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Unit 2 SCM

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© © All Rights Reserved
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Available Formats
Download as PDF, TXT or read online on Scribd

Topics covered

  • Performance Characteristics,
  • Competitive Strategy,
  • Exchange Rate Risk,
  • Manufacturer Storage,
  • Cost Leadership,
  • Strategic Fit,
  • Returnability,
  • Response Time,
  • Last-Mile Delivery,
  • Technological Factors
0% found this document useful (0 votes)
43 views22 pages

Unit 2 SCM

Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Topics covered

  • Performance Characteristics,
  • Competitive Strategy,
  • Exchange Rate Risk,
  • Manufacturer Storage,
  • Cost Leadership,
  • Strategic Fit,
  • Returnability,
  • Response Time,
  • Last-Mile Delivery,
  • Technological Factors

UNIT -II

SUPPLY CHAIN NETWORK DESIGN

influencing Distribution network


in Supply Chain Factors
Role of Distribution Network in Practice -

Distribution Network Distribution


design Design options for
Framework for network Decisions.
Role of network Design in Supply Chain
-

SUPPLY CHAIN
2.1. ROLE OF DISTRIBUTION IN THE

the steps taken to move and store a product from


Distribution refers to
chain.
the supplierstage to a customer stage in the supoly
chain.
Distribution occurs between every pair ofstages in the supply
moved from suppliers to
are
Raw materials and components
moved from the
manufacturers, whereas finished products are

manufacturer to the end consumer.


firm because it
of the overall profitability of
a
Distribution is a key driver
experience directly.
supply chain cost and the
customer
affects boththe
be used to achieve a variety of
distrnibution network can
The appropriate
ranging from low cost to high
responsiveness.
supply chainobjectives
industry often select very different
As a result, companies in the same

distributionnetworks

to end consumers, whereas companies


Dell distributes its PCs directly
such as HPdistribute through resellers
customers wait several days to get a PC, whereas customers can
Dell
reseller.
walk away withan HP PC from
a

chains
P & G has chosen to distribute directly to large supermarket
from distributors.
while obligatingsmaller players to buy P&G products
Supply Chain Management
2.2 thmough
from P&G to the larger chains, but move
P r o d u c t s move directly
when going to smaller supermarkets.
an additionalstage

DISTRIBUTION NETWORK DESIGN


INFLUENCING
2.2. FACTORS

distribution network
should be evaluated along two
Performance of a
Dimensions:

Customer needs that are met

Cost of meeting customer needs

are met influence the company's revenues,


T h e customer's needs that
of the delivery network.
which along with cost decide the profitability
2.2.1. CUSTOMER SERVICE COMPONENTS
it takes for a customer to receive an
Response time: -
Amount of time
order
that are
Product variety: -
Number of different products/configurations
offered bythe distribution network.

Produet availability: -

Probability of having a product in stock when a

customer orderarrives.

includes the with which customers can


Customer experience: ease

place andreceive orders as well as the extent to which this experience


customized.
T i m e to market: - Time it takes to bring a new product to the market.

Order visibility: - Ability of customers to track their orders


placement todelivery.
cton
Returnability: Ease with which a customer can returm unsatisfacto
merchandiseand the ability of the network to handle such
returms of
first that el
It may seem at a customer always wants the highest leve
performance along all these dimensions.
uir
Firms that target customers who can tolerate a long response time re
only a few locations that may be far from the customer.
supply Chain Network Design
2.3
These compan1ies can focus on
increasing the
capacity of each locauon.
I n contrast, firms that
target customers who value short
need to locate facilities close to response unc
them.
These firms must have many
facilities, each with a low capacity.
Thus, decrease in the
a
response time customer's desire increases the
number of facilities required in the network as
shown in Figure 2.
Required Number
of Facilities

Desired
Response
Time
Fig 2.1. Relationship between Desired Response Time and Number of Facilities

Changing the distribution network design affects the following supply


chain costs:
Inventories
Transportation
Facilities and handling
Information
number of
A decrease in the response time customer's desire increases the
facilities required in the network.
Inventory
Costs

Number of
Facilities
Costs
Fig. 2.2. Relationship between Number of Facilities and Inventory
Supply Chain Managemen

