Supply Chain Management, 5e (Chopra/Meindl) Chapter 5 Network Design in the Supply Chain
5.1 True/False Questions 1) Supply chain network design decisions include the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility. Anser! T"#$ %iff! & Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design &) %ecisions concerning the role of each facility are significant ecause they determine the amount of rigidity the supply chain has in changing the ay it meets demand. Anser! FA+S$ %iff! & Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design ) Facility location decisions hae a long-term impact o n a supply chain0s performance ecause it is cost effectie to shut don a facility or moe it to a different location. Anser! FA+S$ %iff! 1 Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design ) apacity allocation decisions hae a significant impact on supply chain performance ecause they tend to stay in place for seeral years. Anser! T"#$ %iff! & Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design 5) The allocation of supply sources and mar(ets to facilities has a significant impact on performance ecause it affects total production, inentory, inentory, and transportation costs incurred y the supply chain to satisfy customer demand. Anser! T"#$ %iff! 1 Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design
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7) The allocation of supply sources and mar(ets to facilities does not need to e reconsidered on a regular asis so that the allocation can e changed as mar(et conditions con ditions or plant capacities change. Anser! T"#$ %iff! & Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 8) 'etor( design decisions hae a significant impact on performance ecause they determine the supply chain configuration and set constraints ithin hich inentory, inentory, transportation, and information can e used to either decrease de crease supply chain cost or increase responsieness. Anser! T"#$ %iff! & Topic! 5.1 The "ole of 'etor( 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 9) Firms focusing on cost leadership tend to find the loest cost location for their manufacturing facilities, ut only if that means locating ery far from the mar(ets they sere. Anser! FA+S$ %iff! 1 Topic! 5.& Factors nfluencing nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design :) f production technology displays significant economies of scale, many local locations are the most effectie. Anser! FA+S$ %iff! & Topic! 5.& Factors nfluencing nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 13) f facilities hae loer fi;ed costs, many local facilities are preferred ecause this helps loer transportation costs. Anser! T"#$ %iff! & Topic! 5.& Factors nfluencing nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 11) f the production technology is ery infle;ile and product re
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1&) f the technology is fle;ile, it ecomes more difficult to consolidate manufacturing in a fe large facilities. Anser! FA+S$ %iff! Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 1) Tariffs hae a minor influence on location decisions ithin a supply chain. Anser! FA+S$ %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 1) 6igh tariffs lead to more production locations ithin a supply chain netor(, ith each location haing a loer allocated capacity. Anser! T"#$ %iff! Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 15) =hen designing supply chain netor(s, companies must uild appropriate fle;iility to help counter fluctuations in e;change rates and demand across different countries. Anser! T"#$ %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 17) nentory and facility costs increase as the nu mer of facilities in a supply chain increase. Anser! T"#$ %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 18) Transportation costs increase as the numer of facilities is increased. Anser! FA+S$ %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 19) A firm may increase the numer of facilities eyond the point that minimi>es total logistics cost to improe the response time to its customers. Anser! T"#$ %iff! 1 Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design
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1:) =hen faced ith a netor( design decision, the goal of a manager is to design a netor( that minimi>es the firm0s costs hile satisfying customer needs in terms of demand and responsieness. Anser! FA+S$ %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design &3) The supply chain netor( is designed to ma;imi>e total profits, ta(ing into account the e;pected margin and demand in each mar(et, arious logistics and facility costs, and the ta;es and tariffs at each location. Anser! T"#$ %iff! 1 Topic! 5. Frameor( for 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design &1) %ecisions concerning the role of each facility are significant ecause they determine the amount of fle;iility the supply chain has in changing the ay it meets demand. Anser! T"#$ %iff! 1 Topic! 5.1 The "ole of 'etor( %esign in the Supply hain AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design &&) 'etor( design decisions hae a significant impact on performance ecause they determine the supply chain configuration and set constraints ithin hich the other supply chain driers can e used either to decrease supply chain cost or to increase responsieness. Anser! T"#$ %iff! 1 Topic! 5.1 The "ole of 'etor( %esign in the Supply hain AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design &) f facilities hae higher fi;ed costs, many local facilities are preferred ecause this helps loer transportation costs. Anser! FA+S$ %iff! 1 Topic! 5.& Factors nfluencing 'etor( %esign %ecisions AAS*! Analytic S(ills +earning utcome! ompare common approaches to supply chain design
