《供应链系统设计与管理》课程授课教案（讲义）Chapter 03（Lecture 6）SC network design and planning

全英文课《DesigningandManagingSupplyChainSystem》授课教案Chapter3(lecture)SCnetwork design andplanningOBJECTIVES() Understand best practices in distribution strategies(2) Learn how to reconfigure the distribution network(3) Know the impact of concepts such as inventory pooling and transshipmentstrategies.TEACHINGCONTENT3.1IntroductionThe physical supply chain consists of suppliers,plants, warehouses, distributioncenters, and retail outlets as well as raw materials, work-in-process inventory, andfinished products thatflowbetween thefacilities.In Chapter 2, we discussed a varietyof approaches for managing inventory in an existing supply chain. In this chapter, wetake a step back and focus on what we call network planning-the process by whichthefirm structures andmanagesthesupplychain inorderto(1)Find the right balance between inventory, transportation and manufacturingcosts,(2)Match supply and demand under uncertaintyby positioning and managinginventory effectively,(3)Utilize resources effectively by sourcing products from the most appropriatemanufacturingfacilityThree Hierarchical Steps:(1)Network designNumber, locations and size of facilitiesAssignment of retail outlets to warehousesMajorsourcingdecisions(2)Inventory positioningIdentifying stocking pointsFacilities that will MTS(stock)andkeep inventoryFacilities that will MTO(order)and hencekeep no inventoryRelated to the inventory management strategies(3)ResourceallocationProduction of products at the right facilityPlants sourcing strategiesCapacity each plant3.2 Network DesignThe supply chain infrastructure typically needs to be reevaluated due to changesin demand patterns, product mix, production processes, sourcing strategies, or the cost

全英文课《Designing and Managin1g Supply Chain System》 授课教案 Chapter 3 (lecture 6) SC network design and planning OBJECTIVES (1) Understand best practices in distribution strategies. (2) Learn how to reconfigure the distribution network. (3) Know the impact of concepts such as inventory pooling and transshipment strategies. TEACHING CONTENT 3.1 Introduction The physical supply chain consists of suppliers, plants, warehouses, distribution centers, and retail outlets as well as raw materials, work-in-process inventory, and finished products that flow between the facilities. In Chapter 2, we discussed a variety of approaches for managing inventory in an existing supply chain. In this chapter, we take a step back and focus on what we call network planning—the process by which the firm structures and manages the supply chain in order to (1)Find the right balance between inventory, transportation and manufacturing costs,(2)Match supply and demand under uncertainty by positioning and managing inventory effectively, (3)Utilize resources effectively by sourcing products from the most appropriate manufacturing facility. Three Hierarchical Steps: (1)Network design Number, locations and size of facilities Assignment of retail outlets to warehouses Major sourcing decisions (2)Inventory positioning Identifying stocking points Facilities that will MTS(stock) and keep inventory Facilities that will MTO(order) and hence keep no inventory Related to the inventory management strategies (3)Resource allocation Production of products at the right facility Plants sourcing strategies Capacity each plant 3.2 Network Design The supply chain infrastructure typically needs to be reevaluated due to changes in demand patterns, product mix, production processes, sourcing strategies, or the cost

全英文课《DesigningandManagingSupplyChainSystem》授课教案of running facilities. In addition, mergers and acquisitions may mandate theintegrationofdifferentlogisticsnetworks.In the discussion below, we concentrate on the following key strategic decisions:(1)Determining the number of facilities, (plants, warehouses,...)(2)Determining the location of each facility.(3)Determining the size of each facility(4)Determining space for products in each facility(5)Determiningsourcingrequirements.(6)Determining distribution strategies, i.e., the allocation of customers towarehouse3.2.1DataCollectionA typical network configuration problem involves large amounts of data,including information on()Locations of customers,retailers,existing warehouses and distribution centers,manufacturing facilities, and suppliers.(2)All products, including volumes, and special transport modes (e.g,refrigerated).(3)Annual demand for each product by customer location.(4)Transportationratesbymode(5)Warehousing costs, including labor, inventory carrying charges, and fixedoperatingcosts.(6)Shipment sizes and frequencies for customer delivery.(7)Order processing costs.(8)Customer service requirements and goals(9)Production and sourcing costs and capacities3.2.2Data Aggregation(1)Customer Zoneusing a clustering techniqueFive-digit or three-digit zip code based clustering(2)Product GroupsDistribution patternProducts picked up at the same source and destined to the same customersLogisticscharacteristicslikeweightandvolumeProducttypeproduct models or style differing only in the type of packaging(3)General Rulesfor AggregationMake sure each zone has approximately an equal amount of total demandPlace aggregated points at the center of the zone(4)Tow key issues:appropriate customer zoneappropriateproductgroups

