Supply chain management hw need help ( Network design)

Description

Designing Distribution Networks
? Consider the following 6 network designs (1 point each):
1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and in-transit merge
3. Distributor storage with carrier delivery
4. Distributor storage with last-mile delivery
5. Manufacturer/distributor storage with customer pickup
6. Retail storage with customer pickup
A. Provide an example for each design (exclude the examples that were discussed in the class). Analyze the current design and recommend a better one if needed.
here I attached my class notes and a excel sample file for your referenceHomework #4
 Consider the following 6 network designs (1 point each):
1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and in-transit merge
3. Distributor storage with carrier delivery
4. Distributor storage with last-mile delivery
5. Manufacturer/distributor storage with customer pickup
6. Retail storage with customer pickup
A. Provide an example for each design (exclude the
examples that were discussed in the class). Analyze the
current design and recommend a better one if needed.
48
Week 6: Designing Distribution Networks
BANA 290:
Supply Chain
Analytics
Spring 2023
Week 6: Designing
Distribution Networks
1
Week 6: Designing Distribution Networks
Agenda
• Aggregate Planning Example
• Chapter 4: Designing Distribution Network
– The Roll of Distribution in the SC
– Important Factors
– Design Options
– Online Sales and Distribution
– Examples
• Midterm Exam
• Homework
2
Week 6: Designing Distribution Networks
Aggregate Planning Example
 Anteater Electronics Manufacturer (AEM),
uses its Irvine, CA, facility to produce two
product categories: routers and switches.
Demand forecast for each category over the
next 12 months (in thousands of units) are
provided (see the provided Excel File)
3
Week 6: Designing Distribution Networks
Aggregate Planning Example, cont
 Manufacturing is primarily an assembly operation, and
capacity is identified as the number of people on the
production line. The plant operates 20 days a month, 8
hours each day. Production of a router takes 20
minutes, and production of a switch requires 10 minutes
of worker time. Each worker is paid $10 per hour, with a
50 percent premium for any overtime. The plant
currently has 6,300 employees. Overtime is limited to 20
hours per employee per month. The plant currently
maintains 100,000 routers and 50,000 switches in
inventory. The cost of holding a router in inventory is $3
per month, and the cost of holding a switch in inventory
is $1 per month.
4
Week 6: Designing Distribution Networks
Aggregate Planning Example, cont
 Assuming no backlogs, no subcontracting, no
layoffs, and no new hires, what is the optimum
production schedule for AEM? What is the
annual cost of this schedule? What inventories
does the optimal production schedule build?
Does this seem reasonable?
5
Week 6: Designing Distribution Networks
Distribution Network Design in the
Supply Chain

Distribution – the steps taken to move and store a
product from the supplier stage to the customer stage in
a supply chain

Impacts profitability by directly affecting supply chain
cost and the customer value

Choice of distribution network can achieve supply chain
objectives from low cost to high responsiveness
6
Week 6: Designing Distribution Networks
Factors Affecting Distribution Network
Design (1 of 3)
• Distribution network performance evaluated along two
dimensions
1. Value provided to the customer
2. Cost of meeting customer needs
Evaluate the impact on customer service and cost for
different distribution network options
• Profitability of the delivery network determined by
revenue from met customer needs and network costs

Factors Affecting Distribution
Network Design (2 of 3)

8
Elements of customer service influenced by network
structure:
 Response time
 Product variety
 Product availability
 Customer experience
 Time to market
 Order visibility
 Returnability
Week 6: Designing Distribution Networks
Factors Affecting Distribution
Network Design (3 of 3)