2.4 chain increases,


the inventoru
yentory and
in a supply
As the number of facilities increase as
shown in Figure 2.2.
costs also
resulting inventory incured in bringing materi
material
costs are the costs
Inbound transportation

into a facility. material out of.


costs are the costs of sending
Outbound transportation

facility. than inbound


costs per unit tend
to be higher
Outbound transportation
For example, the
costs because inbound
lot sizes are typically larger.
Amazon warehouse receives full truckload shipments of books on the
inbound side, but ships out small packages with only a few books per
customer on the outbound side.
Increasing the number of warehouse locations decreases the average
outbound distance to the customer and makes outbound transportation
distance a smaller fraction of the total distance traveled by the product.
Thus, as long as inbound transportation economies of scale are maintained,
increasing the number of facilities decreases total transportation cost, as
shown in Figure 2.3

If the number of facilities is increased to a point where inbound lot siZes


are also
very small and result in a
significant loss of economies of scale im
inbound transportation,
increasing the number of facilities increases tola
total
transportation cost, as shown in Figure 2.3.
Transportation
Costs

Number of
Fig. 2.3. Facilities
Relationship between Number of
Facilities and
Transportution Cosi
ly Chain Network Desi

Facility costs decrease as


2.5
the number of facilities
Figure 2.4, because a reduced,
is reduced, as
as shown
shown in
economies of scale. consolidation of facilities allows a fim to
explo
Fecility
Costs

NuriiDer of
Facilities
Fig. 2.4. Relationship between Number of Facilities and Faciliy Cost
Total logistics costs are the sum of inventory, transportation, and facility
costs for a supply chain network.
A s the number of facilities increases, total logistics costs first decrease and
then increase as shown in Figure 2.5.
that minimize total
Each firm should have at least the number of facilities
Amazon has more than one warehouse
logistics costs. For example,
costs (and improve response time).
primarily to reduce its logistics
Response Time

Total Logistics Cost

Number of Facilities

Time with Number of Facility


cost and Response
2 . 5 . Variation in Logistics it may
time to its c u s t o m e r s further,
to reduce the response minimizes
A s a fim wants that
of facilities beyond the point
number
have to increase the
ir
logistics costs.
the cost-minimizing point only
facilities beyond of better
* A fim should add revenues
because
in
the increase
confident that
managerS are
VMan
2.6 nagemen
than the increase in costs because ae
responsiveness is greater the
additional facilities.

Thus, it is important to ensure that the strengths of the distribution nets.


network
fit with the strategic position of the firm.

2.3. DESIGN OPTIONS FOR A DISTRIBUTION NETWORK

Manufacturer storage with direct shipping:


Product is shipped directly from the manufacturer the end customer to
bypassing the retailer (who takes the order and initiates the delivery
request).
This option is also referred to as drop shipping, with
product delivered
directly from the manufacturer to the customer.
I t is best suited for large variety of
a
low-demand, high-value items for
which customers are willing to wait for delivery and accept several partial
shipments.

OO Manufacturers

Retailer

Customers

Product Flow
--4
Information Flow
Fig. 2.6.
Performance Characteristics of
Manufacturer Storage with
Direct Shipping Network
Inventory Lower costs because
of
aggregation aggregation. Benefits of
are
highest for low demand, high value
items. Benefits are
very large if product
customization can be proaue
postponed by the manufacture
Sgn

Transportation 2.7
Higher transportation
costs because
distance and of increased
Facilities and handling
Lower
disaggregate shipping.
facility costs because of
saving on handling costs if aggregation. Some
small shipments. manufacturer can manage
Information
Significant investment in information
to
integrate manufacturer and retailer. infrastructure
Response Time Long response time of one to two weeks because of
increased distance and two stages for order
processing. Response time may vary by product, thus
complicating receiving
(i) Manufacturer storage with direct shipping and in-transit merge
Unlike pure drop shipping, under which each product in the order is sent

from its manufacturer to the end customer, in-transit merge


directly
from different locations so that the
combines pieces of the order coming
Customer gets a single delivery
Factories
-****---------

In-Transit Merge by Carrier


Retailer

Customers

-Product Flow
--Information Flow

Fig. 2.7.
Sony monitor,
PC from
Dell along with a
orders a and the monitor
the Dell factory
customer

tor when a from


eg, the PC
carrier picks up
the package
2.8
two togetner at a hub bef.
from the Sony factory: it
then merges the fore
making single
a delivery to the customer.
I t is best suited for low-to
medium demand, high value items the retailer
sourcing from a limited number of manufacturers.

