Supply Chain Management
1-1
Part 5
Network Design in the Supply Chain
The role of network design in supply chain
1-2
The success of any supply chain will depend on the plants,
suppliers, warehouses and how the product flows from each of the
origins to the final customer.
Network design in supply chain is a systematic approach to
determining the best location and optimal size of the facilities to
be included in the supply chain, and to ensure an optimal flow of
products using advanced mathematical modelling.
The role of network design in supply chain
1-3
Supply chain network design decisions are classified as follows:
1. Facility role: What role should each facility play? What processes
are performed at each facility?
2. Facility location: Where should facilities be located?
3. Capacity allocation: How much capacity should be allocated to
each facility?
4. Market and supply allocation: What markets should each facility
serve? Which supply sources should feed each facility?
Factors influencing network design
decisions
1-4
•Strategic factors: a firm’s competitive strategy has a significant
impact on network design decisions within the supply chain.
•Technological factors: getting production technologies needs
investment. (high investment: few facilities).
•Tariffs and tax incentives:
Tariff: any duty what a company must pay if a product crosses
the border.
Incentive: is a reduction in tax or tariff or support provided
by government.