9
Supply chain costs affected by network structure:
 Inventories
 Transportation
 Facilities
 Information
Week 6: Designing Distribution Networks
Desired Response Time and Number of
Facilities
Figure 4-1 Relationship Between Desired Response Time and Number of
Facilities
Week 6: Designing Distribution Networks
10
11
Inventory Costs and Number of Facilities
Figure 4-2 Relationship Between Number of Facilities and Inventory Costs
Week 6: Designing Distribution Networks
Transportation Costs and Number of
Facilities
Figure 4-3 Relationship Between Number of Facilities and Transportation
Cost
Week 6: Designing Distribution Networks
12
13
Facility Costs and Number of Facilities
Figure 4-4 Relationship Between Number of Facilities and Facility Costs
Week 6: Designing Distribution Networks
14
Design Options for a Distribution Network (1 of 2)
• Distribution network choices from the manufacturer to the
end consumer
• Two key decisions
1. Will product be delivered to the customer location or
picked up from a prearranged site?
2. Will product flow through an intermediary (or
intermediate location)?
Week 6: Designing Distribution Networks
15
Design Options for a Distribution Network (2 of 2)
• One of six designs may be used
1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and intransit merge
3. Distributor storage with carrier delivery
4. Distributor storage with last-mile delivery
5. Manufacturer/distributor storage with customer pickup
6. Retail storage with customer pickup
Week 6: Designing Distribution Networks
Figure 4-6 Manufacturer Storage with
Direct Shipping (Drop-Shipping)
Orders
16
Week 6: Designing Distribution Networks
Manufacturer Storage with Direct
Shipping Network (1 of 2)
Table 4-1 Performance Characteristics of Manufacturer Storage with Direct
Shipping Network
Cost Factor
Performance
Inventory
Lower costs because of aggregation. Benefits of aggregation
are highest for low-demand, high-value items. Benefits are
large if product customization can be postponed at the
manufacturer.
Transportation
Higher transportation costs because of increased distance and
disaggregate shipping.
Facilities and
handling
Lower facility costs because of aggregation. Some saving on
handling costs if manufacturer can manage small shipments or
ship from production line.
Information
Significant investment in information infrastructure to
integrate manufacturer and retailer.
17
Week 6: Designing Distribution Networks
Manufacturer Storage with Direct
Shipping Network (2 of 2)
Table 4-1 [Continued]
18
Service Factor
Performance
Response time
Long response time of one to two weeks because of increased
distance and two stages for order processing. Response time may
vary by product, thus complicating receiving.
Product variety
Easy to provide a high level of variety.
Product availability
Easy to provide a high level of product availability because of
aggregation at manufacturer.
Customer experience
Good in terms of home delivery but can suffer if order from several
manufacturers is sent as partial shipments.
Time to market
Fast, with the product available as soon as the first unit is produced.
Order visibility
More difficult but also more important from a customer service
perspective.
Returnability
Expensive and difficult to implement.
Week 6: Designing Distribution Networks
Figure 4-7 In-Transit Merge
Network
19
Week 6: Designing Distribution Networks
In-Transit Merge (1 of 2)
Table 4-2 Performance Characteristics of In-Transit Merge
Cost Factor
Performance
Inventory
Similar to drop-shipping.
Transportation
Somewhat lower transportation costs than drop-shipping.
Facilities and handling
Handling costs higher than drop-shipping at carrier;
receiving costs lower at customer.
Information
Investment is somewhat higher than for drop-shipping.
20
Week 6: Designing Distribution Networks
In-Transit Merge (2 of 2)
Table 4-2 [Continued]
Service Factor
Performance
Response time
Similar to drop-shipping; may be marginally higher.
Product variety
Similar to drop-shipping.
Product availability
Similar to drop-shipping.
Customer
experience
Better than drop-shipping because only a single delivery is
received.
Time to market
Similar to drop-shipping.
Order visibility
Similar to drop-shipping.
Returnability
Similar to drop-shipping.
21
Week 6: Designing Distribution Networks
Figure 4-8 Distributor Storage with
Carrier Delivery
22
Week 6: Designing Distribution Networks
Distributor Storage with Carrier
Delivery (1 of 2)
Table 4-3 Performance Characteristics of Distributor Storage with Carrier
Delivery
23
Cost Factor
Performance
Inventory
Higher than manufacturer storage. Difference is not
large for faster-moving items but can be large for very
slow-moving items.
Transportation
Lower than manufacturer storage. Reduction is
highest for faster-moving items.
Facilities and handling
Somewhat higher than manufacturer storage. The
difference can be large for very-slow-moving items.
Information
Simpler infrastructure compared to manufacturer
storage.
Week 6: Designing Distribution Networks
Distributor Storage with Carrier
Delivery (2 of 2)
Table 4-3 [Continued]
Service Factor
Performance
Response time
Faster than manufacturer storage.
Product variety
Lower than manufacturer storage.
Product availability