Performance Characteristics of In-Transit Merge

Inventory Similar to drop shipping


Somewhat lower transportation costs than
Transportation
drop shipping.
Facilities and handling Handling costs higher than drop shipping
at carrier receiving costs lower at
customer.

Information Investment is somewhat higher than for


drop shipping.
Response Time Similar to drop-shipping: may be
marginally higher.
(IHn Distributor Storage with Carrier Delivery

QQP Factories

Warehouse Storage by Distnibutor


Retailer

Customers

Product Flow
Information Flow
Fig. 2.8.
Under this option, inventory is held by manufacturers
not at the facto
but is held by distributors/ retailers in intermediate and
warehouses,
Nefwort Design
Network

package carriers are 29


location to the final used to
transport products from
I t is well suited for customer. the
intermediate
It medium- to-fast
when customersmoving items.
also makes sense
manufacturer storage but do not want delivery faster than is offered
need it by
Performance Characteristics of immediately.
Inventory Distributor storage with
Higher than manufacturer Carrier DeliveryY
for faster- storage. Difference is not large
moving items.
Transportation Lower than
manufacturer storage. Reduction is
for faster-
moving items. highest
Facilities and Somewhat higher than
handling manufacturer storage. The
difference can be large for The
very slow-moving items.
Information Simpler infrastructure compared to manufacturer
storage.
Kesponse Time Faster than manufacturer storage.
v) Distributor Storage with Last-Mile
Delivery
Last-mile delivery refers the distributor/retailer delivering the
to
product to
the customer's home instead of using a package carrier.

Factories

Distributor / Retailer
Retailer Warehouse

6-8-868S Customerss

Product Flow
Information Flgw

Fig. 2.9.
Supply Chain Manageme

2.10 hard to justify distribute


distributor storage
labor costs, it is very
In areas with high efficiency
o r improved maroiin.
on the basis of
with last mile delivery very with an
mile delivery
A n effort
should be made
to couple last
-

scale and improve


existing
economies of
distribution network
to exploit
with Last-Mile Delives
Characteristics of Distributor Storage very
Performance

with package carier


Higher than distributor storage
Inventory
delivery.
cost given minimal scale economies,
Transportation Very high
Higher than any other distribution option.
Facilities and handling8 Facilities costs higher than manufacturer storage or
distributor storage with package carrier delivery,but
lower than a chain of retail stores.

Information Similar to distributor storage with package carrier


delivery.
Response Time Very quick. Same day to next-day delivery._
(v) Manufacturer or Distributor Storage with Customer
Pickup
O --. D Factories
Retailer Cross Dock DC

Pickup Sites
Customers

Customer Flow
Product Flow
Information Flow
Fig. 2.10.
Supply Chain Network Design
2.11
Inventory 1s stored at the
manufacturer or distributor warehouse but
customers place their orders
online or on the phone and then travel to
designated pickup points to collect their
Orders are shipped from the
merchandise
storage site to the pickup points as needed.
Such a network is likely to be most effective
if existing locations such as
coffee shops, convenience stores, or
grocery stores are used as pickupP
sites, because this type of network improves the economies from existing
infrastructure.
Performance Characteristics of Distributor Storage with Customer Pickup

Inventory Can match any other option, depending on the


location of inventory.

Lower than the use of package carriers, especiallyif


Transportation network.
using an existing delivery

Facility costs can be very high ifnew facilities have


Facilities and handling
lower if existing facilities are
to be built. Costs are

cost at the pickup site


used. The increase in handling
can be significant.

investment in infrastructure required.


Information Significant
carrier delivery with
with
Similar to package
Response Time distributor storage. Same day
manufacturer or
stored locally at pick-up
for items
delivery possible
sites.

Pickup
Retailer storage with
Customer

Customers walk into the retail


stores.
at retail store.
stored locally the retail
Inventory is and pick it up at
online o r by phone value
an order
customer's
store or place items for
which
items o r
fast-moving
for
It is best suited
rapid response.
2.12 Supply Chaln Managen
emee
Performance Characteristics of Retaller storage wth Customer Plckun

Inventory Higher than all other options.

