Professional Documents
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Supply Chain
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Chain INDUSTRY
Automobiles
% PURCHASED
67
Costs Beverages
Chemical
52
62
Food 60
Lumber 61
Metals 65
Paper 55
Petroleum 79
Restaurants 35
Transportation 62
Product design • Maximize • Low setup time • Modular design to aid product
characteristics performance • Rapid production differentiation
• Minimize cost ramp-up
Current International
transformation Pepsi Apple
Paper
End-User Paper
Forward integration Bottling Retail stores
Conversion
Finished goods
(customers)
Figure 11.2
h e n o r de he
w u gh t
▶ Issues re la y e d thr o
it h
a i n w
u pp ly ch as ing
▶ Local optimization can magnify
s
t io n s in c re
fluct u a
fluctuations c h s tep
at e a
▶ Incentives push merchandise into the
supply chain for sales that have not
occurred
▶ Large lots reduce shipping costs but
increase inventory holding and do not
reflect actual sales
Response time
$ Facility costs
Inventory costs
Transportation costs
1 2 3 4 5 1 2 3 4 5
Number of facilities Number of facilities
Revenue
Max
Total logistics cost
profit
$
1 2 3 4 5
Number of facilities
Figure 11.4