Supply Chain Management Chapter 5: Network Design

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Questions and Answers

What is the primary role of facility role decisions in network design?

Determining what processes are performed at each facility

Which of the following is an example of a strategic factor influencing network design decisions?

Firm's competitive strategy

What is the primary reason for Toyota's addition of flexibility to its plants post-1997?

To better manage changing global demands

Which of the following is NOT a factor influencing network design decisions?

Organizational culture Signup and view all the answers

What is the primary benefit of locating facilities in low-cost regions?

Reduced production costs Signup and view all the answers

Which company is an example of prioritizing responsiveness by locating production close to markets?

Zara Signup and view all the answers

What is a key consequence of significant economies of scale in production?

Fewer high-capacity locations Signup and view all the answers

What is an example of a macroeconomic factor influencing network design decisions?

Taxes and tariffs Signup and view all the answers

What is the primary goal of capacity allocation decisions in network design?

Allocating the right amount of capacity to each facility Signup and view all the answers

Which of the following is an example of a political factor influencing network design decisions?

Government regulations Signup and view all the answers

What is the primary objective of using optimization models in network design?

To reduce costs and enhance responsiveness Signup and view all the answers

Which of the following factors should be considered when making network design decisions?

All of the above Signup and view all the answers

What is the role of facility locations in network design?

To optimize capacities and responsiveness Signup and view all the answers

What is the primary benefit of using gravity and network optimization models?

To make informed location and capacity decisions Signup and view all the answers

What is the focus of the case study 'Designing the Production Network at CoolWipes'?

Optimizing facility locations and capacities Signup and view all the answers

What is the key consideration when aligning supply chain strategy with competitive strategy?

Regional demand and infrastructure Signup and view all the answers

What is the primary goal of network design in supply chain management?

To define operational constraints and opportunities Signup and view all the answers

What is the role of macroeconomic factors in network design?

To influence network design decisions Signup and view all the answers

What is the focus of the case study 'Managing Growth at SportStuff.com'?

Managing growth and changing market demands Signup and view all the answers

What is the benefit of considering cultural impacts and quality of life in network design?

To improve employee morale and quality of life Signup and view all the answers

Which of the following factors is NOT a consideration for facility location decisions?

Marketing strategy Signup and view all the answers

What is the primary goal of Phase I in the network design process?

Align the supply chain strategy with the competitive strategy Signup and view all the answers

Which of the following models is used to minimize transportation costs?

Gravity Models Signup and view all the answers

What is the primary reason Ford located its luxury car production at the Wixom, Michigan plant?

To ensure quality focus consistent with its luxury brand Signup and view all the answers

Which of the following is an example of a company that benefits from having few large plants globally?

AMD Signup and view all the answers

What is the primary goal of Phase IV in the network design process?

Select precise locations and capacities to maximize profits Signup and view all the answers

Which of the following models is used to maximize overall profitability?

Network Optimization Models Signup and view all the answers

What is the primary reason SunOil evaluates multiple configurations for global petrochemical production?

To balance costs and regional demands Signup and view all the answers

What is the primary consideration for facility location decisions in Phase III?

Infrastructure, labor availability, and other local factors Signup and view all the answers

What is the primary goal of the network design process?

To maximize overall profitability Signup and view all the answers

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Study Notes

Network Design in Supply Chain Management

Network design involves decisions on facility roles, locations, and capacities, which determine the overall supply chain configuration and performance.
Key aspects of network design include:
- Facility role: determining what processes are performed at each facility
- Facility location: deciding where facilities should be located
- Capacity allocation: allocating the right amount of capacity to each facility
- Market and supply allocation: defining which markets each facility will serve and the supply sources feeding each facility

Factors Influencing Network Design Decisions

Strategic factors: competitive strategy affects network design, with cost leaders locating facilities in low-cost regions and firms prioritizing responsiveness locating facilities close to markets
Technological factors: significant economies of scale in production lead to fewer high-capacity locations
Macroeconomic factors: taxes, tariffs, exchange rates, and demand risk
Political factors: stability, trade policies, and government regulations
Infrastructure factors: availability of transportation, utilities, and communication systems
Competitive factors: presence and actions of competitors
Operational factors: quality of life for employees and environmental considerations

Framework for Network Design Decisions

The network design process consists of four phases:
- Phase I: define supply chain strategy and design, aligning with competitive strategy
- Phase II: define regional facility configuration, identifying regions for facility locations and their potential roles
- Phase III: select potential sites within regions, considering infrastructure, labor availability, and other local factors
- Phase IV: select precise locations and capacities, considering logistics costs, taxes, and tariffs

Models for Facility Location and Capacity Allocation

Gravity models: simple models to minimize transportation costs
Network optimization models: comprehensive models to maximize overall profitability, considering production, transportation, inventory, taxes, and tariffs

Making Network Design Decisions in Practice

Continuous evaluation and adjustment are necessary in practice
Consider cultural impacts, quality of life, and employee morale
Utilize tax incentives and tariff considerations to optimize facility locations