Lower than all other options.


Transportation
Facilities and handling Higher than other options. The increase in handling t
at pickup site can be significant for online and
phn
orders.

Information Some investment in infrastructure


required for online
and phone orders.

Response Time Same-day pickup possible for items stored


locally a
pickup site.
(vi) E-Business and the Distribution Network
Impact of E-Business on Customer Service:
Response time to customers:
In selling physical productsthat cannot be downloaded, an e-busines=
without a physical retail outlet takes
longer to fulfill a customer reques
than a retail store because of the
shipping time involved.
There is no such delay,
however, for products that can be downloaded lik
a mutual fund
prospectus or music.
Product Variety:
An e-business finds it
easier to offer a large selection
bricks- and-mortar store.
of products than-
Offering the same selection at a retail store would require atio
loca
with a huge
a
correspondingly large amount of inventory.
Product avallability:
An e-business can
greatly increase the speed with which
customer demand is
disseminated
informaio ris
to more
accurate
throughout the supply ng
chain. givE
forecasts
These improved forecasts 2.13
leads to a better match and the more
accurate view of
between supply and customer deman
Customer Experience demand.
An e-business
affects customer
customization and convenience. experience in terms of access,
Unlike most retail stores that
are
business allows access to only during business hours, an
open
customers who may not be able to e
during regular business hours. place orders
An e-business allows a firm to
access customers who
distant. Firms that focus
are
geographically
on mass customization can use the Internet to
help customers select a product that suits their needs.
*On intermet, customers have the ease ofnot needing to leave home or work
to make a purchase.
Faster time to market
e-business to introduce new products much more quickly
A firm can use

than a firm that uses physical channels.


available
contrast introduces
a new product by making it
An ebusiness in
is not present.
lag to fill the retail
store
on the website- a distribution

Order Visibility which is


to provide visibility of order status,
makes it possible to a customer
* T h e internet physical equivalent
as it has no

crucial in online order


very

shopping
arive from a centralized
Returnability online
orders,
which typically
be much higher for
to
is harder with is also likely the
It
of
returns
and feel
proportion unable to touch
location. The customers
are

because
the
orders
online
purchase.
before
their
product
2.14 Supply Chain Managemen
Direct Sales to Customers

A n e-business allows nmanuficturers and other members


of the
chain that do not have direct contact with customers in traditional upply
Sitne

chann
to enhance revenues by bypassing intermediaries and
channels
selling directlv t

customers, thereby collecting the intermediary's incremental revenue.


Flexible Pricing, Product Portfolio and Promotions
An e-business can easily alter prices by changing one entry in the
database
linked to its website. This ability allows
e-business to maximize
an

revenues by setting prices based on current


inventories and demand.
For eg, the airlines make last-minute, low cost fares available
on the Web
on routes with unsold seats. Can
easily alter the product portfolio that it
offers as well as the
promotions it is running.
Efficient Funds Transfer
A n e-business can enhance revenues
by speeding up collection.
2.4. DISTRIBUTION NETWORKS IN
PRACTICE
The ownership structure of the distribution network can have as big an impact as
the type of distribution network:

Distribution networks that have exactly the same physical flow but
different ownership structures can have
vastly different performance.
For eg, a manufacturer that owns its
distribution network can control tne
network's actions.
However, if the manufacturer does not own the distribution a
wide variety of issues need to network
be taken into account to
network. optimize over u
The choice of a
distribution network has very long term
The structure of the consequences:
distribution network is one of the most fricult
decisions to change. di
*The impact often lasts for decades, amplifying the
of the
choice. importance
Supply Chain Network Des

For 2.15
eg, In the early days, PC
distributors and retailers. Dell's manufacturers sold through independent
the direct model emergence was a clear example of how
was often superior to the
Other PC
traditional model.
manufacturers, such as HP, made forays into selling PCS
directly.
Consider whether an exclusive distribution
A manufacturer
strategy is advantageous
of consumer electronics such as Sony could choose to
have relationships with many distributors such as eZone.
Product price, commoditization, and criticality affect the type of distribution
system preferred by customers:

