Unit III

Designing a Supply Chain Network

1. Role of network design in SCs

 Determines SC configuration
 Four major decision areas
o Facility role: purpose of each facility; processes at each facility
o Facility location
o Capacity allocation to each facility
o Supply and Market allocation: from and to each facility
 The four decision factors affect each other

2. Factors influencing network design decisions

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3. Framework for network design decisions
There are four phases in the framework for designing a global SC network.

4. Network optimization models

 There are optimization models available for II, III, and IV phases.
 The following example illustrates the use of an optimization model (known
as the capacitated plant location model) in Phase II.

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SunOil, a petrochemical products manufacturer, with sales in North America, South America, and Europe is looking to
setup plants that meet demand in these locations. Demand in North America, South America, and Europe are 12, 8, and 14
million units respectively. The following table shows variable costs, which include production, inventory, and
transportation costs (including tariffs and duties) for manufacturing one million products. And the table also shows fixed
costs to build plants in respective regions. Low capacity plants can build 10 million units a year, and High capacity plants
20 million units. The assumption is that variable costs grow linearly with the quantity shipped or produced. All the costs are
in USD.

5. Risk Management in SCs

For details on the five topics presented above pl refer to:

 https://base-logistique-services.com/storage/app/media/Chopra_Meindl_SCM.pdf
Supply Chain Management by Chopra and Meindl (listed in the syllabus) Any latest edition
pages 108 – 122 (except “Gravity Location Model”)
pages 148 - 151
 https://slideplayer.com/slide/12720245/ for PPTs
 Online class schedule