SUP 3033 Network Design and Planning

Assignment #1

Date:
Instructor Greta Todorova
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Supply Chain Network Design Under Operational and Disruption Risks

Introduction:

Supply chain network design is the process of strategically deciding on a supply chain's best
organizational layout in order to meet predetermined goals and objectives. In particular, in the
face of operational and interruption threats, good network architecture is crucial for supply
chain management success.
 The purpose of this paper is to investigate the significance of supply chain network architecture
in light of operational and disruption concerns, as well as its traits, unique advantages, and
difficulties. Modern organizations must operate efficiently and be competitive, which requires
good supply chain network architecture. Organizations can maintain a continuous and effective
flow of goods and services, cutting lead times, costs, and inventory levels, by proactively
managing operational and interruption risks. As a result, firms are better able to respond to
demand shifts, shifting market conditions, and unanticipated interruptions like natural
catastrophes, supplier problems, geopolitical upheavals, and major world crises. The key
component of supply chain management is optimized network design since it increases supply
chain resilience and customer service.

The architecture of the supply chain network has received a lot of attention recently due to
operational and interruption issues, according to the literature review. Researchers and
practitioners have looked into many models, methodologies, and approaches to address this
important problem. Strategies for risk management, decision-making frameworks, enhancing
resilience, and optimization algorithms are some of the major themes in the literature. In order
to improve supply chain performance, several studies have emphasized the significance of
taking multi-dimensional risk indicators into account and including risk factors in the network
design process.

Characteristics of Supply Chain Network Design under Operational and Disruption Risks:
a. Multi-objective optimization: The network design process often involves optimizing
conflicting objectives, such as cost minimization, service level maximization, and risk mitigation.
b. Data-driven decision-making: Access to accurate and real-time data is essential for making
informed decisions regarding network design and risk assessment.
c. Scenario analysis: Considering multiple scenarios and simulations helps in identifying
vulnerabilities and designing flexible supply chain networks capable of withstanding disruptions.
d. Collaborative approach: Involving multiple stakeholders, including suppliers, logistics
providers, and customers, fosters a more robust and responsive supply chain network.

Benefits and Challenges:

a) Benefits:
i. Improved resilience: Strong network designs are better able to tolerate operational hiccups
and uncertainties, guaranteeing supply chain continuity.
ii. Cost reduction: Strategic network design lowers expenses associated with warehousing,
inventory management, and transportation by strategically placing facilities.
iii. Better customer service: A well-designed network guarantees faster order fulfilment and
shorter lead times, which raises customer satisfaction.
iv. Competitive edge: In markets that are dynamic, companies who have flexible and robust
supply networks have an advantage.

b) Challenges:
i. Data availability and quality: Obtaining reliable and up-to-date data for risk assessment and
optimization remains a challenge for many organizations.

ii. Complexity: The network design process involves numerous variables, constraints, and
interdependencies, making it complex and challenging to model accurately.

iii. Trade-offs: Balancing conflicting objectives in the network design process requires careful
consideration of trade-offs between risk, cost, and service levels.

iv. Implementation: Translating optimal network designs into practical implementation involves
organizational and logistical challenges.

Real-World Examples:
a) Apple, Inc.
For its effective and creative supply chain management, Apple is well-known. Apple's supply
chain network design places a strong emphasis on risk reduction through a diversified supplier
base dispersed across many geographies to ensure resiliency. Apple lessens its dependence on a
single source by using many sources for essential components, which lessens the impact of
disruptions. This tactic was especially clear during the 2011 earthquake in Japan, which had an
impact on several important suppliers in the area. Apple's capacity to swiftly change suppliers
helped them to preserve a largely steady flow of goods to the market, highlighting the
significance of a strong and adaptable supply chain network design.

b) Toyota Motor Corporation.

One of the top automakers, Toyota, uses a hybrid network design technique that combines local
and centralised distribution hubs. Toyota is able to balance the risk brought on by interruptions
to suppliers and changes in demand because to this strategy. While centralised distribution
centres offer economies of scale and better inventory control, regional distribution centres
enable quicker response times to local market demands. Toyota improves the efficacy of its
supply chain network and ensures greater resilience in the event of unforeseen disruptions by
carefully placing its facilities.
 c) The COVID-19 Pandemic.
The COVID-19 pandemic outbreak in 2020 posed supply networks with previously unheard-of
difficulties. The disruption brought on by factory closures, shipping constraints, and changing
demand was easier to manage for businesses that had invested in flexible and varied sourcing
strategies. For instance, several businesses that had suppliers from a variety of locations were
able to move their manufacturing to areas that were less affected by the pandemic. Others may
find different ways to carry goods when conventional channels were disrupted since they have
various transportation routes and partners. Such adaptability and diversity in the supply chain
network design were crucial to preserving the flow of necessities and reducing the crisis's
effects on companies and customers.

Conclusion:
Supply chain management requires careful consideration of operational and interruption risks
when designing the supply chain network. To develop robust and effective networks,
organisations must take into account risk considerations, maximise trade-offs, and adopt a
collaborative mindset. By doing this, they may increase their competitiveness, adapt to
changing market conditions, and survive unforeseen interruptions, resulting in a supply chain
that is strong and sustainable.