Unit 2

Basic Concept of Designing In Supply chain:-

Designing in supply chain management refers to the process of structuring

and optimizing the flow of goods and services throughout a company’s
supply chain, aiming to achieve the best balance between cost, efficiency,
and responsiveness by strategically selecting suppliers, manufacturing
locations, distribution channels, and inventory levels to meet customer
demand effectively.

Key aspects of supply chain design include:

Demand forecasting:

Predicting future customer demand to ensure proper inventory levels and

production planning.

Network design:

Deciding on the optimal locations for suppliers, warehouses, production

facilities, and distribution centers to minimize transportation costs.

Inventory management:

Determining the right amount of inventory to hold at each stage of the

supply chain to balance cost and availability.

Sourcing strategy:

Selecting the best suppliers based on factors like price, quality, reliability,
and delivery time.

Transportation mode selection:

Choosing the most appropriate transportation method (truck, rail, air, sea)
based on product type, delivery time, and cost.

Production planning:

Scheduling manufacturing activities to meet demand while optimizing

production capacity.

Risk management:

Identifying potential disruptions in the supply chain (natural disasters,

geopolitical issues) and developing mitigation strategies.
Goals of supply chain design:

Cost reduction: Minimizing overall supply chain costs through efficient

operations and optimized inventory levels.

Improved customer service: Ensuring timely delivery of products to meet

customer expectations.

Increased agility: Adapting to changing market conditions and customer

demands quickly.

Sustainability: Incorporating environmentally friendly practices throughout

the supply chain.

Designing A Distribution Network :-

Designing a distribution network in a supply chain involves planning the flow

of goods from manufacturers to consumers. The goal is to make sure
products are delivered efficiently, on time, and at a cost.

Steps for designing a distribution network:

Consider customers: Understand your customers’ needs and preferences

Research distribution channels: Consider wholesalers, retailers, and online

sales

Choose locations: Decide where to put warehouses, distribution centers, and

production facilities

Develop a transportation strategy: Pick the best modes of transportation, like

air, sea, road, or rail

Optimize inventory: Use inventory management systems to reduce costs and

improve cash flow

Track performance: Measure results and make adjustments to improve the

network

Other considerations :-

Regulatory compliance: Ensure the network meets all relevant regulations

Market conditions: Take into account market trends and demand variability

Technology: Use information systems to manage the network

Sustainability: Consider the environmental impact of the network

Distribution Network in Practice :-

A “distribution network in practice” refers to the real-world system of

warehouses, transportation routes, and logistics processes used by a
company to move goods from a production facility to the end consumer.

Key points about a distribution network in practice:

Centralized vs. decentralized:

Companies can choose to have a single large distribution center (centralized)

or multiple smaller warehouses spread geographically (decentralized)
depending on their needs.

Different distribution models:

Direct distribution: Goods are shipped directly from the manufacturer to the
customer.

Wholesale distribution: Goods are sent to wholesalers who then distribute to

retailers.

Retail distribution: Goods are shipped directly to retail stores.

Hub-and-spoke model: Goods are first sent to a central hub and then
distributed to smaller locations.

Example of a distribution network in practice:

A large online retailer like Amazon: Products from various suppliers are sent
to massive central warehouses where they are sorted and stored. When a
customer places an order, the items are picked, packed, and shipped directly
from the warehouse to the customer’s address using a network of delivery
trucks.

Role of Distribution Network :-

A distribution network moves products from a manufacturer to the end

consumer. It’s a vital part of supply chain management that helps companies
meet customer demands and reduce costs.

How does a distribution network work?

A distribution network includes warehouses, transportation systems, and
storage facilities.

It can be direct, meaning the manufacturer sells directly to the consumer, or

indirect, meaning the manufacturer uses intermediaries like wholesalers or
retailers.

A distribution network can help companies reach customers quickly and

efficiently.

Benefits of a distribution network

Lower costs

A well-defined distribution strategy can reduce transportation, inventory

holding, and warehousing costs.

Better customer experience

A distribution network that delivers products on time and in full can improve
customer satisfaction.

Higher profits

A distribution network that helps companies reach customers quickly and

efficiently can lead to higher profits.

Factors Influencing Distribution Network:-

Key factors influencing a distribution network in supply chain management

include:

Customer Demand:

The volume and geographic distribution of customer orders directly influence

the location and capacity of distribution centers needed to meet demand
effectively.

Transportation Costs:

The cost of moving goods between suppliers, warehouses, and customers is

a major factor in network design, impacting the choice of transportation
modes and routes.

Inventory Levels:
Balancing inventory levels at different points in the network is crucial to
optimize costs and ensure product availability while managing stock levels.

Product Characteristics:

The size, weight, perishability, and value of products influence the type of
packaging, storage requirements, and transportation methods needed.

Geographical Location:

The proximity of suppliers, customers, and potential distribution centers,

along with geographical barriers, affect the network design.

Lead Times:

The time required to deliver products from the point of origin to the
customer, impacting inventory management and responsiveness.

Regulatory Compliance:

Industry-specific regulations regarding product handling, labeling, and

transportation can influence distribution network design.

Demand Variability:

Fluctuations in customer demand can necessitate flexible distribution

network strategies to manage inventory levels effectively.

Desired Service Levels:

Customer expectations regarding delivery speed and reliability impact the

choice of transportation modes and distribution center locations.

Sustainability Considerations:

Environmental impact factors like carbon footprint and energy consumption

can influence the selection of transportation modes and warehouse locations.

Modelling for Supply Chain :-

Supply chain modeling is a process that uses mathematical models to

analyze and optimize a supply chain. It helps businesses understand and
improve their supply chain performance.

Supply chain modeling is a process that helps businesses plan and optimize
their supply chain. It’s an analytical process that uses a digital representation
of a supply chain to simulate different scenarios.
Benefits of supply chain modeling

Helps identify risks and vulnerabilities

Helps determine the best strategies for sourcing materials

Helps select suppliers

Helps manage inventories

Helps respond to disruptions

Helps improve logistics

Helps deliver products on time

Helps resolve supply chain issues

Helps cut costs

Helps increase shipping speed

Benefits of supply chain modeling

Cost reduction: Helps companies identify ways to reduce costs

Risk management: Helps companies identify vulnerabilities and risks

Improved customer service: Helps companies meet customer service goals

Better decision-making: Helps companies make informed decisions

Improved supply chain efficiency: Helps companies improve the flow of

products and services

Types of supply chain models

Continuous-flow model: Works well for mature industries with stable demand

Fast model: Works well for products with a short lifecycle, like fashion

Flexible model: Works well for industries with unpredictable demand and
products that are made to order

Just-In-Time (JIT) model: Works well for reducing inventory levels and
improving operational efficiency