6.1 Chapter 6 Supply network design Digital Stock 6.1 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.2 Operations network for a plastic homeware company Second tier suppliers Chemical company Second tier customers Wholesaler Plastic stockist Cardboard company Ink supplier First tier customers First tier suppliers Retailer Plastic homeware manufacturer Retailer Packaging supplier Direct supply Information 6.2 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.3 Operations network for a shopping mall Second tier suppliers Recruitment agency First tier suppliers First tier customers Second tier customers Retailers Retail customers Security services Cleaning materials supplier Cleaning services Equipment supplier Maintenance services Shopping mall Direct supply Information 6.3 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.4 Operations performance should be seen as a whole supply chain issue Benefits 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. 6.4 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.5 Direction, extent and balance of vertical integration Balance — should excess capacity be used to supply other companies? Raw material suppliers Component maker Assembly operation Wholesaler Retailer Extent – Narrow process span Extent – Wide process span Direction – Upstream vertical integration 6.5 Direction – Downstream vertical integration Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.6 The decision logic of outsourcing Is activity of strategic importance Yes Does No company have No specialized knowledge Yes Is company’s operations performance superior? No Yes Is significant operations No performance improvement likely? Explore outsourcing this activity Yes Explore keeping this activity in-house 6.6 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.7 Supply-side and demand-side factors in location decisions Demand-side factors which vary to influence customer service/revenue as location varies. Supply-side factors which vary to influence costs as location varies. For example: • labour costs • land costs • energy costs • transportation costs • community factors 6.7 The operation For example: • labour skills • suitability of site • Image • convenience for customers Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.8 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. 6.8 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.9 Capacity leading demand and capacity lagging demand Capacity leads demand Capacity lags demand Demand Time 6.9 Volume Volume Capacity Demand Capacity Time Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 6.10 Smoothing with inventory Smoothing with inventory Volume Capacity Demand Time 6.10 Slack, Chambers and Johnston, Operations Management, 6th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010