全英文课《Designing and Managin2g Supply Chain System》 授课教案 of running facilities. In addition, mergers and acquisitions may mandate the integration of different logistics networks. In the discussion below, we concentrate on the following key strategic decisions: (1)Determining the number of facilities, (plants, warehouses,.) (2)Determining the location of each facility. (3)Determining the size of each facility. (4)Determining space for products in each facility. (5)Determining sourcing requirements. (6)Determining distribution strategies, i.e., the allocation of customers to warehouse 3.2.1 Data Collection A typical network configuration problem involves large amounts of data, including information on (1)Locations of customers, retailers, existing warehouses and distribution centers, manufacturing facilities, and suppliers. (2)All products, including volumes, and special transport modes (e.g., refrigerated). (3)Annual demand for each product by customer location. (4)Transportation rates by mode. (5)Warehousing costs, including labor, inventory carrying charges, and fixed operating costs. (6)Shipment sizes and frequencies for customer delivery. (7)Order processing costs. (8)Customer service requirements and goals. (9)Production and sourcing costs and capacities. 3.2.2 Data Aggregation (1)Customer Zone using a clustering technique. Five-digit or three-digit zip code based clustering. (2)Product Groups Distribution pattern Products picked up at the same source and destined to the same customers Logistics characteristics like weight and volume. Product type product models or style differing only in the type of packaging. (3)General Rules for Aggregation Make sure each zone has approximately an equal amount of total demand Place aggregated points at the center of the zone (4)Tow key issues: appropriate customer zone appropriate product groups

全英文课《DesigningandManagingSupplyChainSystem》授课教案3.2.3TransportationRate EstimationTransportation cost is animportantfactorfordesigningnetworkRatesarealmostlinearwithdistancebutnotwithvolume.(Y/N?)Differencesbetweeninternalandexternalfleetrate- Company-owned fleet:- External fleet:Truckload (TL)Less than truckload (LTL)3.2.4 Mileage EstimationNational transportation (straight Euclidean lines)Dab=ky(xa-x)+(ya-yb)Rectilinear/"checker-board"distance?Modified by a scale factor r=1.1~1.3Street NetworkGlobal SCnetworkEstimate lona and lata,the longitude and latitude of point a (and similarlyfor point b)Distance between a and bFor short distancesDab=69/(lona-lonb)?+(lata-lat)3.2.5 Warehouse CostsWarehousing and distribution center costs include three main components:(1)Handling costs. These include labor and utility costs that are proportional toannual flowthroughthewarehouse(2)Fixed costs.These capture all cost components that are not proportional to theamountof materialthatflowsthroughthewarehouse.Thefixedcost istypicallyproportional to warehouse size (capacity)but in a nonlinear way.As the figure shows,this cost is fixed in certain ranges of the warehouse size.(3)Storage costs.These represent inventory holding costs, which are proportionalto average positive inventory levels.3.2.7Potential LocationsFactorsaffectinglocationdecision(1)Geographicalandinfrastructureconditions(2)Natural resources and labor availability(3)Local industry and tax regulations.(4)Public interestAsaresult,onlya limited numberof locationswould meetall therequirements

