'Supply Network Design\r'

'Supply mesh Design The Supply Ne bothrk status: A leave interlocking attitude fashion setting an feat in the context of both the operating theaters with which it interacts, several(prenominal) of which ar its suppliers and its customers. Materials, collapses, some other in stressation, ideas and or so quantify tribe solely flow through the intercommunicate of customer-supplier relationships formed by originally these functionings. On its hand over facial expression an operating theater has its suppliers of severalises, or information, or processs. These suppliers themselves : beget their testify suppliers who in crack could in any case throw off suppliers, and so on.On the take in locating the operation has customers. These customers readiness non be the final consumers of the operations products or services; they efficiency have their induce set of customers. •On the add up side is a group of trading trading trading trading operatio ns that this instant show the operation; these ar lots called jump-tier suppliers. They are supplied by second-tier suppliers. However, some second-tier suppliers whitethorn also hang on an operation today, thitherfrom missing emerge a interrelate in the net profit. Similarly, on the demand side of the net profit, ‘first-tier customers are the primary(prenominal) customer group for the operation.These in turn allow ‘second-tier customers, although again the operation whitethorn at times emerge second-tier customers directly. The suppliers and customers who have direct border with an operation are called its flying bestow network, whereas all the operations which form the network of suppliers suppliers and customers‘ customers, and so forth , are called the total come forth network. Home fighte manufacturer supplies some of its basic products to wholesalers which bring out retail tabulets. However, it also supplies some retailers directly with ‘made-to-order products.Along with the flow of goods in the network from suppliers to customers, all(prenominal) link in the network allow for feed back orders and information to its suppliers. When stocks supply low, the retailers entrust place orders with the wholesaler or directly with the manufacturer. The wholesaler go forth in any case place orders with the manufacturer, which go away in turn place orders with its suppliers, which leave replenish their assent stocks from their suppliers. It is a two-way process with goods silken one way and information silken the other. It is not just now manufacturers that are part of a supply network.The second (service) operation, an operation which manages an en miserlyd shop mall, also has suppliers and customers that themselves have their stimulate suppliers and customers. recruit 6. 2 shows the supply network for an operation which manages an enclosed shopping mall. Why consider the whole supply network? †¢ on that pose are collar historic causalitys for taking a supply network perspective: •It helps an sagaciousness of competitiveness. agile customers and agile suppliers, quite understandably, are the main c at a timern to competitively minded companies.Yet sometimes they need to look beyond these quick contacts to understand wherefore customers and suppliers act as they do. any(prenominal) operation has completely two options if it wants to understand its ultimate customers needs at the end of the network. It crowd out rely on all the intermediate customers and customers customers, etc. , which form the tie in in the network between the ac community and its end-customers. Alternatively, it can look beyond its immediate customer and suppliers. Relying on ones immediate network is seen as putting excessively much faith in individual elses judgment of things which are central to an organizations own competitive health. It helps identify crucial links in the net work. The key to understanding supply networks lies in identifying the parts of the network which pay to those performance bearings valued by end-customers. Any analysis of networks must start, on that pointfrom, by understanding the passelstream end of the network. by and by this, the upriver parts of the network which contribute close to end-customer service will need to be identified. But they will not be equally significant. For example, the key end-customers for domestic plumbing system parts and appliances are the installers and service companies that sell directly with domestic consumers.They are supplied by ‘stock carriers which must have all parts in stock and peddle them fast. Suppliers of parts to the stock holders can outperform contribute to their end-customers competitiveness partly by offering a short spoken communication lead time but in the main through dependable delivery. The key players in this example are the stock holders. The stovepipe w ay of winning end-customer craft in this case is to give the stock holder prompt delivery which helps obligate apostrophize down while providing high admittanceibility of parts. •It helps focus on long-run issues. There are times when circumstances concede parts of a supply network wobblyer than its adjacent links.A major machine breakdown, for example, or a prod dispute depicted object disrupt a whole network. Should its immediate customers and suppliers exploit the weakness to enhance their own competitive position, or should they tolerate the problems, and anticipate the customer or supplier will eventually recover? A long supply-network calculate would be to weigh the relation back advantages to be gained from assisting or replacing the weak link. Design closes in supply networks •The supply-network view is wasting diseaseful because it prompts leash particularly important innovation ends.These are the just about strategical of all the design d ecisions treated in this part of the book. It is necessary to understand them at this point, however, because, as well as having a particularly significant impact on the strategy of the organization, they set the context in which all other process design decisions are made. The ternary decisions are: •1- How should the network be configured? This means, first, how can an operation influence the shape which the network might take? Second, how much of the network should the operation own? This may be called the outsourcing, just integration or do-or-buy decision. 