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5.& ?ultiple hoice Questions 1) Supply chain network design decisions include A) only the location of manufacturing, storage, or transportation-related facilities. *) only the allocation of capacity and roles to each facility. ) oth the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility. %) neither the location of manufacturing, storage, or transportation-related facilities nor the allocation of capacity and roles to each facility. $) none of the aoe Anser! %iff! 1 Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design &) Supply chain netor( design decisions classified as facility role are concerned ith A) hat processes are performed at each facility. *) here facilities should e located. ) ho much capacity should e allocated to each facility. %) hat mar(ets each facility should sere and hich supply sources should feed each facility. $) none of the aoe Anser! A %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design ) Supply chain netor( design decisions classified as facility location are concerned ith A) hat processes are performed at each facility. *) here facilities should e located. ) ho much capacity should e allocated to each facility. %) hat mar(ets each facility should sere and hich supply sources should feed each facility. $) none of the aoe Anser! * %iff! 1 Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design ) Supply chain netor( design decisions classified as capacity allocation are concerned ith A) hat processes are performed at each facility. *) here facilities should e located. ) ho much capacity should e allocated to each facility. %) hat mar(ets each facility should sere and hich supply sources should feed each facility. $) none of the aoe Anser! %iff! 1 Topic! 5.1 The "ole of 'etor( %esign in the Supply hain
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5) Supply chain netor( design decisions classified as market and supply allocation are concerned ith A) hat processes are performed at each facility. *) here facilities should e located. ) ho much capacity should e allocated to each facility. %) hat mar(ets each facility should sere and hich supply sources should feed each facility. $) none of the aoe Anser! % %iff! 1 Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 7) %ecisions concerning the role of each facility are significant ecause A) they determine the amount of fle;iility the supply chain has in demanding change. *) they determine the amount of fle;iility the supply chain has in changing the ay it meets demand. ) they determine the amount of capacity the supply chain has in changing the ay it meets demand. %) they determine the amount of inentory the supply chain has in demanding change. $) 'one of the aoe are true. Anser! * %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 8) Facility location decisions hae a long-term impact o n a supply chain0s performance ecause A) it is ery e;pensie to shut don a facility or moe it to a different location. *) it is not e;pensie to shut don a facility or moe it to a different location. ) it is adisale to shut don a facility or moe it to a different location. %) it is cost effectie to shut don a facility or moe it to a different location. $) none of the aoe Anser! A %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 9) apacity allocation decisions hae a significant impact on supply chain performance ecau se A) capacity decisions tend to e permanent. *) capacity decisions tend to e changed fre
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:) Allocating too much capacity to a location results in A) permanent damage. *) poor utili>ation, and as a result, higher costs. ) high utili>ation, and as a result, higher costs. %) poor utili>ation, and as a result, loer costs. $) high utili>ation, and as a result, loer co sts. Anser! * %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 13) Allocating too little capacity results in A) temporary damage. *) good responsieness if demand is not satisfied or lo cost if demand is filled from a distant facility. ) good responsieness if demand is not satisfied or high cost if demand is filled from a distant facility. %) poor responsieness if demand is not satisfied or lo cost if demand is filled from a distant facility. $) poor responsieness if demand is not satisfied or high cost if demand is filled from a distant facility. Anser! $ %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 11) The allocation of supply sources and mar(ets to facilities has a significant impact on performance ecause A) it cannot affect total production, inentory, and transportation costs incurred y the supply chain to satisfy customer demand. *) it cannot affect customer demand. ) it affects total production, inentory, and transportation costs incurred y the supply chain to satisfy customer demand. %) it cannot satisfy customer demand. $) none of the aoe Anser! %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design
