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    Chapter 5 - SCM

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    J83MEGHA DAS
    This document summarizes network design models in supply chain management. It discusses factors that influence network design decisions and presents frameworks for making those decisions. Optimization models are described for designing regional network configurations by locating plants and allocating market demands. The models require inputs like potential plant locations and capacities, market demands, production and transportation costs. The goal is to minimize total costs by deciding which plants to open and how much to ship between plants and markets.

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    Chapter 5 - SCM

    Uploaded by

    J83MEGHA DAS
    23 views28 pages
    This document summarizes network design models in supply chain management. It discusses factors that influence network design decisions and presents frameworks for making those decisions. Optimization models are described for designing regional network configurations by locating plants and allocating market demands. The models require inputs like potential plant locations and capacities, market demands, production and transportation costs. The goal is to minimize total costs by deciding which plants to open and how much to ship between plants and markets.

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    This document summarizes network design models in supply chain management. It discusses factors that influence network design decisions and presents frameworks for making those decisions. Optimization models are described for designing regional network configurations by locating plants and allocating market demands. The models require inputs like potential plant locations and capacities, market demands, production and transportation costs. The goal is to minimize total costs by deciding which plants to open and how much to ship between plants and markets.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    23 views28 pages

    Chapter 5 - SCM

    Uploaded by

    J83MEGHA DAS
    This document summarizes network design models in supply chain management. It discusses factors that influence network design decisions and presents frameworks for making those decisions. Optimization models are described for designing regional network configurations by locating plants and allocating market demands. The models require inputs like potential plant locations and capacities, market demands, production and transportation costs. The goal is to minimize total costs by deciding which plants to open and how much to ship between plants and markets.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 28

    Supply Chain Management

    Chapter 5 – Network Design in the Supply Chain

    DR. RISHABH RATHORE


    ICFAI BUSINESS SCHOOL, HYDERABAD
    Learning Objectives
    1. Understand the role of network design in a supply chain.
    2. Identify factors influencing supply chain network design
    decisions.
    3. Develop a framework for making network design decisions.
    4. Use optimization for facility location and capacity allocation
    decisions.
    The Role of Network Design
    Factors Influencing Network Design
    Decisions
    Factors Influencing Network Design
    Decisions
    Framework
    for Network
    Design
    Decisions
    Framework for Network Design
    Decisions
    Framework for Network Design
    Decisions
    Framework for Network Design
    Decisions
    Models for Facility Location and Capacity
    Location
    Models for Designing a Regional Network
    Configuration
    1. Optimization Model to design a regional network configuration
    2. Optimization Model to identify potential sites in a region
    3. Optimization Model to design to locate plants and allocate market
    demands
    Models for Designing a Regional Network
    Configuration
    1. Optimization Model to design a regional network configuration
    2. Optimization Model to identify potential sites in a region
    3. Optimization Model to design to locate plants and allocate market
    demands
    Optimization Model to design a regional
    network configuration
    Optimization Model to design a regional
    network configuration
    The capacitated plant location network optimization model requires the
    following inputs:
    𝑛= number of potential plant locations/capacity (each level of capacity will count
    as a separate location)
    𝑚= number of markets or demand points
    𝐷𝑗 = annual demand from market 𝑗
    𝐾𝑖 = potential capacity of plant 𝑖
    𝑓𝑖 = Annualized fixed cost of keeping plant 𝑖 open
    𝑐𝑖𝑗 = cost of producing and shipping one unit from plant i to market j (cost includes
    production, inventory, transportation, and tariff
    Optimization Model to design a regional
    network configuration
    ◦ The supply chain team’s goal is to decide on a network design that maximizes
    profits after taxes.
    ◦ For the sake of simplicity, however, we assume that all demand must be met and
    taxes on earnings are ignored.
    ◦ The model thus focuses on minimizing the cost of meeting global demand.
    ◦ It can be modified, however, to include profits and taxes. Define the following
    decision variables:

    𝑦𝑖 = 1 if plant i is open, 0 otherwise


    𝑥𝑖𝑗 = quantity shipped from plant i to market j
    Optimization Model to design a regional
    network configuration
    The problem is then formulated as the following mixed integer program:

    Subject to:
    Models for Designing a Regional Network
    Configuration
    1. Optimization Model to design a regional network configuration
    2. Optimization Model to identify potential sites in a region
    3. Optimization Model to design to locate plants and allocate market
    demands
    Optimization Model to identify potential
    sites in a region
    Gravity Location Model:
    Gravity models assume that both the markets and the supply sources can be located as grid points on a
    plane.
    All distances are calculated as the geometric distance between two points on the plane.
    These models also assume that the transportation cost grows linearly with the quantity shipped.
    We discuss a gravity model for locating a single facility that receives raw material from supply sources
    and ships finished product to markets.
    The basic inputs to the model are as follows:

    𝑥𝑛 , 𝑦𝑛 = coordinate location of either a market or supply source n


    𝐹𝑛 = cost of shipping one unit (a unit could be a piece, pallet, truckload or ton) for
    one mile between the facility and either market or supply source n
    𝐷n = quantity to be shipped between facility and market or supply source n
    Optimization Model to identify potential
    sites in a region
    Optimization Model to identify potential
    sites in a region
    Gravity Location Model:
    Models for Designing a Regional Network
    Configuration
    1. Optimization Model to design a regional network configuration
    2. Optimization Model to identify potential sites in a region
    3. Optimization Model to design to locate plants and allocate
    market demands
    Optimization Model to design to locate
    plants and allocate market demands
    Optimization Model to design to locate
    plants and allocate market demands
    Optimization
    Model to design
    to locate plants
    and allocate
    market demands
    Optimization
    Model to design
    to locate plants
    and allocate
    market demands
    Logistics unboxed: Inside India's largest
    warehouse
    https://www.youtube.com/watch?v=sWpb-bR0Uw8

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