產能限制

倉庫之輸入與輸出均等限制

倉庫輸出滿足市場需求之限制

69Network Planning

The Optimal Strategy ExampleExample

Facility

Warehouse p1 p2 c1 c2 c3

W1140000 0 50000 40000 50000

w2 0 60000 0 60000 0

Optimal distribution strategy

70Network Planning

Simulation Models1

Useful for a given design and a micro-level analysis. Examine:Individual ordering pattern.Specific inventory policies.Inventory movements inside the

warehouse.Not an optimization modelCan only consider very few alternate

models

71Network Planning

Simulation Models2

Limitation of mathematical optimization

techniques: They deal with static models

以模擬模式為基礎的工具可考慮動態系統且能表達出給定設計系統的系統績效。

72Network Planning

Simulation Models3

模擬模式只能模擬預定的物流網路系統。換言之，當提供某一結構的倉庫、零售商…等資料，模擬模式可估計出運作這個結構的成本。如果考慮變換結構（例如：有幾個顧客要改換其他倉庫提供服務），則要重新運作此模式。

一個詳細的模擬模式（納入每個客戶的訂單、特殊存貨、生產政策、每日配銷策略…等），可能需要非常多計算時間來讓系統執行到某一精確度。

73Network Planning

如果動態不是主要關鍵，用靜態模式較為適當，且可應用數學最佳化方法。實務上的網路結構大多使用這類型模式。

如果動態是主要關鍵，可利用二階段方法(Hax and Candea) ：1.用最佳化模式找出幾個最低成本的解，以宏觀

的層面，考慮最重要的成本組成元素。2.用模擬模式評估前面求得的解。

Simulation Models4

74Network Planning

DSS for Network Design1

Flexibility to incorporate a large set of preexisting network characteristics

Other Factors:Customer-specific service level

requirements.Existing warehouses kept openExpansion of existing warehouses.Specific flow patterns maintained Warehouse-to-warehouse flow possibleProduction and Bill of Materials (BOM)

details may be important

75Network Planning

DSS for Network Design2

Robustness Relative quality of the solution

independent of specific environment, data variability or specific settings

例如，規劃在越南建廠的流程模型，亦適用於泰國建廠之專案…

System running time be reasonable

76Network Planning

3.3 Inventory Positioning and Logistics Coordination

Multi-facility supply chain that belongs to a single firm

Manage inventory so as to reduce system wide cost

Consider the interaction of the various facilities and the impact of this interaction on the inventory policy of each facility

Ways to manage: Wait for specific orders to arrive before starting to

manufacture them [make-to-order facility] Otherwise, decide on where to keep safety stock? Which facilities should produce to stock and

which should produce to order?

77Network Planning

Single Product, Single Facility Periodic Review Inventory Model

Assume - SI: amount of time between when an order is

placed until the facility receives a shipment (Incoming Service Time)( 進入服務時間 )

S: Committed Service Time (允諾服務時間 ) made by the facility to its own customers. (Si+1=SIi)

T: Processing Time ( 處理時間 ) at the facility.

Net Lead Time = SI + T - S Safety stock (cost) at the facility(安全庫存成

本 ):

SI T S

zh SI T S

78Network Planning

2-Stage System

Reducing committed service time from facility 2 to facility 1 (S2 )(or SI1) impacts required inventory at both facilities Inventory at facility 1 is reduced Inventory at facility 2 is increased

Overall objective is to choose: the committed service time at each facility the location and amount of inventory minimize total or system wide safety stock cost.

79Network Planning

問題討論―桌上型電腦的庫存定問題

產品階層成品 組件 零件

存貨應如何配置 ? 各自獨立管理 ? 平均分擔 ?成品階段 ? 組件階段 ? 零件階段 ?

80Network Planning

Consider a two-tier supply chain Items shipped from manufacturing facilities to

primary warehouses From there, they are shipped to secondary

warehouses and finally to retail outlets

How to optimally position inventory in the supply chain? Should every SKU be positioned both at the

primary and secondary warehouses?, OR Some SKU be positioned only at the primary while

others only at the secondary?

