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Outline
Designing the Distribution Network in Supply Chain
Factors Influencing Distribution Network Design Design Options for Distribution Network Selecting Distribution Network Design
Response Time
Transportation
Number of Facilities
Facility
Number of Facilities
Order visibility
Ability of customer to track their order from placement to delivery
Returnability
Ease with which customer can return unsatisfactory merchandise and ability of logistics network to handle such returns
Retailer
Customers
Product variety
Product availability Customer experience
H
H M L L
Product Flow
Information Flow
Retailer
Product availability
H
H L L
Customers
Product Flow Information Flow
Product availability
M
H M M
Customers
Product Flow Information Flow
Distributor/Retailer Warehouse
Product availability
L
H M M
Customers
Product Flow Information Flow
Inventory Transportation
? L ? H L H
Retailer
Cross Dock DC
Pickup Sites
Product availability
Customer experience
H
L H H
Customers
Product Flow
Information Flow
Customer Flow
Inventory Transportation Facilities and handling Information Response time Product variety Product availability
1 4 1 4 4 1 1
2 2 3 3 3 2 2
3 5 4 2 2 3 3
4 1 6 1 1 4 4
Customer experience
Order visibility Returnability
4
5 5
3
4 5
2
3 4
1
2 3
5
6 2
5
1 1
High-demand product Medium-demand product Low-demand product Very low-demand product Many product source High product value Quick desired response High product variety Low customer effort
-2 -1 +1 +2 -1 +2 -2 +2 +1
0 +1 +1 0 +2 +1 -1 +1 +2
+1 0 -1 -2 +1 0 +1 0 +2
+2 +1 -1 -2 +1 -1 +2 -1 -2
GLOBAL COMPETITION
REGIONAL DEMAND
AVAILABLE INFRASTRUCTURE
inventory, coordination
Operations
Distribution
Services
Phase IV involves selecting specific facilities and allocating capacity within those selected, given,
Fixed facility cost, transportation cost, production cost, inventory cost, coordination cost
Question:
Where to locate facilities to service their demand What size to build in the region (small or large), should they locate a facility there
m: number of markets Dj: demand from market j Ki: capacity of plant i fi: fixed cost of keeping plant i open cij: variable cost of sourcing market j from plant i yi = 1 if plant is located at site i, = 0 otherwise xij: quantity shipped from plant i to market j
s.t.
x
i 1 m
ij
Dj K i yi
for j 1, , m for i 1, , n
x
j 1
ij
yi {0,1} for i 1, , n
d
n 1
Dn Fn
Limitions?
s.t.
x
i 1 m
ij
Dj Ki
x
j 1
ij
xij 0
customer3
min s.t.
f y f
i 1 i i e 1