Supply Chaın Management (ENG) — Ünite 2 Soru-Cevap

Fixed costs are costs that are independent of the amount processed. For example, when a company rents a warehouse at the cost of $300 per month. In the first month, the company keeps 100 units of products in that warehouse, but in the second month, 90 units of these products are sold, and only 10 units of products are kept in the same warehouse. Although the number of products kept in the warehouse is very different in the first and second months, the same renting cost ($300 in our example) is paid in both months. In other words, renting cost does not depend on the amount kept in the warehouse. Hence, this cost can be considered as a fixed cost.

Variable costs are costs depending on the amount processed. For example, suppose that a company makes manufacturing at a unit cost of $1. In the first month, assume that the company manufactured 2000 units since unit manufacturing cost is $1, this month, the total manufacturing cost will be $2000. On the other hand, assume that the manufacturer manufactured 1500 units; this month, the total manufacturing cost becomes $1500. As this simple example shows, manufacturing cost depends on the number of products manufactured.

While selecting the suppliers, various qualitative and quantitative criteria such as cost, quality, lead time, and environmental performance should be considered and these criteria generally contradict each other.

Facility decisions include the determination of the number, locations and capacities of the facilities (manufacturing plants, distribution centers, warehouses etc.). 

As the name indicates, these decisions focus on determining the flows between different facilities in the supply chain. If there is only one manufacturing plant, distribution center, or retailer, then it is certain that all the products will be processed in that facility. In cases where there are many production factories, distribution centers, and retailers, it is determined by the flow decision which ways the product will be delivered to the customer.

Economic Objectives: Minimization of total supply chain cost, maximization of total profit, maximization of after-tax profit etc.

Environmental Objectives: Minimization of carbon emissions, maximization of collected product quantity, maximization of environmentally friendly raw material rate etc.

Social Objectives: Minimization of work accidents, maximization of job opportunities etc.

Supply constraints are constraints related to the procurement of components or raw materials. 

Examples of supply can be given as follows; Minimum purchasing quantity for a component is 150 units but if the manufacturer purchases 500 units or more, a 5% all unit quantity discount can be applied. The second example can be: The manufacturer can purchase at most 2250 units of raw material. Due to operational reasons, the supplier cannot provide more. 

In real-life applications, the capacities of the facilities and vehicles are generally limited. Hence, while designing the supply chain network, the decision-maker must consider capacity constraints. If they are not considered, the obtained supply chain network may be infeasible in daily operations. Some examples of capacity constraints are: At most 1000 units of the product can be stored in a warehouse, At most 27-ton products can be shipped b company-owned trucks, 200 units of the product can be packed and 150 units product can be repaired in a distribution center. 

Macroeconomic factors involve taxes, tariffs, and exchange rates.

Characteristics of the production and shipment technologies affect the supply chain network design decisions. For example, in some cases, such as computer components manufacturing, creating a manufacturing plant requires very high fixed costs, and these products' shipment may not be costly. For this reason, in those cases, opening only one manufacturing plant and shipping the products from that manufacturing plant to distribution centers in different regions may be better compared to opening more than one manufacturing plant in terms of total supply chain cost. On the other hand, for some other cases, such as water bottling companies, the fixed cost of opening a manufacturing plant may be less. Due to the high volume of shipments, opening more manufacturing plants may be better in terms of the total supply chain cost.

For example, where do the competitors open manufacturing plants, how many distribution centers do they have, what are their main goals while designing their supply chain networks, should the company be close to their competitors or far from them? These kinds of questions play an important role in the success of a supply chain and hence they must be considered while designing the supply chain network.

If a manufacturing plant is opened in somewhere that is far from the city center, it may be difficult and costly for the company to find workers that will work in that manufacturing plant. On the other hand, it may be easier and less costly to find workers for a manufacturing plant that is located near the city center. In addition, proximity to the airport, seaport, and rail service is also among the infrastructure factors that should be considered while designing the supply chain network.

These approaches ensure obtaining the best solution for the considered network design problem. For example, if the objective function is minimization of total supply chain cost, an exact solution approach ensures obtaining the supply chain structure which provides the minimum possible total supply chain cost.

Heuristic approaches are efficient algorithms developed with the expectation of finding a “good” solution. These approaches never guarantee to find the optimal solution. If the problem size is very large, even those commercial optimization software cannot find the optimal solution. In other words, in some problem instances, it may not be possible for the decision-maker to find the optimal solution by using exact solution approaches. In those cases, the decision-maker may consider using a heuristic solution approach to find a solution.

Heuristic approaches are approaches that do not ensure finding the optimal solution but expected to provide a reasonably good solution at an acceptable time.