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1&) The allocation of supply sources and mar(ets to facilities should e reconsidered on a regular asis so that A) the allocation can e held constant as mar(et conditions or plant capacities e;pand. *) the allocation can e changed as mar(et conditions or plant capacities stagnate. ) the allocation can e held constant as mar(et conditions or plant capacities change. %) the allocation can e changed as mar(et conditions or plant capacities change. $) none of the aoe Anser! % %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 1) 'etor( design decisions hae a significant impact on performance ecause they A) determine the supply chain configuration. *) determine the supply chain conflagration. ) set constraints ithin hich inentory, transportation, and information can e used to either decrease supply chain cost or increase responsieness. %) set constraints ithin hich inentory, transportation, and information can e used to either increase supply chain cost or decrease responsieness. $) A and only Anser! $ %iff! Topic! 5.1 The "ole of 'etor( %esign in the Supply hain 1) ustomer order entry is A) the point in time hen the customer has access to choices and ma(es a decision regarding a purchase. *) the customer informing the retailer of hat they ant to purchase and the retailer allocating product to the customer. ) the process here product is prepared and sent to the customer. %) the process here the customer receies the product and ta(es onership. $) none of the aoe Anser! * %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain +earning utcome! ompare common approaches to supply chain design 15) =hich of the folloing is not a factor influencing netor( design decisions in supply chains@ A) Strategic factors *) Tactical factors ) ?acroeconomic factors %) 4olitical factors $) nfrastructure factors Anser! * %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain 5-9 opyright 2 &31 4earson $ducation, nc. pulishing as 4rentice 6all
17) Firms focusing on cost leadership tend to A) locate facilities close to the mar(et they sere. *) locate facilities ery far from the mar(et they sere. ) find the loest cost location for their manufacturing facilities. %) select a high-cost location to e ale to react
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&3) A facility that also has lo cost as its primary oBectie, ut its strategic role is roader than that of an offshore facility is A) an offshore facility. *) a source facility. ) a serer facility. %) a contriutor facility. $) an outpost facility. Anser! * %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions &1) A facility uilt ecause of ta; incenties, local content reation, process improements, product modifications, or product deelopment is A) an offshore facility. *) a source facility. ) a serer facility. %) a contriutor facility. $) an outpost facility. Anser! % %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions
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&) A facility that creates ne products, processes, and technologies for the entire netor( is A) an offshore facility. *) a source facility. ) a serer facility. %) a lead facility. $) an outpost facility. Anser! % %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions &5) 4roduction technology displays significant economies of scale, A) many high-capacity locations are the most effectie. *) fe high-capacity locations are the most effectie. ) fe high-capacity locations are the least effectie. %) fe lo-capacity locations are the most effectie. $) fe lo-capacity locations are the least effectie. Anser! * %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions &7) f facilities hae loer fi;ed costs, A) a fe high-capacity facilities are preferred ecause this helps loer transportation costs. *) a fe local facilities are preferred ecause this helps loer transportation costs. ) many high-capacity facilities are preferred ecause this helps loer transportation costs. %) many local facilities are preferred ecause this helps loer transportation costs. $) one central facility is preferred ecause this helps loer transportation costs. Anser! % %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions &8) f the production technology is ery infle;ile and product re
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&9) f the technology is fle;ile, A) it ecomes more difficult to consolidate manufacturing in a fe large facilities. *) it ecomes more difficult to distriute manufacturing in many local facilities. ) it ecomes easier to consolidate manufacturing in a fe large facilities. %) it ecomes easier to consolidate manufacturing in many local facilities. $) the firm should hae one central facility. Anser! %iff! Topic! 5.& Factors nfluencing 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design &:) %uties that must e paid hen products and/or e
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&) *uilding some oer-capacity in the supply chain netor( and ma(ing the capacity fle;ile allos a firm to alter production flos ithin the supply chain to A) produce less in facilities that hae a loer cost ased on current e;change rates. *) produce more in facilities that hae a loer cost ased on current e;change rates. ) produce more in facilities that hae a higher cost ased on current e;change rates. %) produce less in facilities that hae the same cost ased on current e;change rates. $) 'one of the aoe are accurate. Anser! * %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions ) Total logistics costs are a sum of the A) inentory and facility costs. *) transportation and facility costs. ) inentory and transportation costs. %) inentory, transportation, and facility costs. $) inentory, transportation, and faculty costs. Anser! % %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions ) The facilities in a supply chain netor( must A) at least ma;imi>e total logistics cost. *) at least ees total logistics cost. ) at least ees total logistics cost. %) at least minimi>e total logistics cost. $) none of the aoe Anser! %iff! 1 Topic! 5.& Factors nfluencing 'etor( %esign %ecisions 5) =hen faced ith a netor( design decision, the goal of a manager is to design a netor( that A) ma;imi>es the firm0s profits. *) minimi>es the firm0s costs. ) satisfies customer needs in terms of demand and responsieness. %) ma;imi>es the firm0s profits hile satisfying customer needs in terms of demand and responsieness. $) none of the aoe Anser! % %iff! & Topic! 5. Frameor( for 'etor( %esign %ecisions
