Scribd
Upload
19 views

Location Analysis

The document discusses supply network design and location decisions. It explains that operations should take a total supply network perspective considering suppliers, customers, and interconnected operations. When configuring a supply network, key decisions include outsourcing, vertical integration, and make-versus-buy decisions. Location analysis techniques like the weighted-score method and center-of-gravity method can help determine where in the network individual operations should be located to optimize factors like costs, resources, and future growth.

Uploaded by

Mr.JoJI
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
19 views

Location Analysis

The document discusses supply network design and location decisions. It explains that operations should take a total supply network perspective considering suppliers, customers, and interconnected operations. When configuring a supply network, key decisions include outsourcing, vertical integration, and make-versus-buy decisions. Location analysis techniques like the weighted-score method and center-of-gravity method can help determine where in the network individual operations should be located to optimize factors like costs, resources, and future growth.

Uploaded by

Mr.JoJI
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 18

OPERATIONS

MANAGEMENT
Lecture 3
Supply network design

 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?
Introduction

 No operation exists in isolation


 Every operation is part of a larger and interconnected
network of other operations.
 This supply network includes suppliers and customers. It
also includes suppliers’ suppliers and customers’
customers, and so on.
 At a strategic level, operations managers are involved in
‘designing’ the shape and form of their network.
 Network design starts with setting the network’s strategic
objectives.
Why should an organization take a total
supply network perspective?

 The supply network perspective


 Supply network
 Supply side
 Demand side
 First-tier
 Second-tier
 Immediate supply network
 Total supply network
The supply network perspective

Supply network: A supply network perspective means setting an operation in the context of all the
other operations with which it interacts, some of which are its suppliers and its customers.

Materials, parts, other information, ideas and sometimes people all flow through the network of
customer–supplier relationships formed by all these operations.

Supply side: An operation has its suppliers of parts, or information, or services. These suppliers
themselves have their own suppliers who in turn could also have suppliers, and so on.

Demand side: The operation has customers. These customers might not be the final consumers of the
operation’s products or services; they might have their own set of customers.
The supply network
perspective
 Supply side (First & Second Tier): Is a group of operations that directly supply the
operation; these are often called first-tier suppliers. They are supplied by second-tier
suppliers. However, some second-tier suppliers may also supply an operation
directly, thus missing out a link in the network.
 Demand side (First & Second Tier): Of the network, ‘first-tier’ customers are the
main customer group for the operation. These in turn supply ‘second-tier’ customers,
although again the operation may at times supply second-tier customers directly.
 Immediate supply network: The suppliers and customers who have direct contact
with an operation
 Total supply network: All the operations which form the network of suppliers’
suppliers and customers’ customers, etc.
The supply network
perspective

 There are three important reasons for taking a


supply network perspective:
 It helps an understanding of competitiveness
 It helps identify significant links in the network
 It helps focus on long-term issues
Design decisions in supply
networks

 The supply-network view is useful because it prompts


three particularly important design decisions. These
are the most strategic of all the design decisions.
 Outsourcing

 Vertical integration
 Do or buy
 Location
Location

 Where should each part of the network be


located?
 If the home ware company builds a new factory,
should it be close to its suppliers or close to its
customers, or somewhere in between?
 This decision is called the operations location
decision
Location Techniques

Weighted-score method
The center-of-gravity method
Weighted-score method

The procedure involves, first of all, identifying the criteria


which will be used to evaluate the various locations.
Second, it involves establishing the relative importance of
each criterion and giving weighting factors to them.
Third, it means rating each location according to each
criterion. The scale of the score is arbitrary. In our example
we shall use 0 to 100, where 0 represents the worst possible
score and 100 the best
Worked example

 In order to choose a site it has decided to evaluate all


options against a number of criteria, as follows:
 the cost of the site
 the rate of local property taxation
 the availability of suitable skills in the local labor force
 the site’s access to the motorway network
 the site’s access to the airport
 the potential of the site for future expansion
Sr. Facilities Weighted Lahore Faisalabad Multan
No Point
1 Raw Material 20 7 17 17
2 Market 10 8 6 5
3 Plan of Expansion 10 4 8 8
4 Labor Supply 20 8 15 10
5 Land 5 1 4 4
6 Civic Conditions 10 8 6 4
7 Safety Measures 15 8 11 12
8 Taxes Advantage 25 - 25 25
9 Climate 15 10 12 5
10 Fuel & Power 20 15 13 10
Total: 150 71 115 100
% 100 % 47.3 % 76.6 % 66.6 %

Choice of Town or City Through Weighted


Index
The centre-of-gravity method

 The center-of-gravity method is used to find a


location which minimizestransportation costs.
 It is based on the idea that all possible locations
have a ‘value’ which is the sum of all
transportation costs to and from that location.
 The best location, the one which minimizes costs,
is represented by what in a physical analogy
would be the weighted center of gravity of all
points to and from which goods are transported.

You might also like