Interactions between a buyer and a seller take time and resources. Many
buyers would like to establish a relationship with a single enterprise that
can deliver a full line of products.
This can be accomplished by a manufacturer with a broad line of products.
distributor
effectively by a
However, this is often accomplished
more

manufacturers.
carrying products from many
NETWORK:
EXISTING PHYSICAL
2.4.1. INTEGRATE THE INTERNET WITH THE
should integrateit
ebusinesses, firms
benefit from
To extract maximum
chain networks.
with their existing supply inefficiencies within the
often results in
two networks
Separating the
supply chain. network has been
physical
e-business with the existing online and
This coupling of
order
clicks-and-mortar.
For eg. Placing
referred to as
store.
from the physical
collecting goods
SUPPLY CHAIN
THE
DESIGN IN
NETWORK
.5. THE ROLE OF
performed
are

Facility role: facility play?


What
processes

each
What role should

at eachfacility?

Faclity location: be
cated?
located
facilities
should
Where
2.16 Supply Chain nagemem
Capacity allocation:

How much capacity should be allocated to each facility?

Market and supply allocation:

What markets should each facility serve? Which supply sources shoul
ho d
feed eachfacility?

2.6. FACTORS INFLUENC NG NETwORK DESIGN DECISIONS

26.1. STRATEGIC FACTORS


A firm's competitive strategy has a significant impact on network design
decisions within the supply chain.
Firms that focus on cost leadership
tends to find the lowest cost location
for their manufacturing facilities, even if that
means locating very far from
the markets they serve.
Fims that focus on responsiveness tend to locate
facilities closer to the
market and may select a high-cost location
if this choice allows the fimto
react quickly to changing market needs
Classification of possible strategic roles for various
faclities:
Offshore facility: low-cost
facility for export production
Serves the role of being a low-cost supply source for markets locatc
outside the country where the
facility is located.
Source facility: low-cost
facility for global production
Often a primary source
of product for the entire global network.
Server facllity:
regional production facility
Objective is to
supply the market where it is
built because of located. A server facin
tax
incentives, tariff barriers
supply the region from elsewhere. or high logistics co t
For eg. Suzuki got into tie
up with Maruti and establishes
unit in India to
serve Indian
market.
a
manutactuturing
Supply Chain Nerwork Design
contributor facility: regional
productlon facility with
2.17
Serves the market where it is development sills
oment skills

product customization, processlocated but also assumes responsibility for


product development. improvements, product modifications or
26.2. TECHNOLOGICAL FACTORs
I f production technology
displays significant economies of scale,
high- capacity locations are most effective.
a few

I f facilities have lower fixed


costs, many local facilities
because this helps lower transportation costs.
are
preferred
If the fixed cost of setting up facility is high, few
facility location is a
feasible option but if setting up fixed cost is low, more number of
facilities
should be established.

Macroeconomic Factors Tariffs and Tax Incentives

Tariffs refer to any duties that must be paid when product and/or
equipment are moved across international, state, or city boundaries.

do not serve the local


Ifa country has very high tariffs, companies either
to save on duties.
market or set up manufacturing plants within the country
taxes that countries, states and
T a x incentives are a reduction in tariffs or

locate their facilities in specific


Cities often provide to encourage firms to

areas

Xchange Rate and Demand Risk


but one countries
money in
terms
of other
EXchange rate is nothing
countries money. significant impact
significant
and have a
rates are common sells
Fluctuations in exchange markets. A fim that
chain serving global to the
the profits of any supply in India is exposed
O United States
with production
Sproduct in the
Tisk of appreciation of the rupee. in demand caused by
fluctuations
account
into
Co must also take
panies different
countries.

e c o n o m i e s of
changes in the
ppiy nain
2.1N
Manageme
263 POLITICAL FACTORS

able countrie
Compunies preler to locate facilities in politically table countries wher
the rules of commerce and ownership are well defined

Countries with independent and clear legal systems allow fims tofel n
el the
they have recourse in the courts should they need it.

2.6.4. INFRASTRUCTURE FACTORS

Key infrastructure elements to be considered during network deti


include availability of sites, labor availability, proximity to transportatie
terminals, rail service, proximity to airports and seaports, highway acceu
congestion and local utilities.

2.6.5. COMPETITIVE FACTORS

Companies must consider competitor's strategy, size and location whe


designing their supply chain networks.