Integrating Inventory Positioning and Network Design1

81Network Planning

Integrating Inventory Positioning and Network Design 2

FIGURE 3-18: Sample plot of each SKU by volume and demand

82Network Planning

Three Different Product Categories

High variability - low volume products 例如，精品

限量筆 Low variability - high volume products, and

例如， coca-cola筆心

Low variability - low volume products. 例如，日常民生雜貨 ...

常銷筆款…

83Network Planning

Supply Chain Strategy Different for the Different Categories1

High variability low volume products Inventory risk is the main challengePosition them mainly at the primary

warehouses demand from many retail outlets can be

aggregated reducing inventory costs.例如，物流中心…

Low variability low volume products Require more analysis since other

characteristics are important, such as profit margins, etc.

84Network Planning

Supply Chain Strategy Different for the Different Categories2

Low variability high volume products Position close to the retail outlets at the

secondary warehousesShip fully loaded tracks as close as

possible to the customers reducing transportation costs.

例如，顧客直送…

85Network Planning

3.4 Resource Allocation1

Supply chain master planning ( 供應鏈主計畫 )

The process of coordinating and allocating production, and distribution strategies and resources to maximize profit or minimize system-wide cost

問題： 各廠生產少數品項產品：生產成本低，運輸成本高 各廠生產多品項產品：生產成本高，運輸成本低

86Network Planning

Resource Allocation2

Trade off between production cost and inventory cost.

However, the firm optimized production cost usually.( 各廠生產少數品項產品 )

87Network Planning

Resource Allocation3

Process takes into account: interaction between the various levels of

the supply chainidentifies a strategy that maximizes supply

chain performance

88Network Planning

Global Optimization and DSSFACTORS TO CONSIDER

Facility locations: plants, distribution centers and demand points

Transportation resources including internal fleet and common carriers

Products and product information Production line information such as minimum lot

size, capacity, costs, etc. Warehouse capacities and other information such as

certain technology (refrigerators) that a specific warehouse has and hence can store certain products

Demand forecast by location, product and time.

89Network Planning

Focus of the OutputSourcing Strategies:

where should each product be produced during the planning horizon, OR

Supply Chain Master Plan: production quantities, shipment size and

storage requirements by product, location and time period.

90Network Planning

The Extended Supply Chain: From Manufacturing to Order

Fulfillment

FIGURE 3-19: The extended supply chain: from manufacturing to order fulfillment

91Network Planning

Questions to Ask During the Planning Process1

Will leased warehouse space alleviate capacity problems?

When and where should the inventory for seasonal or promotional demand be built and stored?

Can capacity problems be alleviated by re-arranging warehouse territories?

What impact do changes in the forecast have on the supply chain?

What will be the impact of running overtime at the plants or out-sourcing production?

92Network Planning

Questions to Ask During the Planning Process2

What plant should replenish each warehouse?

Should the firm ship by sea or by air. Shipping by sea implies long lead times and therefore requires high inventory levels. On the other hand, using air carriers reduces lead times and hence inventory levels but significantly increases transportation cost.

Should we rebalance inventory between warehouses or replenish from the plants to meet unexpected regional changes in demand?

93Network Planning

SUMMARYNetwork Planning Characteristics

Network Design Inventory Positioning and Management

Resource Allocation

Decision focus Infrastructure Safety stock Production Distribution

Planning Horizon Years Months Months

Aggregation Level Family Item Classes

Frequency Yearly Monthly/Weekly Monthly/Weekly

ROI High Medium Medium

Implementation Very Short Short Short

Users Very Few Few Few

94Network Planning

SUMMARY Optimizing supply chain performance is difficult

conflicting objectives demand and supply uncertainties supply chain dynamics.

Through network planning, firms can globally optimize supply chain performance Combines network design, inventory positioning

and resource allocation Consider the entire network

production Warehousing transportation inventory costs service level requirements.