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7) =hich of the folloing is not a phase in the design of a gloal supply chain netor(@ A) %efine a supply chain strategy *) %efine the regional facility configuration ) Select desirale sites %) +ocation choices $) mplement supply chain strategy Anser! $ %iff! & Topic! 5. Frameor( for 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design 8) =hich of the folloing is the first phase in the design of a gloal supply chain netor(@ A) %efine a supply chain strategy *) %efine the regional facility configuration ) Select desirale sites %) +ocation choices $) mplement supply chain strategy Anser! A %iff! & Topic! 5. Frameor( for 'etor( %esign %ecisions 9) The oBectie of the first phase of netor( design is to A) ma;imi>e total profits, ta(ing into account the e;pec ted margin and demand in each mar(et. *) select a precise location and capacity allocation for each facility. ) select a set of desirale sites ithin each region here facilities are to e located. %) identify regions here facilities ill e located, their potential roles, and their appro;imate capacity. $) specify hat capailities the supply chain netor( must hae to support a firm0s competitie strategy. Anser! $ %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions :) The oBectie of the second phase of netor( design is to A) ma;imi>e total profits, ta(ing into account the e;pec ted margin and demand in each mar(et. *) select a precise location and capacity allocation for each facility. ) select a set of desirale sites ithin each region here facilities are to e located. %) identify regions here facilities ill e located, their potential roles, and their appro;imate capacity. $) specify hat capailities the supply chain netor( must hae to support a firm0s competitie strategy. Anser! % %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions
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3) The oBectie of the third phase of netor( design is to A) ma;imi>e total profits, ta(ing into account the e;pec ted margin and demand in each mar(et. *) select a precise location and capacity allocation for each facility. ) select a set of desirale sites ithin each region here facilities are to e located. %) identify regions here facilities ill e located, their potential roles, and their appro;imate capacity. $) specify hat capailities the supply chain netor( must hae to support a firm0s competitie strategy. Anser! %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions 1) t is ery important that long-term conse
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) The
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7) Firms that focus on cost leadership tend to find the loest-cost location might A) locate far from their customers. *) locate in a higher cost area to proide faster response. ) hae many facilities to ta(e adantage of economies of scale. %) increase inentory leels to reduce stoc(outs. Anser! A %iff! 1 Topic! 5.& Factors nfluencing 'etor( %esign %ecisions AAS*! %ynamics of the Cloal $conomy +earning utcome! ompare common approaches to supply chain design 8) ?acroeconomic factors influencing netor( design decisions ould typically 'T include A) tarriffs. *) e;change rates. ) shipping costs. %) aailale production technologies. Anser! % %iff! & Topic! 5.& Factors nfluencing 'etor( %esign %ecisions AAS*! %ynamics of the Cloal $conomy +earning utcome! ompare common approaches to supply chain design 9) DDDDDDDD costs increase as the numer of facilities in a supply chain increases. A) nentory *) Transportation ) "etail operation %) nformation Anser! A %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions +earning utcome! ompare common approaches to supply chain design :) apital, groth strategy, e;isting netor(s and gloal competition mostly affect hich of the four Cloal 'etor( %esign %ecisions@ A) 4hase - Supply hain Strategy *) 4hase - "egional Facility onfiguration ) 4hase - %esirale Sites %) 4hase E - +ocation hoices Anser! A %iff! & Topic! 5. Frameor( for 'etor( %esign %ecisions AAS*! %ynamics of the Cloal $conomy +earning utcome! ompare common approaches to supply chain design
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53) The aailaility of suppliers, transportation serices, communication, utilities, and arehousing infrastructure mostly affect hich of the four Cloal 'etor( %esign %ecisions@ A) 4hase - Supply hain Strategy *) 4hase - "egional Facility onfiguration ) 4hase - %esirale Sites %) 4hase E - +ocation hoices Anser! %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions AAS*! ?ulticultural %iersity #nderstanding +earning utcome! ompare common approaches to supply chain design 51) Tariffs, economies of scale and aggregate factor costs mostly affect hich of the four Cloal 'etor( %esign %ecisions@ A) 4hase - Supply hain Strategy *) 4hase - "egional Facility onfiguration ) 4hase - %esirale Sites %) 4hase E - +ocation hoices Anser! * %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions 5&) Aailale infrastructure, s(ill needs and response time mostly affect hich of the four Cloal 'etor( %esign %ecisions@ A) 4hase - Supply hain Strategy *) 4hase - "egional Facility onfiguration ) 4hase - %esirale Sites %) 4hase E - +ocation hoices Anser! %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions AAS*! %ynamics of the Cloal $conomy +earning utcome! ompare common approaches to supply chain design 5) ?anagers should (eep certain issues in mind hen ma(ing netor( design decisions for a supply chain. =hich of these ould NOT e on that list@ A) Quality of life *) Tarriffs and ta; incenties ) ultural implications %) The life span of most facilities is getting shorter and shorter. Anser! % %iff! 1 Topic! 5.5 ?a(ing 'etor( %esign %ecisions in 4ractice