2.7. FRAME WORK FOR NETWORK DESIGN


DECISIONS
Phase : Design a Supply Chain Strategy
Starts with a clear definition of the firm's competitive strategy as the se
customer needs that the
supply chain aims to
satisfy. Managers
forecast the likely evolution of global competition and whethe wheu
competitors each market will be local or global
in
players.
Constraints on available capital and whether growth will be
by acquiring existing facilities, accomp
building new facilities or partnernng
Phase lI: Define the
Regional Facility Configuration
orecast of the demand by country. Include o ft

demand as well
ameasure of the s1Z
as a
determination of whetl.er the customer requremen
are
homogenous or variable across different
countries.
*omogenous requirements favor large vhere"

requirements that vary across consolidated faciliu ic


countries favor
smaller,
e df a c i l i t i e s

localized io
Suppiy Chain Nenwork Design
2.19
Phase 1: Select a Set of
Desirable Potential Sites
Hard intrastructure requirements
include the availability of
transportation services, communication, suppliets,
utilities and warehousing
infrastructure
Soft infrastructure facilities include the
availability of skilled worktorce,
workforce turnover and the community
receptivity to business and
industry.
Phase IV: Location Choices
Maximize total profits taking into account the expected margin and
demand in each market, various logistics and facility costs, and the taxes
and tariffs at each location.

TWO MARK QUESTIONS AND ANSWERS

1. Define supply chain strategy.


the cost- benetit
iterative process that evaluates
Supply chain strategy is an

Business strategy involves leveraging the


trade- offs of operational components. goal or
defined high-level
to achieve a

core competencies of the organization

objective.
chain?
supply
2. What is the need for integrated networks.
collaboration of dynamic
supply
End-to-end
inventories.
flow, and
Transparency of materials supply,
networks.

orchestration of production
The nimble information.

communication about product


Real time
S3. How is strategicfit achieved strategy and
of competitive
customer
priorities
between strategy.
Consi
nsistency the supply chain
specified by big
capabilities the same goals. Eg:
Supply chain strategies
have
chain
and supply
C aompetitive
bazaar
2.20
4. Define Cycle time in SCM. business process. For
time is the end-to-end delay in a
Cycle time or lead
are the supply
chain process and
business processes of interest
supply chains, the then it would be equal to
process. If the items are in stock,
the order-to-delivery
time.
the distribution lead time and order management

(a) A span of time required to perform a process.

of the need for an order and the receipt of


(6) Time between recognition
goods.
5. What is meant byfacility Decisions?
crucial role in the logistics activities
Facility location decisions play a

involved in chain management. In real-life settings, the optimization of


supply
of the
location and allocation decisions is often preceded by an evaluation
existing distribution network system.
6. Define distribution network.
A distribution network is an interconnected group of storage facilities and

transportation systems that receive inventories of goods and then deliver them to
customers. It is an intermediate point to get products from the manufacturer to
the end customer, either directly or through a retail network.
7. How to create the effective supply chain process?
Supply chain management (SCM) is the broad range of activities required to
plan, control and execute a product's flow, from acquiring raw materials and
production through distribution to the final customer, in the most streamlined
and cost- effective way possible.
8. What are the
various factors to be considered before selecting the site for
warehouse?
Cost of distribution from warehouse to market area
Availability of transportation and infrastructure-cost of transportation
Presence of competitors
Availability and cost of labor-Cost of lar.d
Local resident's attitude
Local taxation etc.
Supply Chain Network Design
2.21
Who are the participants of
The
supply chain management?
participants of
supply chain management
distributors, retailers and customers.
are
Suppliers, wholesalers,
10. What is network planning in
supply chain?
Supply Chain Network Design (SNDC) also
known as 'strategic supply chain
planning' is the process for building and
understand the costs and time to bring modelling the supply chain to
goods and services to market within an
organizations available resources.
11. What is meant by network optimization models in supply chain?
Supply chain network optimization seeks to find an optimal combination of
factories and distribution centers in the supply chain.
Based on the optimization results, a manager can compare potential network
designs and evaluate the maximum profitability of each of them.
12. What do you mean by decision making under uncertainty in supply chain?

