2 Supply network design Operations strategy Process design Design ImprovementProcess designSupply Network DesignLayoutand flowProcess technologyPeople, jobs and organizationProduct/service designSupply network designPlanning and control
3 Key operations questions In Chapter 6 – Supply network design – Slack et al. identify the following key questions:Why should an organization take a total supply network perspective?What is involved in configuring a supply network?Where should an operation be located?How much capacity should an operation plan to have?
4 Operations in practice Michael Dell started in 1984 by cutting out the ‘middle man’ and delivering computers direct to the customer.Using its direct selling methods, Dell went on to become the number one computer maker.Most of the reasons for Dell’s success come from the way Dell configures its supply networks.Dell’s supply network model being adapted to take account of market changes (products now available in stores).
7 Benefits of looking at the whole supply chain include: Operations performance should be seen as a whole supply chain issueBenefits of looking at the whole supply chain include:It helps an understanding of competitiveness.It helps to identify the significant links in the network.It helps focus on long-term issues.
8 Direction, extent and balance of vertical integration Balance — should excess capacity be used to supply other companies?Raw material suppliersComponent makerAssembly operationWholesalerRetailerExtent – Narrow process spanExtent – Wide process spanDirection – Upstream vertical integrationDirection – Downstream vertical integration
9 The decision logic of outsourcing Is activity of strategic importanceYesDoes company have specialized knowledgeNoIs company’s operations performance superior?YesNoIs significant operations performance improvement likely?YesNoExplore outsourcing this activityNoExplore keeping this activity in-houseYes
10 Supply-side and demand-side factors in location decisions Supply-side factorswhich vary to influence costs as location varies.For example:labour costsland costsenergy coststransportation costscommunity factorsDemand-side factorswhich vary to influence customer service/revenueas location varies.For example:labour skillssuitability of siteImageconvenience for customersTheoperation
11 The cost breakdown of shirt made in various countries and sold in France 15.55€France14.33€Portugal11.43€Turkey11.43€ThailandLabour11.13€MoroccoTransport10.82€RomaniaFabric10.37€ChinaSupplies9.60€MyanmarCustoms duties246810121416Cost in euros
12 The balance of capacity Capacity can either lead or lag demand.Inventory can be used to smooth out the peaks.Spare capacity can be used to supply other operations.The danger of this is that the original operation may receive a lower level of service.
13 Unit cost curves for service centres of varying capacities Cost curve for 5 bay service centreCost curve for 10 bay service centreCost curve for 15 bay service centre‘Economy of scale’ curve for hotel capacityReal cost per customer servedEconomies of scaleDiseconomies of scale51015Average number of bays in use
14 Capacity leading demand and capacity lagging demand Capacity leads demandVolumeTimeCapacity lags demandVolumeTimeCapacityDemandDemandCapacity
15 Smoothing with inventory VolumeTimeDemandCapacity
16 Disney Resort ParisWhat were the main ‘network design’ decisions taken by Disney Resort Paris?