Facility Decisions Network Design in a Supply Chain

Facility DecisionsNetwork Design in a Supply

Chain

Facility DecisionsNetwork Design in a Supply

Chain

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第十三單元 (2) ： Facility Decisions Network Design in a Supply Chain

蔣明晃教授

1

http://get.nccu.edu.tw:8080/getcdb/handle/getcdb/127023






Conventional NetworkConventional Network

CustomerStore

CustomerStore

CustomerStore

CustomerStore

CustomerStore

MaterialsDC

Final Assembly

ComponentManufacturing

ComponentsDC

PlantWarehouse

FinishedGoods DC

FinishedGoods DC

CustomerDC

CustomerDC

CustomerDC

VendorDC

VendorDC

VendorDC

Codigofonte.net

Codigofonte.net

Codigofonte.net

2

http://www.codigofonte.net/galeria-de-imagens/cliparts/visualizar/LOJA.jpg



► Facility role and processes needed to be performed

► Facility location: strategic view

》Lower cost, flexibility: Toyota

》Responsiveness, cost-effective: Amazon

► Capacity allocation

► Market and supply allocation

Network Design Decisions

Network Design Decisions

Microsoft。3

http://www.codigofonte.net/galeria-de-imagens/cliparts/34

► Strategic roles:

》Off-shore facility: low-cost for export production

》Source facility: low-cost facility for global production (involve manufacture through oversea)

》Server facility: regional market supporting

》Contributor facility: regional with development skills

》Outpost facility: regional build to gain local skills

》Lead facility: lead in development and process technologies

Factors Influencing Network Design Decisions


Microsoft。4


► Technological: availability, cost and flexibility

》examples: computer chips v.s. Coke

► Macroeconomic:

》 tariffs and tax incentives (WTO, regional agreements, free trade zone, local content & limits)

》Exchange rate and demand risk

► Political:

》stability; legal system

► Infrastructure:

》available sites, labor availability, proximity to transportation channels, local utilities



Microsoft。

5

http://office.microsoft.com/zh-hk/HA010152965.aspx

► Competitive:

》Positive externalities: company tend to locate close to each other, develop appropriate infrastructure

》 Locating to split the market: capture the largest market share

》Customer response time and local presence

0 1

1-ba



Microsoft。6


Local FG

Custom production with raw material at suppliers

Cost

Response Time HiLow

Low

Hi

The Cost-Response Time Frontier

The Cost-Response Time Frontier

Mix

Regional FG

Local WIP

Central FG

Central WIP

Central Raw Material and Custom production

7

► Logistics and facility costs:

》Inventory costs

》Transportation costs: weight or volume

》Facility setup and operating costs



8

Inventory

Percent Service Level Within Promised Time

Total Costs

Labor

Transportation

Facilities

Number of Facilities

Inventory

Percent Service Level Within Promised Time

Total Costs

Labor

Transportation

Facilities

Cost Build-up as a function of facilitiesCost Build-up as a

function of facilitiesC

os

t o

f O

pe

rati

on

s

9

A Framework for Global Site Location

A Framework for Global Site Location

GLOBAL COMPETITION

TARIFFS AND TAXINCENTIVES

REGIONAL DEMANDSize, growth, homogeneity,

local specifications

POLITICAL, EXCHANGERATE AND DEMAND RISK

AVAILABLEINFRASTRUCTURE

LOGISTICS COSTSTransport, inventory, coordination

Competitive STRATEGY

INTERNAL CONSTRAINTSCapital, growth strategy,

existing network

PRODUCTION TECHNOLOGIESCost, Scale/Scope impact, support

required, flexibility

COMPETITIVEENVIRONMENT

PRODUCTION METHODSSkill needs, response time

FACTOR COSTSLabor, materials, site specific

PHASE ISupply Chain

Strategy

PHASE IIRegional Facility

Configuration

PHASE IIIDesirable Sites

PHASE IVLocation Choices

10

RegionalFinished

Goods DC

RegionalFinished

Goods DC

Customer 1DC

Store 1

NationalFinished

Goods DC

Local DCCross-Dock

Local DC Cross-Dock

Local DCCross-Dock

Customer 2DC

Store 1

Store 2

Store 2

Store 3

Store 3

Tailored Network: Multi - Echelon Finished Goods Network

Tailored Network: Multi - Echelon Finished Goods Network

Codigofonte.net

11

http://www.codigofonte.net/galeria-de-imagens/cliparts/visualizar/LOJA.jpg

► Location of supply sources and markets

► Location of potential facility site

► Demand forecasts by market

► Facility, labor, and materials cost by site

► Transportation costs between each pair of sites

► Inventory costs by site as well as a function of quantity

► Sales price of product in different regions

► Taxes and tariffs as product is moved between locations

► Desired response time and other service factors

Information Needed for Design Decision

Information Needed for Design Decision

Microsoft。12


► Decide the regions where facilities to be located by considering regional demand, tariffs, economies of scale, and aggregate factor costs

► Two possible alternatives:

》Setup facility in each region

》Consolidate plants in few regions

Phase II: Network Optimization Models


13

► Decide the regions where facilities to be located by considering regional demand, tariffs, economies of scale, and aggregate factor costs

► Two possible alternatives:

》Setup facility in each region

》Consolidate plants in few regions



14

{0,1}

s.t.

