Framework for Network Design Decisions in the Supply Chain

The goal when designing a supply chain network is to maximize the firm’s profits while satisfy­ing customer needs in terms of demand and responsiveness. To design an effective network, a manager must consider all the factors described in Section 5.2 and those discussed in Chapter 4. Global network design decisions are made in four

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Models for Facility Location and Capacity Allocation in the Supply Chain

A manager’s goal when locating facilities and allocating capacity should be to maximize the overall profitability of the resulting supply chain network while providing customers with the appropriate responsiveness. Revenues come from the sale of product, whereas costs arise from facilities, labor, transportation, material, and inventories. The profits of the firm are also affected

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Making Network Design Decisions in the Supply Chain in Practice

Managers should keep the following issues in mind when making network design decisions for a supply chain. Do not underestimate the life span of facilities. It is important to think through the long­term consequences of facility decisions because facilities last a long time and have an enduring impact on a firm’s performance. Managers must

Managing Growth at SportStuff.com

In December 2008, Sanjay Gupta and his management team were busy evaluating the performance at Sport- Stuff.com over the previous year. Demand had grown by 80 percent. This growth, however, was a mixed blessing. The venture capitalists supporting the company were very pleased with the growth in sales and the resulting increase in revenue.

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Designing the Production Network at CoolWipes

Matt O’Grady, vice president of supply chain at Cool- Wipes, thought that his current production and distribu­tion network was not appropriate, given the significant increase in transportation costs over the past few years. Compared to when the company had set up its produc­tion facility in Chicago, transportation costs had increased by a factor of

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The Impact of Globalization on Supply Chain Networks

Globalization offers companies opportunities to simultaneously increase revenues and decrease costs. In its 2008 annual report, P&G reported that more than a third of the company’s sales growth was from developing markets with a profit margin that was comparable to developed mar­ket margins. By 2010, sales for the company in developing markets represented almost

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The Offshoring Decision: Total Cost of Global Supply Chains

This importance of comparative advantage in global supply chains was recognized by Adam Smith in The Wealth of Nations when he stated, “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry,

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Risk Management in Global Supply Chains

Global supply chains today are subject to more risk factors than localized supply chains of the past. These risks include supply disruption, supply delays, demand fluctuations, price fluctua­tions, and exchange rate fluctuations. As was evident in the financial crisis of 2008, underesti­mating risks in global supply chains and not having suitable mitigation strategies in

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Discounted Cash Flows in Global Supply Chains

Global supply chain design decisions should be evaluated as a sequence of cash flows over the duration of time they will be in place. This requires the evaluation of future cash flows account­ing for risks and uncertainties likely to arise in the global supply chain. In this section, we dis­cuss the basics of analysis

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Evaluating Supply Chain Network Design Decisions Using Decision Trees

In any global supply chain, demand, prices, exchange rates, and several other factors are uncer­tain and are likely to fluctuate during the life of any supply chain decision. In an uncertain envi­ronment, the problem with using a simple DCF analysis is that it typically undervalues flexibility. The result is often a supply chain that

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To Onshore or Offshore: Evaluation of Global Supply Chain Design Decisions Under Uncertainty

In this section, we discuss a supply chain design decision at D-Solar, a German manufacturer of solar panels, to illustrate the power of the decision tree analysis methodology for designing global supply chain networks while accounting for uncertainty. D-Solar faces a plant location decision in a global network with fluctuating exchange rates and demand

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Making Global Supply Chain Design Decisions Under Uncertainty in Practice

Managers should consider the following ideas to help them make better network design deci­sions under uncertainty. Combine strategic planning and financial planning during global network design. In most organizations, financial planning and strategic planning are performed independently. Strategic planning tries to prepare for future uncertainties but often without rigorous quan­titative analysis, whereas financial planning

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Global Supply Chain of BioPharma, Inc.

In 2013, Phillip (Phil) Landgraf faced several glaring problems in the financial performance of his company, BioPharma, Inc. The firm had experienced a steep decline in profits and high costs at its plants in Germany and Japan. Landgraf, the company’s president for world­wide operations, knew that demand for the company’s products was stable across

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The Sourcing Decision at Forever Young in Global Supply Chains

In 2011, telephone users numbered more than 4.6 billion worldwide. Until 2010, Nokia was the market leader with 29 percent of total market share, and it is still the leader in emerging economies such as China and India. Apple recently took first place in terms of revenue. In 2010, 1.6 billion cell phones were

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The Role of Forecasting in a Supply Chain

Demand forecasts form the basis of all supply chain planning. Consider the push/pull view of the supply chain discussed in Chapter 1. All push processes in the supply chain are performed in anticipation of customer demand, whereas all pull processes are performed in response to cus­tomer demand. For push processes, a manager must plan

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Characteristics of Forecasts in a Supply Chain

Companies and supply chain managers should be aware of the following characteristics of forecasts. Forecasts are always inaccurate and should thus include both the expected value of the forecast and a measure of forecast error. To understand the importance of forecast error, consider two car dealers. One of them expects sales to range between

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Components of a Forecast and Forecasting Methods in a Supply Chain

Yogi Berra, the former New York Yankees catcher who is famous for his malapropisms, once said, “It’s tough to make predictions, especially about the future.” One may be tempted to treat demand forecasting as magic or art and leave everything to chance. What a firm knows about its customers’ past behavior, however, sheds light

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Basic Approach to Demand Forecasting in a Supply Chain

The following five points are important for an organization to forecast effectively: Understand the objective of forecasting. Integrate demand planning and forecasting throughout the supply chain. Identify the major factors that influence the demand forecast. Forecast at the appropriate level of aggregation. Establish performance and error measures for the forecast. 1. Understand the Objective

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Time-Series Forecasting Methods in a Supply Chain

The goal of any forecasting method is to predict the systematic component of demand and esti­mate the random component. In its most general form, the systematic component of demand data contains a level, a trend, and a seasonal factor. The equation for calculating the systematic com­ponent may take a variety of forms: Multiplicative: Systematic

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Measures of Forecast Error in a Supply Chain

As mentioned earlier, every instance of demand has a random component. A good forecasting method should capture the systematic component of demand but not the random component. The random component manifests itself in the form of a forecast error. Forecast errors contain valu­able information and must be analyzed carefully for two reasons: Managers use

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