09-10-2012, 10:16 AM
Designing Global Supply Chain Networks
Designing Global.ppt (Size: 585.5 KB / Downloads: 65)
Outline
The Impact of Globalization on Supply Chain Networks
The Offshoring Decision: Total Cost
Risk Management in Global Supply Chains
The Basic Aspects of Evaluating Global Supply Chain Design
Evaluating Network Design Decisions Using Decision Trees
AM Tires: Evaluation of Global Supply Chain Decisions Under Uncertainty in Practice
Summary of Learning Objectives
The Impact of Globalization on Supply Chain Networks
Globalization offers companies opportunities to simultaneously grow revenues and decrease costs
The opportunities from globalization are often accompanied by significant additional risk
There will be a good deal of uncertainty in demand, prices, exchange rates, and the competitive market over the lifetime of a supply chain network
Therefore, building flexibility into supply chain operations allows the supply chain to deal with uncertainty in a manner that will maximize profits
The Offshoring Decision: Total Cost
Total cost can be identified by focusing on the complete sourcing process
Offshoring to low-cost countries is likely to be most attractive for products with:
High labor content
Large production volumes
Relatively low variety
Low transportation costs
Perform a careful review of the production process
Tailored Risk Mitigation Strategies
Increase capacity
Get redundant suppliers
Increase responsiveness
Increase inventory
Increase flexibility
Pool or aggregate demand
Increase source capability
Discounted Cash Flow Analysis
Supply chain decisions are in place for a long time, so they should be evaluated as a sequence of cash flows over that period
Discounted cash flow (DCF) analysis evaluates the present value of any stream of future cash flows and allows managers to compare different cash flow streams in terms of their financial value
Based on the time value of money – a dollar today is worth more than a dollar tomorrow
Evaluating Network Design Decisions Using Decision Trees
A manager must make many different decisions when designing a supply chain network
Many of them involve a choice between a long-term (or less flexible) option and a short-term (or more flexible) option
If uncertainty is ignored, the long-term option will almost always be selected because it is typically cheaper
Such a decision can eventually hurt the firm, however, because actual future prices or demand may be different from what was forecasted at the time of the decision
A decision tree is a graphic device that can be used to evaluate decisions under uncertainty
Decision Tree Methodology
Identify the duration of each period (month, quarter, etc.) and the number of periods T over the which the decision is to be evaluated.
Identify factors such as demand, price, and exchange rate, whose fluctuation will be considered over the next T periods.
Identify representations of uncertainty for each factor; that is, determine what distribution to use to model the uncertainty.
Identify the periodic discount rate k for each period.
Represent the decision tree with defined states in each period, as well as the transition probabilities between states in successive periods.
Starting at period T, work back to period 0, identifying the optimal decision and the expected cash flows at each step. Expected cash flows at each state in a given period should be discounted back when included in the previous period.
Decision Tree Methodology:Trips Logistics
Decide whether to lease warehouse space for the coming three years and the quantity to lease
Long-term lease is currently cheaper than the spot market rate
The manager anticipates uncertainty in demand and spot prices over the next three years
Long-term lease is cheaper but could go unused if demand is lower than forecast; future spot market rates could also decrease
Spot market rates are currently high, and the spot market would cost a lot if future demand is higher than expected