Report Group2

COORDINATION IN THE SUPPLY CHAIN MANAGEMENT
SC505E
Tanja Mlinar

CASE 1: SUPPLY CHAIN DESIGN

Submitted by:
Anna Mironenko
Lisheng Liang
Bharat Pawar
Nanda Kishore Gownivaripally

October 2014
Rennes

Question 1.1
In the design of supply chain there are basically two opposite strategies:
1) the maximum responsiveness, when we create a variety of DCs and thus minimize the delivery lead time
2) and the strategy of economies of scale where we primarily reduce our DC costs by minimizing the number of DCs. In this case transportation time represents is not an issue for the SC.
Regarding the case given the distinctions of the both strategies are given in the table below. Number of DCs
Desired DC location Total weighted distance (km)
Total delivery time
(hours)
Total delivery cost
(EUR)
Total cost start-up year (EUR)
Total cost following years
(EUR)

Strategy 1 (max. responsiveness)

Strategy 2(economies of scale)

4
Location #1, #3, #5, #6

1
Location #6

298 046

520 158

7, 45

9, 35

1320, 91

2338,1

5 201 320, 91

1 302 338,1

1 201 320, 91

302 338,1

(Calculations are effected in PMedian, reference Excel file attached)
Comment: with the strategy 1 (maximum responsiveness) we consider the model of maximal covering where we have to cover more than 90% of demand we just need to open than 50% of facilities , and in our case the 4 facilities are enough, because the total weighted distance would be the same as for 6 facilities (ref. the graph below)

2

With reference to the table above we can see that these two strategies differ from each a lot regarding the points of total costs and weighted distance that in its turn makes the total delivery time different in both cases.
The delivery time if we proceed with the Strategy 1 would be less by 79% than the delivery time for the Strategy 2. But depending on a customer this factor (delivery time) would contribute as an economic value or not.