Higher cost to provide the same level of availability as
manufacturer storage.
Customer
experience
Better than manufacturer storage with drop-shipping.
Time to market
Higher than manufacturer storage.
Order visibility
Easier than manufacturer storage.
Returnability
Easier than manufacturer storage.
24
Week 6: Designing Distribution Networks
Distributor Storage with
Last Mile Delivery
FIGURE 4-9
25
Week 6: Designing Distribution Networks
Distributor Storage with Last Mile
Delivery (1 of 2)
Table 4-4 Performance Characteristics of Distributor Storage with Last-Mile
Delivery
Cost Factor
Performance
Inventory
Higher than distributor storage with package carrier
delivery.
Transportation
Very high cost given minimal scale economies. Higher than
any other distribution option.
Facilities and handling
Facility costs higher than manufacturer storage or
distributor storage with package carrier delivery, but lower
than a chain of retail stores.
Information
Similar to distributor storage with package carrier delivery.
26
Week 6: Designing Distribution Networks
Distributor Storage with Last Mile
Delivery (2 of 2)
Table 4-4 [Continued]
27
Service Factor
Performance
Response time
Very quick. Same day to next-day delivery.
Product variety
Somewhat less than distributor storage with package carrier delivery
but larger than retail stores.
Product availability
More expensive to provide availability than any other option except
retail stores.
Customer experience
Very good, particularly for bulky items.
Time to market
Slightly longer than distributor storage with package carrier delivery.
Order visibility
Less of an issue and easier to implement than manufacturer storage
or distributor storage with package carrier delivery.
Returnability
Easier to implement than other previous options. Harder and more
expensive than a retail network.
Week 6: Designing Distribution Networks
Figure 4-10 Manufacturer or Distributor
Storage with Customer Pickup
28
Week 6: Designing Distribution Networks
Manufacturer or Distributor
Storage with Customer Pickup (1 of 2)
Table 4-5 Performance Characteristics of Network with Customer Pickup
Sites
Cost Factor
Performance
Inventory
Can match any other option, depending on the location of
inventory.
Transportation
Lower than the use of package carriers, especially if using an
existing delivery network.
Facilities and handling
Facility costs can be high if new facilities have to be built.
Costs are lower if existing facilities are used. The increase in
handling cost at the pickup site can be significant.
Information
Significant investment in infrastructure required.
29
Week 6: Designing Distribution Networks
Manufacturer or Distributor
Storage with Customer Pickup (2 of 2)
Table 4-5 [Continued]
30
Service Factor
Performance
Response time
Similar to package carrier delivery with manufacturer or
distributor storage. Same-day pickup is possible for items stored
at regional DC.
Product variety
Similar to other manufacturer or distributor storage options.
Product availability
Similar to other manufacturer or distributor storage options.
Customer experience
Lower than other options because of the lack of home delivery.
Experience is sensitive to capability of pickup location.
Time to market
Similar to manufacturer or distributor storage options.
Order visibility
Difficult but essential.
Returnability
Somewhat easier, given that pickup location can handle returns.
Week 6: Designing Distribution Networks
Figure 4-11 Retail Storage with
Customer Pickup
31
Week 6: Designing Distribution Networks
32
Comparative Performance of Delivery
Network Designs (1 of 3)
Table 4-7 Comparative Performance Rank of Delivery Network Designs
Retail
Storage
with
Customer
Pickup
Manufacturer
Storage
with Direct
Shipping
Manufacturer
Storage with
In-Transit
Merge
Distributor
Storage with
Package
Carrier
Delivery
Distributor
Storage with
Last-Mile
Delivery
Manufacturer/
Distributor
Storage with
Customer
Pickup
Response
time
1
4
4
3
2
4
Product
variety
4
1
1
2
3
1
Product
availability
4
1
1
2
3
1
Blank
Week 6: Designing Distribution Networks
33
Comparative Performance of Delivery
Network Designs (2 of 3)
Table 4-7 [Continued]
Retail
Storage with
Customer
Pickup
Manufacturer
Storage
with Direct
Shipping
Manufacturer
Storage with
In-Transit
Merge
Distributor
Storage
with
Package
Carrier
Delivery
Distributor
Storage
with
Last-Mile
Delivery
Manufacturer/
Distributor
Storage with
Customer
Pickup
Varies From 1
to 5
4
3
2
1
5
Time to market
4
1
1
2
3
1
Order visibility
1
5
4
3
2
6
Returnability
1
5
5
4
3
2
Blank
Customer
experience
Week 6: Designing Distribution Networks
34
Comparative Performance of Delivery
Network Designs (3 of 3)
Table 4-7 [Continued]
Retail
Storage with
Customer
Pickup
Manufacturer
Storage
with Direct
Shipping
Manufacturer
Storage with
In-Transit
Merge
Distributor
Storage with
Package
Carrier
Delivery
Distributor
Storage
with
Last-Mile
Delivery
Manufacturer/
Distributor
Storage with
Customer
Pickup
Inventory
4
1
1
2
3
1
Transportation
1
4
3
2
5
1
Facility and
handling
6
1
2
3
4
5
Information
1
4
4
3
2
5
Blank
Key: 1 corresponds to the best performance and 6 the worst performance.
Week 6: Designing Distribution Networks
Online Sales and Omni-Channel
Retailing