Min

y

yKx

Dx

xcyf

i

ii

n

1jij

j

n

1iij

n

1i

m

1jijiji

n

1ii

◈ n =number of potential locations/capacity

◈ m = number of markets◈ Dj = annual demand of market j◈ Ki = capacity of plant i◈ fi = annualized fixed cost of

keeping factory i opened◈ Cij = cost of producing and

shipping 1 unit from factory i to market j

◈ yi = 1 if plant is located at site i, 0 otherwise

◈ xij = Quantity shipped from plant site i to customer j

The Capacitated Plant Location Problem


15

► Identify potential locations in each region

► Geographical locations:

》Plainer: Gravity location models

》Network: median models, center models

Phase III: Gravity Location Models

Phase III: Gravity Location Models

16

► Ton Mile-Center Solution》x,y: Warehouse

Coordinates

》xn, yn : Coordinates of delivery location n

》dn : Distance to delivery location n

》Fn : cost of shipping one unit for one mile

》Dn : Annual tonnage to delivery location n

Min nn

k

1nn FDdTC

Gravity Methods for Location


n

n

1inn

k

1n n

nnn

n

n

1inn

k

1n n

nnn

22

n

/dFD

dyFD

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d xF D

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nn )y(y)x(xd

17



k

1nDn XnFn

X=

k

1nDn Fn

k

1nDn YnFn

Y=

k

1nDn Fn

18

► Ton Mile-Center Solution》x,y: Warehouse

Coordinates

》xn, yn : Coordinates of delivery location n

》dn : Distance to delivery location n

》Fn : cost of shipping one unit for one mile

》Dn : Annual tonnage to delivery location n

Min nn

k

1nn FDdTC



n

n

1inn

k

1n n

nnn

n

n

1inn

k

1n n

nnn

22

n

/dFD

dyFD

y

/dFD

d xF D

x

nn )y(y)x(xd

19

► Decide how market will be allocated to facilities

► Must consider customer service constraints in term of response time

► Decision should be altered on a regular basis as cost change and market evolve.

Phase IV: Network Optimization ModelsPhase IV: Network

Optimization Models

20

n

1i

m

1jijijxcMin

0x

Kx

ij

i

m

1jij

Dx j

n

1iij

◈ Which market is served by which plant?

◈ Which supply sources are used by a plant?

Demand Allocation Model

Demand Allocation Model

》 n =number of potential locations/capacity

》 m = number of markets

》 Dj = annual demand of market j

》 Ki = capacity of plant i

》 Cij = cost of producing and shipping 1 unit from factory i to market j

》 xij = Quantity shipped from plant site i to customer j

s.t.

n

1i

m

1jijijxcMin

0x

Kx

ij

i

m

1jij

Dx j

n

1iij

s.t.

21

◈ n =number of potential locations/capacity

◈ m = number of markets◈ Dj = annual demand of market j

◈ Ki = capacity of plant i

◈ fi = annualized fixed cost of keeping factory i opened

◈ Cij = cost of producing and shipping 1 unit from factory i to market j


◈ xij = Quantity shipped from plant site i to customer j

{0,1}k;

s.t.

Min

yy

yKx

Dx

xcyf

i

m

1ii

ii

n

1jij

j

n

1iij

n

1i

m

1jijiji

n

1ii



22

1n

1iijx

yKDx iij

n

1jij

{0,1},k; yxyiij

n

1ii

s.t.


◈ xij = 1 if market j is supplied from plant site i, 0 otherwise

Capacitated Plant Location with Single

Sourcing

Capacitated Plant Location with Single

Sourcing

1n

1iijx

yKDx iij

n

1jij

{0,1},k; yxyiij

n

1ii

s.t.

n

1i

m

1jijiji

n

1ii xc Dyf jMin

23

Which plants to establish? Which warehouses to establish?How to configure the network? Which plants to establish? Which warehouses to establish?How to configure the network?

