What is supply chain network design?
Supply chain network design is the process of designing a product supply chain with a better understanding of time, costs, resources, and location. Designing a supply chain depends on determining the best location and optimal-sized- facilities. This, in turn, ensures an uninterrupted flow of products using an appropriate mathematical model.
The supply chain network design is important for the success of any business. It depends on various factors, such as
Warehouses,
Suppliers,
Factories,
The flow of product from origin to customer
It is important to ensure that the number of factories or facilities and their location is suitable. It reduces operational costs and increases overall efficiency.
The procedure of network design in a supply chain
1. Evaluate the scope of the supply chain
Creating a scope of the supply chain before designing it is crucial. Once the scope is decided, important deadlines and goals can be scheduled realistically.
2. Collection of supporting data
In the second step, elements of supply chain designs are determined to create a modelling framework. It is important to focus on collecting proper data to support the supply chain network model. The elements of the supply chain include:
Planning
Sourcing raw materials
Manufacturing
Delivering and returns
Warehousing costs
Inventory costs
Transportation rates
3. Analysis and modelling
An analysis is conducted based on the company’s performance. Companies also carry out analyses regarding the demand for products. The company then runs the model to identify any problematic areas. They also find solutions to troubleshoot the same.
4. Creation of alternative models
The next step in designing a supply chain network is creating an alternative model. The alternatives help the companies to ensure supply in case the original model breaks down. It includes:
Adding and removing products or locations
Adding or removing resources
Adding or removing transportation elements
Changing network flow and sources of supply
Changing locations according to the demand of customers
5. Detailed planning and implementation
The last step is creating a final detailed plan and its implementation. The chosen network of the supply chain is analysed further for availability and implementation. During this step, spending and savings are analysed. The planning should be revisited and checked regularly to tweak the model according to any changes in the previous steps. It helps to decrease the chances of interruptions in a supply chain. Remember, the design and analysis in designing a supply chain network is an ongoing process.
Areas of focus while creating a supply chain network design
1. Logistics
To design an efficient system, route planning and optimisation are essential as it supports the systematic and timely transportation of products. It includes planning the proper transportation of raw materials and the final product and determining that the operational process is working properly.
2. Placement of warehouses and distribution points
Warehouses and distribution points are key to an effective supply chain. They ensure that the product reaches customers on time. A good supply chain network design ensures that these are located in appropriate locations. The process focuses on finding an optimum number of facilities to build an efficient supply chain. It is also important that the sizes of warehouses match the requirement.
3. Inventory
Inventory planning and management are major areas while designing a supply chain network. It means that inventory should be stored and transported properly. A proper design should also ensure that the response time is maintained for increased efficiency.
4. Cost and process of the procurement
While designing a network of the supply chain, the materials sourcing and vendor management must be done in terms of
Cost
Time
Location
Identifying the quality and number of manufacturers and suppliers is also important.
Advantages of supply chain design
Supply chain network design is important since it helps to optimise the resources to achieve business goals. It also increases efficiency and overall profitability. It also helps in the following:
Reduction in production costs
Increased efficiency
Improvement in customer satisfaction
Receiving raw materials at competitive prices
Increase in brand loyalty
Balanced cost and revenue to generate profits
Highly optimised operations
Reduction in transportation cost
Reduced transit time and fuel cost
Performance visibility of the supply chain
Why choose Imarticus Learning?
Imarticus Learning offers Executive certification Chief Supply Chain and Operations Officers Online Training. The online+ campus immersion program spans around 10 months. The Supply Chain Management Strategies Course is offered in collaboration with IIM Raipur. The program offers the following benefits:
c-suite training
SCM Globe simulations
Masterclasses by industry leaders
Campus immersion
IIM Raipur alumni status
To know more about how to get a successful Career In Supply Chain And Operations, click here.