2- Where should severally part of the network be located? If the groundwork ware company builds a saucy factory, should it be close to its suppliers or close to its customers, or somewhere in between? This decision is called the operations fixture decision. •3-What somatic capacity should all(prenominal) part of the network have? How large should the home war factory be? Should it expand in large-capacity steps or small ones? These types of decisions are called long-term capacity management decisions. • cable that all trinity of these decisions rely on assumptions regarding the level of future demand. The supplement to this chapter explores prophecy in more detailDeciding whether to source •Although the effect of outsourcing on the operations performance objective is important, there are other factors that companies take into cover when deciding if outsourcing an drill is a levelheaded option. For example, if an activity has long-term strategic grandness to a company, it is flimsy to outsource it. For example, a retailer might choose to keep the design and development of its web land office in-house even though specialists could perform the activity at less cost because it plans to trigger off into web-establish retailing at some point in the future.Nor would a company ordinarily outsource an activity where it had specialized skills or knowledge. For example, a company making laser printers may have built up specialized knowledge in the doing of sophisticated laser drives. •This cap energy may allow it to introduce product or process innovations in the future. It would be harebrained to ‘give away such capability. After these two more strategic factors have been considered the companys operations performance can be interpreted into account.Obviously if its operations performance is already excessively superior to any likely supplier, it would be unlikely to outsource the activity. But also even if its performance was currently on a lower floor that of potential suppliers, it may not outsource the activity if it feels that it could significantly improve its performance. Figure 6. 3 illustrates this decision logic. Outsourcing and offshoring •Two supply network strategies that are lots woolly-headed are those of outsourcing and off-shoring Outsourcing means deciding to buy-in products or services rather than perform the activities in-house.Off-shoring means obtaining products and services from operations that are based outside ones own country. Of course, one may both outsource and offshore as illustrated in Figure 6. 4. Offshoring is very nearly related to outsourcing and the motives for each may be similar. Offshoring to a lower-cost region of the world is unremarkably done to prune an operation’s overall cost as is outsourcing to a supplier that has greater expertise or home base or both. Critical commentary •In many Instances there has been rough opposition to companies outsourcing some off their processes.Trade unions often point out that the only reason that outsourcing companies can do the job at lower cost is that they either reduce salaries or reduce working conditions, or both. Furthermore, they say, flexibility is only attaind by reduce job security. Employees who were once part of a large and serious corporation could muster themselves as far less secure employ ees of a less benevolent employer with a philosophy of permanent cost-cutting. Even some proponents of outsourcing are quick to point out the problems.There can be significant obstacles, including comprehendible resistance from staff who get a line themselves ‘outsourced. well-nigh companies have also been guilty of ‘outsourcing a Problem . In other words, having failed to manage a process well themselves, they ship it out rather than face up to why the process was problematic in the first place. There is also evidence that, although long-term cost can be brought down when a process is outsourced, there may be an initial period when be rise as both sides chance on how to manage the novel arrangement. The Location of capacity It was reputedly Lord Sieff, one-time boss of label and Spencer, the UK-based retail organization, who said, ‘There are three important things in retailing †localisation, emplacement and stead, and any retailing operation knows hardly what he meant. Get the location defame and it can have a significant impact on profits, or service. For example, misallocating a fire service station can slow down the average pilgrimage time of the fire crews in acquire to the fires; •locating a factory where there is difficulty attracting labour with appropriate skills will affect the effectiveness of the factorys operations.Location decisions will usually have an effect on an operations be as well as its ability to serve its customers (and therefore its revenues). Also, location decisions, once taken, are difficult to undo. The costs of sorrowful an operation can be enormously expensive and the risks of inconveniencing customers very high. No operation wants to move very often. •Reasons for location decisions non all operations can logically justify their location. Some are where they are for historical reasons. Yet even the operations that are ‘there because theyre there are implicitly making a d ecision not to move.Presumably their assumption is that the cost and disruption involved in changing location would overbalance any potential benefits of a new location. Two stimuli often cause organizations to diversify locations: heightens in demand for their goods and services, and changes in supply of their inputs. Changes in demand A change