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5. $ssay Questions 1) $;plain ho supply chain netor( design decisions are classified. Anser! Supply chain network design decisions include the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility. Supply chain netor( design decisions are classified as follos! 1. Facility role: =hat role should each facility play@ =hat processes are performed at each facility@ &. Facility location: =here should facilities e located@ . Capacity allocation: 6o much capacity should e allocated to each facility@ . Market and supply allocation! =hat mar(ets should each facility sere@ =hich supply sources should feed each facility@ %iff! & Topic! 5.1 The "ole of 'etor( %esign in the Supply hain
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&) %escrie the factors that influence supply chain netor( design decisions. Anser! Strategic Factors Firms focusing on cost leadership tend to find the loest cost location for their manufacturing facilities, een if that means locating ery far from the mar(ets they sere. Firms focusing on responsieness tend to locate facilities closer to the mar(et and may select a high-cost location if this choice allos the firm to
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Co!petiti%e Factors ompanies must consider competitorsG strategy, si>e, and location hen designing their supply chain netor(s. A fundamental decision firms ma(e is hether to locate their facilities close to competitors or far from them. 6o the firms compete and hether e;ternal factors such as ra material or laor aailaility force them to locate close to each other influence this decision. 4ositie e;ternalities lead to competitors locating close to each other. =hen there are no positie e;ternalities, firms locate to e ale to capture the largest possile share of the mar(et. Custo!er &esponse Ti!e and 'ocal "resence Firms that target customers ho alue a short response time must locate close to them. f a firm is deliering its product to customers, use of a rapid means of transportation allos it to uild feer facilities and still proide a short response time. This option, hoeer, increases transportation costs. ?oreoer, there are many situations here the presence of a facility close to a customer is important. 'ogistics and Facility Costs +ogistics and facility costs incurred ithin a supply chain change as the numer of facilities, their location, and capa city allocation is changed. ompanies must consider inentory, transportation, and facility costs hen designing their supply c hain netor(s. nentory and facility costs increase as the numer of facilities in a supply chain increase. Transportation costs decrease as the numer of facilities is increased. ncreasing the numer of facilities to a point here inound economies o f scale are lost increases transportation cost. The supply chain netor( design is also influenced y the transformation occurring at each facility. =hen there is a significant reduction in material eight or olume as a result of processing, it may e etter to locate facilities closer to the supply source rather than the customer. Total logistics costs are a sum of the inentory, transportation, and facility costs. The facilities in a supply chain netor( must at least ees total logistics costs. A firm may increase the numer of facilities eyond this point to improe the response time to its customers. This decision is Bustified if the reenue increase from improed response outeighs the increased cost from additional facilities. %iff! Topic! 5.& Factors nfluencing 'etor( %esign %ecisions
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) %escrie the four phases in the frameor( for netor( design decisions. Anser! "hase # De$ine a Supply Chain Strategy The oBectie of the first phase of netor( design is to define a firm0s supply chain strategy. The supply chain strategy specifies hat capailities the supply chain netor( must hae to support a firm0s competitie strategy. 4hase starts ith a clear definition of the firm0s competitie strategy as the set of customer needs that the supply chain aims to satisfy. 'e;t, managers must forecast the li(ely eolution of gloal competition and hether competitors in each mar(et ill e local or gloal players. ?anagers must also identify constraints on aailale capital and hether groth ill e accomplished y ace of the demand as ell as a determination of hether the customer re
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"hase #* 'ocation Choices The oBectie of this phase is to select a precise location and capacity allocation for each facility. Attention is restricted to the desirale sites selected in 4hase . The netor( is designed to ma;imi>e total profits, ta(ing into account the e;pected margin and demand in each mar(et, arious logistics and facility costs, and the ta;es and tariffs at each location. %iff! Topic! 5. Frameor( for 'etor( %esign %ecisions
) $;plain the to situations in hich managers use netor( design models. Anser! ?anagers use netor( design models in to different situations. First, these models are used to decide on locations here facilities ill e estalished and the capacity to e assigned to each facility. ?anagers must ma(e this decision considering a time hori>on oer hich locations and capacities ill not e altered Htypically in years). Second, these models are used to assign current demand to the aailale facilities and identify lanes along hich product ill e transported. ?anagers must consider this decision at least on an annual asis as demand, prices, and tariffs change. n oth cases, the goal is to ma;imi>e the profit hile satisfying customer needs. %iff! & Topic! 5. ?odels for Facility +ocation and apacity Allocation
5-& opyright 2 &31 4earson $ducation, nc. pulishing as 4rentice 6all