Omni-channel retailing
 The use of multiple channels to interact with
customers and fulfill their orders
 Three flows
 Information
 Products
 Funds

TED TALK: (Omnichannel: Retail (R)evolution |
Kilian Wagner | TEDxHSG)

35

Week 6: Designing Distribution Networks
Figure 4-12 Alternatives in Omni-Channel
Retailing
Week 6: Designing Distribution Networks
36
Alternatives in Omni-Channel
Retailing (1 of 3)

37
Traditional Retail
 Face-to-face interaction
 Customer leaves with product
 Many facilities close to customers
 High level of inventory
 Low transportation costs
Week 6: Designing Distribution Networks
Alternatives in Omni-Channel
Retailing (2 of 3)

38
Showrooms
 Face-to-face interaction
 Product ordered for later pickup
 Low level of inventory
 Smaller facilities
 More transportation and information infrastructure
than traditional retail
Week 6: Designing Distribution Networks
Alternatives in Omni-Channel
Retailing (3 of 3)
Online Information + Home Delivery
 Aggregation of inventories
 Few locations
 High transportation costs
 Online Information + Pickup
 Reduces outbound transportation costs
 Customer must travel to pickup location

39
Week 6: Designing Distribution Networks
Performance of Channels (1 of 3)
Response time to customers
 Picking up physical products faster than other
channels
 Online channel may be fastest to provide information
of goods
 Product variety
 Easier to offer larger selection remotely
 Product availability
 Aggregating inventory improves product availability

40
Week 6: Designing Distribution Networks
Performance of Channels (2 of 3)
Customer experience
 Channels have complementarity strengths
 Faster time to market
 Online/showrooms are quicker than retailing
 Order Visibility
 Critical for showrooms or online
 Automatic in retail

41
Week 6: Designing Distribution Networks
Performance of Channels (3 of 3)
Returnability
 Easier with physical locations
 Proportion of returns likely to be higher when
information exchange is remote
 Direct Sales to Customers
 Manufacturers can use remote information exchange
for direct access to customers
 Efficient Funds Transfer
 Internet and smartphones

42
Week 6: Designing Distribution Networks
Performance of Channels in
Terms of Cost (1 of 2)
Inventory
 Lower inventory levels if customers will wait
 Postpone variety until after the customer order is
received
 Facilities
 Costs related to the physical facilities in a network
 Costs associated with the operations in these facilities

43
Week 6: Designing Distribution Networks
Performance of Channels in Terms
of Cost (2 of 2)
Transportation
 Lower cost of “transporting” information goods in
digital form
 For nondigital, aggregating inventories increases
outbound transportation
 Information
 Investment higher for channels that provide
information remotely

44
Week 6: Designing Distribution Networks
Relative Costs for Omni-Channel
Alternatives
Table 4-9 Relative Costs for Omni-Channel Alternatives
Traditional
Retail
Showrooms
+ Home
Delivery
Online
Information +
Home
Delivery
Online
Information +
Pickup
Inventory
High
Low – Medium
Low
Low – Medium
Facilities
High
Medium
Low
Low – Medium
Transportation
by retailer
Low
High
High
Medium
Transportation
by customer
High
High
Low
Medium
Information
Low
High
High
High
Blank
45
Week 6: Designing Distribution Networks
Framework for Omni-Channel
Retailing
Product characteristics and customer needs influence
choice of channel
 Product dimensions
 Demand uncertainty
 Value
 Information complexity
 Customer dimensions
 Willingness to pay
 Price conscious/service conscious

46
Week 6: Designing Distribution Networks
Midterm
 Midterm covers the following chapters:
Chapters 1, 2, 3, 7, 11, and 8
 The test will be online on Canvas
 The test will be available on Friday 5/12, 7 AM till
Sunday 5/14, 11:00 PM
 The test will be 90 minutes long and includes
multiple choice questions and problem solving
 Sample exam is available on Canvas by 5/11 class
session.

47
Week 6: Designing Distribution Networks
Homework #4
 Consider the following 6 network designs (1 point each):
1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and in-transit merge
3. Distributor storage with carrier delivery
4. Distributor storage with last-mile delivery
5. Manufacturer/distributor storage with customer pickup
6. Retail storage with customer pickup
A. Provide an example for each design (exclude the
examples that were discussed in the class). Analyze the
current design and recommend a better one if needed.
48
Week 6: Designing Distribution Networks

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