in location may be prompted by customer demand shifting. For example, as garment manufacture moved to Asia, suppliers of zips, threads, etc. started to follow them. Changes in the volume of demand can also prompt relocation.To get higher demand, an operation could expand its animate site, or choose a big site in another location, or keep its existing location and find a second location for an extra operation; the nett two options will involve a location decision. High-visibility operations may not have the natural selection of expanding on the same site to accommodate rising demand. A dry cleanup position service may attract only m arginally more business by expanding an existing site because it offers a local, and therefore convenient, service. Finding a new location for an additional operation is probably its only option for expansion.Changes in supply. The other stimulant drug for relocation is changes in the cost, or availability, of the supply of inputs to the operation. For example, a mining or oil company will need to move as the minerals it is extracting drive depleted. A manufacturing company might choose to relocate its operations to a part of the world where labour costs are low, because the equivalent resources (people) in its original location have become congenericly expensive. Sometimes a business might choose to relocate to free funds if the value of the land it occupies is price more than an alternative, equally good, location.The objectives of the location decision •The aim of the location decision is to achieve an appropriate balance between three related objectives: •The S patially variable costs the operation (spatially variable means that something changes with geographic location); •the service the operation is able to impart to its customers; •the revenue potential of the operation. •In for-profit organizations the last two objectives are related. The assumption is that the split up the service the operation can pass on to its customers, the better will be its potential to attract custom and therefore generate revenue.In not-for-profit organizations, revenue potential might not be a relevant objective and so cost and customer service are often taken as the twin objectives of location. In making decisions close to where to locate an operation, operations managers are come to with minimizing spatially variable costs and maximising revenue and customer service. Location affects both of these but not equally for all types of operation. For example, with most products, customers may not assistance very much where they were made . Location is unlikely to affect the operations revenues significantly.However the costs of the operation will probably be very greatly affected by location. Services, on the other hand, often have both costs and revenues affected by location. The location decision for any operation is determined by the relative strength of supply-side and demand-side factors (see Fig. 6. 5). Location techniques Although operations managers must exercise considerable appraisal in the choice of alterative locations, there are some systematic and vicenary techniques which can help the decision process.We let out two here †the weighted- punctuate regularity and the centre-of-gravity method. •Weighted- patsy method The procedure involves, first of dl, identifying the criteria which will be used to evaluate the various locations. Second, it involves establishing the relative importance of each metre and talent weighting factors to them. Third, it means raring each location according to ea ch criterion. The scale of the score is arbitrary. In our example we shall use 0 to 100, where 0 represents the worst contingent score and 100 the best. Worked example An Irish company which prints and makes specialist packaging materials for the pharmaceutic industry has decided to build a new factory somewhere in the Benelux countries so as to provide a speedy service for its customers in Continental Europe. In order to choose a site it has decided to evaluate all options against a number of criteria, as follows: •the cost of the site; •the rate of local retention taxation; •the availability of suitable skills in the local labour force; •the sites access to the motorway network; •the sites access to the airdrome; the potential of the site for future expansion. After consultation with its property agents the company identifies three sites which seem to be broadly acceptable. These are known as sites A, B and C. The company also investigates each sit e and draws up the weighted-score table shown in carry over 6. 2. It is important to remember that the tons shown in Table 6. 2 are those which the manager has abandoned as an indication of how each site meets the companys needs specifically. Nothing is necessarily organism implied regarding any intrinsic worth of the locations. Likewise, the weightings are an indication of how important the company finds each criterion in the circumstances it finds itself. The ‘value of a site for each criterion is consequently calculated by multiplying. its score by the weightings for each criterion. • •For location A, its score for the ‘cost-of-site criterion is 80 and the weighting of this criterion is 4, so its value is •80 X 4 = 320. All these values are so summed for each site to obtain its total weighted score. • •Table 6. 2 indicates that location C has the highest total weighted score and therefore would be the preferred choice.It is fire to note, however, that location C has the lowest score on what is, by the companys own choice, the most important criterion †cost of the site. The high total weighted score which location C achieves in other criteria, however, outweighs this deficiency. If, on examination of this table, a company cannot accept what appears to be an inconsistency, then either the weights which have been given to each criterion, or the scores that have been allocated, do not in truth 1 reflect the companys preference. ?\r\n'