PlantsPlants WarehousesWarehouses

11

22

MarketsMarkets

Location Allocation Decisions

Location Allocation Decisions

24

◈ n =number of potential locations/capacity◈ m = number of markets or demand points◈ l = number of suppliers◈ t = number of potential warehouse locations◈ DJ = annual demand of market j◈ Ki = capacity of plant i◈ Sh = supply capacity at supplier h◈ We = potential warehouse capacity at site e◈ Fi = annualized fixed cost of keeping factory i opened◈ fe = annualized fixed cost of keeping warehouse e opened◈ Chi = cost of shipping 1 unit from supply source h to factory i◈ Cie = cost of producing and shipping 1 unit from factory i to

warehouse e◈ Cej = cost of shipping 1 unit from warehouse e to market j

Locate Plants and Warehouses

Simultaneously


Simultaneously

25


Simultaneously


Simultaneously

supplier manufactory customer

( l ) ( n ) ( t ) ( m )

warehouseplant market

Sh Ki We Dj

◈ l = number of suppliers◈ m = number of markets or demand points◈ n =number of potential locations/capacity◈ t = number of potential warehouse locations◈ DJ = annual demand of market j◈ Ki = capacity of plant i◈ Sh = supply capacity at supplier h◈ We = potential warehouse capacity at site e

26


Simultaneously


Simultaneously


( l ) ( n ) ( t ) ( m )


Sh Ki We Dj

Fi fe

◈ Fi = annualized fixed cost of keeping factory i opened

◈ fe = annualized fixed cost of keeping warehouse e opened

◈ Chi = cost of shipping 1 unit from supply source h to factory i

◈ Cie = cost of producing and shipping 1 unit from factory i to warehouse e

◈ Cej = cost of shipping 1 unit from warehouse e to market j

CejCieChi

27

◈ yi = 1 if factory is located at side i

◈ ye = 1 if warehouse is located at side e

◈ xej = quantity shipped from warehouse e to market j per year

◈ xie = quantity shipped from factory i to warehouse e per year

◈ xhi = quantity shipped from supplier h to factory i per year


Simultaneously


Simultaneously

28


Simultaneously


Simultaneously


( l ) ( n ) ( t ) ( m )


Sh Ki We Dj

Fi fe

CejCieChi

◈ yi = 1 if factory is located at side i◈ ye = 1 if warehouse is located at side e◈ xej = quantity shipped from warehouse e to market j per year◈ xie = quantity shipped from factory i to warehouse e per year◈ xhi = quantity shipped from supplier h to factory i per year

yi ye xejxiexhj

29

ej

t

1e

m

1jej

n

1i

t

1eieiehi

l

1h

n

1ihi

t

1eeei

n

1ii xcxcxcyfyFMin


Simultaneously


Simultaneously


( l ) ( n ) ( t ) ( m )


Sh Ki We Dj

Fi fe

CejCieChi

yi ye xejxiexhj

30

m,1,jforDx

t,1,eforyWx

t,1,efor0xx

n,1,iforyKx

n,1,ifor0xx

l,1,hforSx

j

t

1eej

ee

m

1jej

m

1jej

n

1iie

ii

t

1eie

t

1eie

l

1hhi

h

n

1ihi


Simultaneously


Simultaneously

31

◈ If rj is the revenue form selling one unit in market j, the objective function of the capacitated plant location model can be modified as

◈ Also the constraint related to demand is modified as

◈ Customer preferences and requirements can be modeled in terms of modes of transportation.

n

1i

m

1jijiji

n

1ii

m

1j

n

1iijj xcyfxrMax

Dx j

n

1iij

Accounting for Taxes, Tariffs, and Customer RequirementsAccounting for Taxes, Tariffs, and Customer Requirements

32

► Do not underestimate the life span of facilities

► Do not gloss over the cultural implications

► Do not ignore quality of life issues

► Focus on tariffs and tax incentives when locating facilities

Making Network Design Decisions in Practice

Making Network Design Decisions in Practice

Microsoft。33


版權聲明頁碼作品授權條件作者 /來源

2, 11本作品轉載自 Codigofonte.net 網站 (http://www.codigofonte.net/galeria-de-imagens/cliparts/visualizar/LOJA.jpg) ，瀏覽日期2012/2/18。依據著作權法第 46 、 52 、 65 條合理使用。

2, 11 國立臺灣大學蔣明晃

2本作品轉載自 Codigofonte.net 網站 (http://www.codigofonte.net/galeria-de-imagens/cliparts/visualizar/FABRICA2.gif) ，瀏覽日期 2012/2/18。依據著作權法第 46 、 52 、65 條合理使用。

3 本作品轉載自 Microsoft Office 2007 多媒體藝廊，依據 Microsoft 服務合約及著作權法第 46 、 52 、 65 條合理使用。





34


版權聲明頁碼作品授權條件作者 /來源

33本作品轉載自 Microsoft Office 2007 多媒體藝廊，依據Microsoft 服務合約及著作權法第 46 、 52 、 65 條合理使用。

35

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Facility Decisions Network Design in a Supply Chain