Supply Chain Network Design is one of the most critical disciplines of supply chain management. It would not be an exaggeration to say that two of the planet's most successful companies - Amazon and Walmart built their businesses around supply chain network design. Visit our website to explore further: http://goo.gl/HSgVyE

1. Introduction to Supply Chain Network Design
Baidhurya Mani

2. What is a Supply Chain?
A supply chain is a system of organizations, people, activities,
information, and resources involved in moving a product or
service from supplier to customer.
Every company wants to achieve the supply chain objective:
How does a company achieve supply chain objectives?
Distribution is the process of moving products from supplier stage
to consumption stage. Distribution is a critical function of supply
chain management and helps a company achieve this objective.
Supplier warehouses, manufacturing plants, warehouses,
retailers, customers, transportation etc., all are part of the supply
chain distribution network.
UNDERSTANDING SUPPLY CHAIN
Right Product
Right Place
Right Quantity
Right Time
Supplier
Warehouse
Supplier
Warehouse
Supplier
Warehouse
Plant
Distribution
Center
Distribution
Center
Customer
Warehouse
Customer
Warehouse
Customer
Warehouse
A Typical Supply Chain Network
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3. WALMART’S DISTRIBUTION NETWORK Visit SCA Academy
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4. What is Supply Chain Network Design?
The supply chain discipline used to determine the optimal
location, number and size of facilities and the flow through
the facilities is called supply chain network design. Putting it
simply, supply chain network design is the science and art of
making decisions related to distribution network. It is also
referred to as network design or supply chain design.
Network Modeling is a subset of supply chain network design
in which mathematical models of the supply chain network
are created. These models are then solved using various
techniques like optimization and facilitate optimal decision
making.
UNDERSTANDING SUPPLY CHAIN NETWORK DESIGN Visit SCA Academy
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5. NATURE OF SUPPLY CHAIN NETWORK DESIGN DECISIONS
Supply Chain Network Design projects
are strategic in nature.
Supply Chain design decisions can be
broadly categorized into three
categories:
Supply
Chain
Network
Design
Facility
Location
Capacity
Allocation
Supply &
Demand
Allocation
• What should be the role of a
facility?
• Where should the facilities be
located?
• How many facilities should be
setup?
• What should be the size of a
particular facility?
• How much capacity should be
allocated to a region?
• Which plant should ship to which
Distribution Center?
• Which Distribution Center should
ship to which customers?
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6. WHY IS SUPPLY CHAIN NETWORK DESIGN SO IMPORTANT
Why is Supply Chain Network Design so
Important?
In today's competitive business environment, supply chain no longer
remains just a medium to distribute one's products but supply chain
has now become an important driver for achieving your business
goals.
Additionally, distribution is important for impacting customer
service and thus product sales and has become an important tool
for gaining competitive advantage.
According to different experts, 80% of the supply chain costs are
because of network related decisions. A good supply chain design
initiative can help achieve as much as 10-15% supply chain savings.
For most companies, this equates to millions in costs savings
The Starbucks CEO, Howard Schultz, spoke at a supply
chain event recently and mentioned two things about
supply chain network design:
First, you won’t be able to scale your business unless
your supply chain can handle it. The key point here is
that you need to design your supply chain to handle
your growth and to scale.
Second, the internet has killed distance. You need to
make sure your supply chain is designed to handle
customer expectations of fast deliveries for online
orders.
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7. Example #2
Whirlpool acquired Maytag in 2005 and the overall goal for the
acquisition was to gain competitive advantage. Management’s
main objective was to create a stronger, leaner company from
the two units.
There was obvious duplication in the distribution network of the
two companies. They had the same basic distribution
configuration—each had manufacturing operations that shipped
from factory distribution centers to regional DCs, then on to local
DCs. Streamlining these operations and eliminating redundancy
could offer the kind of savings that made the merger very
attractive.
Out of the total $400 million in savings committed to
the senior management from 2006 to 2008, $40
millions was expected to come from Network Design
EXAMPLES TO ILLUSTRATE IMPORTANCE OF SUPPLY CHAIN NETWORK DESIGN
Example #1
Walmart’s business strategy revolves around providing lowest costs
to its customers . It has been able to provide lowest costs to its
customers partly because of the scale it has achieved and partly
because of supply chain efficiency.
Walmart implemented various innovative and effective strategies to
lower distribution costs. For example, Walmart came up with Cross
Docking strategy - its DCs acted as Cross Docking centers products
are directly transferred from inbound trucks to outbound trucks for
distribution to customers. This helps save storage costs and reduces
transportation time.
As a result of effective network design strategy, Walmart
has consistently kept its distribution costs 2-3% lower than
its competitors. In an industry where average margin is in
the range of 3-5%, a difference of 2% resulted in a major
competitive advantage for Walmart and has proved to be
an important factor for its success.
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8. WHEN DOES NEED FOR SUPPLY CHAIN NETWORK DESIGN ARISE?
• A new company is being setup
• A company enters a new business altogether
• A company enters a new geography altogether
Designing a New Network
• When one company acquires another company
• Demand patterns have changed substantially since last network redesign
• Company has added new categories to its business
• Planning for future growth and expansion
Redesigning a Network
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9. Thank You
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