全英文课《Designing and Managin3g Supply Chain System》 授课教案 3.2.3 Transportation Rate Estimation Transportation cost is an important factor for designing network Rates are almost linear with distance but not with volume. (Y/N?) Differences between internal and external fleet rate - Company-owned fleet: - External fleet: Truckload (TL) Less than truckload (LTL) 3.2.4 Mileage Estimation National transportation (straight Euclidean lines) Rectilinear / "checker-board” distance ? Modified by a scale factor r=1.1~1.3 Street Network Global SC network Estimate lona and lata , the longitude and latitude of point a (and similarly for point b) Distance between a and b For short distances 3.2.5 Warehouse Costs Warehousing and distribution center costs include three main components: (1)Handling costs. These include labor and utility costs that are proportional to annual flow through the warehouse. (2)Fixed costs. These capture all cost components that are not proportional to the amount of material that flows through the warehouse. The fixed cost is typically proportional to warehouse size (capacity) but in a nonlinear way. As the figure shows, this cost is fixed in certain ranges of the warehouse size. (3)Storage costs. These represent inventory holding costs, which are proportional to average positive inventory levels. 3.2.7 Potential Locations Factors affecting location decision: (1)Geographical and infrastructure conditions. (2)Natural resources and labor availability. (3)Local industry and tax regulations. (4)Public interest. As a result, only a limited number of locations would meet all the requirements

全英文课《DesigningandManagingSupplyChainSystem》授课教案Thesearethe potential location sitesfor thenewfacilities.3.2.10 Methods and models of SC network planningNumberofWarehouses(DCs)OptinSBOA(sssTotal CostTransportationCos-FixedCostentoryCost520$101068Numberof WarehousesIndustryBenchmarks:NumberofDistributionCenters:Pharmaceuticals FoodCompaniesChemicalsAvg#of1425WH-Lowmarginproduct-High margin productServiceveryimportanServicenotimportant(or-Outboundtransportationeasytoshipexpressexpensiverelativeto-Inventoryexpensivenounorelativetotransauot3.2.11SolutionTechniquesMathematicaltechniques:(1)Optimizationmodel:findoptimal solutionsbyexactalgorithms(2)Heuristicsmodel:find“good"solutions,notnecessarilyoptimalSimulation models: provide a mechanism to evaluate specified design alternativescreated by the designer.Tools are requiredQUESTIONS1. Why is it important for a firm to periodically review its logistics network design?Howdo a firm's requirements for its logistics network change over time?2. Within the organization, who is involved in a network design project (operations.sales,marketingexecutives,etc.)?How?3.KLF Electronics is anAmerican manufacturer of electronic equipment.Thecompany has a singlemanufacturingfacilityin San Jose,California.KLFElectronicsdistributes its products through five regional warehouses located in Atlanta, Boston,Chicago, Dallas, and Los Angeles. In the current distribution system, the UnitedStates is partitioned into five major markets, each of which is served by a singleregional warehouse. Customers, typically retail outlets, receive items directly from the

全英文课《Designing and Managin4g Supply Chain System》 授课教案 These are the potential location sites for the new facilities. 3.2.10 Methods and models of SC network planning Number of Warehouses (DCs): Industry Benchmarks: Number of Distribution Centers: 3.2.11 Solution Techniques Mathematical techniques: (1)Optimization model: find optimal solutions by exact algorithms (2)Heuristics model: find “good” solutions, not necessarily optimal Simulation models: provide a mechanism to evaluate specified design alternatives created by the designer. Tools are required. QUESTIONS 1. Why is it important for a firm to periodically review its logistics network design? How do a firm's requirements for its logistics network change over time? 2. Within the organization, who is involved in a network design project (operations, sales, marketing executives, etc.)? How? 3. KLF Electronics is an American manufacturer of electronic equipment. The company has a single manufacturing facility in San Jose, California. KLF Electronics distributes its products through five regional warehouses located in Atlanta, Boston, Chicago, Dallas, and Los Angeles. In the current distribution system, the United States is partitioned into five major markets, each of which is served by a single regional warehouse. Customers, typically retail outlets, receive items directly from the