Decision-making environments for Supply Chain Network Design(SNDC)


under uncertainty. Several parameters of a Supply Chain Network Design
(SNDC) problem, such as costs, demand, and supply, have inherent uncertainty.
The objective of Supply Chain Network Design (SNDC) under uncertainty is to
achieve a configuration so that it can perfom well under any possible realization
ofuncertain parameters.
13. Name the value addition types in supply chain.
and inventory control of input
Inbound logistics: Receiving, warehousing,
materials.
inputs into the final product orservice
to create
Operations: Transforming

value.
that get the final product to the customer,
Outbound logistics: Actions
and order fulfillment.
including warehousing
decision nodes in supply chain
.Iist the any benefits ofusing
Better collaboration.

Improved quality control.


Supply Chain Manage
2.22 agement
Higher etficiency rate.

Keeping up with demand.


Shipping optimization.
Reduced overhead costs.
Improved cash flow.
15. Outline the scope of TMS in supply chain.

Transportation management solution (TMS) provides visibility into day-to-


day transportation operations, trade compliance information and
and ensuring the timely delivery of freight and goods.
documentation,

REVIEW QUESTIONS
.
Explain various design options available for a
Distribution Network.
2 Elucidate the frame work for
network design decisions.
3. Explain the Role of Distribution in the
4. supply chain.
Explain the factors influencing Distribution
5. State the role of network network design.
6.
design in Supply Chain.
Compose the different methods for
diagram. selecting the proper channel i detail with
7.
Interpret the
objectives & process of
models. Supply Chain Network
8.
optimization
Describe the outcome
and benefits of
models. Supply Chain Network
9.
optimizauoon
Why is it important to
consider
decision? Explain. uncertainty when evaluating
supply chain o sign
10. What type of
distribution network is typically best
11. ldentify factors influencing suited for
supply chain network commodity item>8?
decisions.
OD

Common questions

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Adding facilities beyond the point where logistics costs are minimized can increase total costs if not strategically justified. Only if managers are confident that the improved responsiveness will lead to greater revenue than the additional costs should new facilities be added. This decision also needs to fit with the firm's strategic position .

Manufacturer storage with direct shipping has lower costs due to inventory aggregation, especially beneficial for low-demand, high-value items. However, it incurs higher transportation costs because of increased distances and disaggregated shipping, and requires significant investment in information infrastructure. Response times are typically long due to increased distance and processing stages .

Exchange rate fluctuations can significantly affect the profitability of a supply chain serving global markets, creating risks if a country's currency appreciates. High tariffs may discourage serving a local market or encourage setting up local manufacturing to avoid duties. Strategically, firms must balance these economic factors with political stability and infrastructure availability when designing global supply chains .

E-business allows for a wider product variety and faster dissemination of demand information, leading to better supply-demand alignment. It provides customers access outside of regular business hours and geographically distant customer access. However, e-business often incurs longer fulfillment times for physical products compared to retail stores due to shipping, impacting the overall efficiency and structure of distribution networks .

In-transit merge combines shipments from different manufacturers, reducing transportation costs compared to pure drop shipping, which sends separate shipments from each manufacturer. While in-transit merge increases handling costs at merging points, it can provide a single, consolidated delivery to the customer, potentially enhancing customer satisfaction .

Customer pickup strategies can significantly lower transportation costs by utilizing existing delivery networks, but may require high infrastructure investments for new pickup facilities. They allow for same-day delivery if goods are locally stored, providing customers with rapid response times, which is essential for fast-moving items or when quick customer response is valued .

Collaboration among supply chain participants, such as suppliers, distributors, and customers, enhances transparency and agility. It leads to improved quality control, better demand forecasting, and cost efficiency, thereby optimizing the network. Strategic collaboration ensures a streamlined flow of goods and information, aligning partners with competitive strategies .

Political stability, clearly defined commerce rules, and reliable legal systems make countries attractive for facility location. Infrastructure factors such as availability of transportation, utilities, and a skilled workforce are also crucial. These factors ensure operational success and minimized risks, influencing supply chain location selection .

The framework involves four phases: designing a supply chain strategy, defining regional facility configuration based on demand forecasts and customer requirements, selecting potential site locations with adequate infrastructure and community support, and making location choices while maximizing profits by considering logistics and facility costs, demand, and taxes .

Distributor storage with last-mile delivery is advantageous in dense urban areas where the value of quick response times justifies higher delivery costs. It allows for very quick deliveries, same-day to next-day, but has much higher transportation costs compared to other methods and requires exploiting economies of scale within existing networks to improve cost efficiency .

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