全英文课《DesigningandManagingSupplyChainSystem》授课教案regional warehouse in their market area. That is, in the current distribution system,each customer is assigned to a single market and receives deliveries from one regionalwarehouse. The warehouses receive items from the manufacturing facility. Typically,it takes about two weeks to satisfy an order placed by any of the regional warehousesIn recent years, KLF has seen a significant increase in competition and huge pressurefromtheircustomersto improveservicelevel andreducecosts.Toimproveservicelevel and reduce costs,KLFwould liketo consider an alternativedistribution strategyin which the five regional warehouses are replaced with a single, central warehousethat will be in charge of all customer orders.Describe how you would design a new logistics network consisting of only a singlewarehouse.Provide an outline of such an analysis:What are the main steps?Specifically, what data would you need? What are the advantages and disadvantagesof the newly suggested distribution strategy relative to the existing distributionstrategy?4. In selecting potential warehouse sites, it is important to consider issues such asgeographical and infrastructure conditions, natural resources and labor availability,local industry and tax regulations, and public interest. For each of the followingindustries,give specific examples of how the issues listed above could affect thechoice of potential warehouse sites:a.Automobile manufacturingb.Pharmaceuticalsc.Booksd.Aircraft manufacturinge. Book distributionf Furniture manufacturing and distributiong. PC manufacturing5.Consider the pharmaceutical and thechemical industries.In thepharmaceuticalindustry, products have high margins and overnight delivery typically is used. On theother hand, in the chemical industry, products have low margins and outboundtransportation cost is moreexpensivethaninbound transportation.What istheeffectof these characteristics on the number of warehouses for firms in these industries?Where do you expect to see more warehouses: in the chemical industry or thepharmaceutical industry?6.In Section3.2.3, we observe that the TL transportation rate structure is asymmetric.Why?7. Discuss some specific items that make up the handling costs, fixed costs, andstoragecostsassociatedwithawarehouse.8. What is the difference between using an exact optimization technique and aheuristic to solve a problem?9. What is simulation, and how does it help solve difficult logistics problems?

全英文课《Designing and Managin5g Supply Chain System》 授课教案 regional warehouse in their market area. That is, in the current distribution system, each customer is assigned to a single market and receives deliveries from one regional warehouse. The warehouses receive items from the manufacturing facility. Typically, it takes about two weeks to satisfy an order placed by any of the regional warehouses. In recent years, KLF has seen a significant increase in competition and huge pressure from their customers to improve service level and reduce costs. To improve service level and reduce costs, KLF would like to consider an alternative distribution strategy in which the five regional warehouses are replaced with a single, central warehouse that will be in charge of all customer orders. Describe how you would design a new logistics network consisting of only a single warehouse. Provide an outline of such an analysis: What are the main steps? Specifically, what data would you need? What are the advantages and disadvantages of the newly suggested distribution strategy relative to the existing distribution strategy? 4. In selecting potential warehouse sites, it is important to consider issues such as geographical and infrastructure conditions, natural resources and labor availability, local industry and tax regulations, and public interest. For each of the following industries, give specific examples of how the issues listed above could affect the choice of potential warehouse sites: a. Automobile manufacturing b. Pharmaceuticals c. Books d. Aircraft manufacturing e. Book distribution f. Furniture manufacturing and distribution g. PC manufacturing 5. Consider the pharmaceutical and the chemical industries. In the pharmaceutical industry, products have high margins and overnight delivery typically is used. On the other hand, in the chemical industry, products have low margins and outbound transportation cost is more expensive than inbound transportation. What is the effect of these characteristics on the number of warehouses for firms in these industries? Where do you expect to see more warehouses: in the chemical industry or the pharmaceutical industry? 6. In Section 3.2.3, we observe that the TL transportation rate structure is asymmetric. Why? 7. Discuss some specific items that make up the handling costs, fixed costs, and storage costs associated with a warehouse. 8. What is the difference between using an exact optimization technique and a heuristic to solve a problem? 9. What is simulation, and how does it help solve difficult logistics problems?