Supply chain design problems are concerned with determining logistics infrastructure over an extended planning horizon. Decisions may include number, type, and location of plants and warehouses along with the sourcing assignments between them and customers. The objective is to provide the most effective strategic solution in terms of cost and/or service.

This case considers distribution of automotive parts and supplies to the Ford authorized dealers throughout North America. Ford is faced with pressure to provide excellent customer service, which means timely distribution of parts to the dealers, with minimal logistics investment, both in capital and operations. Planners want to determine the most effective warehouse locations and dealer service regions to meet these objectives.

See Dealers worksheet in SCDCaseStructure.xls.

These data represent the 6,113 Ford authorized dealers in North America, i.e., the customers in the supply chain. Data describe a dealer’s location and its connection to the Ford infrastructure.

1. ID unique identifier for each dealer.
2. X longitude coordinate.
3. Y latitude coordinate.
4. CITY.
5. STATE.
6. ZIP Canadian, Mexican, and U.S. postal codes.
7. US48 binary field defining inclusion in the 48 contiguous states (to focus the problem geographically, if necessary).
8. CURSOURCE the Primary DC to serve this dealer, this field has relation with ID on the DCs worksheet.
9. ROUTEID identifies Contract Carrier route (IGNORE identifies a dealer that is not served via contract carrier route).

See DCs worksheet in SCDCaseStructure.xls">SCDCaseStructure.xls.

These data describe the 13 Regional distribution centers and the national replenishment center with one optional RC.

1. ID unique identifier for each distribution center.
2. X longitude coordinate.
3. Y latitude coordinate.
4. ZIP Canadian and U.S. postal codes.
5. NAME.

See Demand worksheet in SCDCaseStructure.xls">SCDCaseStructure.xls.

Demand by Dealer is given only for the combined product group (COMB). Demand broken down into the twelve primary product groups is only given at the DC level.

1. SITEID location identifier that has relation with ID on the Dealers or DCs worksheet.
2. PRODUCTID product identifier that has relation with ID on the Products worksheet.
3. DEMAND demand in hundreds of pieces per year for the site/product combination.

See Product worksheet in SCDCaseStructure.xls.

Products are aggregated into the primary inventory/material handling management groups. The attributes for each group represent a demand-weighted average.

1. ID unique identifier for each product group.
2. WEIGHT number of pounds per hundred pieces of product.
3. VALUE number of dollars per hundred pieces of product.

See Current worksheet and All worksheet in SCDCaseSoln.xls.

These worksheet scenarios provide the flow and cost data for all DC to Dealer channels. The Current scenario represents a supply chain restricted to the existing PrimaryDC assignment for each Dealer. The All scenario allows Dealers to be assigned to any DC.

1. FROMID location identifier that has relation with ID on the DCs worksheet.
2. TOID location identifier that has relation with ID on the Dealers worksheet.
3. PRODUCTID product identifier that has relation with ID on the Products worksheet.
4. DISTANCE miles between DC and Dealer using the road network.
5. COST dollars per hundred pieces for shipping via non-discounted LTL rates.
6. FLOW hundreds of pieces moving through the channel.
7. TOTALCOST dollars equal to flow x cost.
8. TEMPSHIPSIZE average shipment size in pounds that is used for LTL rating.

See CostMH worksheet in SCDCaseCost.xls.

The material handling cost is based on standards of handling time per flow unit (in this case, hundreds of pieces). It is broken down by function. Hours per flow unit measurement is multiplied by a representative hourly wage rate to give cost per flow unit. Interesting scenarios could be created by adjusting the wage rate by region.

See CostFixed worksheet in SCDCaseCost.xls.

Facility fixed cost is available for the eight regional DCs in the U.S. This cost, independent of facility throughput, is broken down into facility/maintenance cost, fixed labor, and salary components. Square feet per facility is included to enable fixed cost approximations based on facility size.

See CostTran1 and CostTran2 worksheets in SCDCaseCost.xls.

CostTran1 provides origin-destination quotes for dedicated rail and truckload modes. The data include quotes to the current regional DCs and to fifty large markets throughout the U.S. Distance (via road network) is provided to enable mileage-based approximations for origin-destination pairs not provided.

CostTran2 provides multi-stop route delivery costs based on contract carrier rates. Fixed cost represents equipment commitment and carrier management for a site. The number of routes run per site is provided for approximation at other sites. Mileage and stop costs are applied to trips longer than 150 miles. For shorter trips, mileage and hourly costs apply.

Note that LTL delivery costs are included on the Current and All channels in SCDCaseSoln.xls.

See ThruInv worksheet in SCDCaseCost.xls.

The relationship between throughput and average inventory (in dollars and in hundreds of pieces) is mapped with data points for each regional DC in the U.S. Inventory approximation can be based on these data. Carrying cost is broken down into capital, taxes, shrinkage, and obsolescence. Note: Detroit is an outlier since it carries additional emergency stock.

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The following basic supply chain design questions can be investigated:

1. Does the current supply chain have the right number of distribution centers and are they placed in the correct locations?

2. Consultants have performed an analysis assuming dealers are allocated to the nearest distribution center. Does such an allocation result in minimal supply chain costs? If not, how should the dealers be allocated to distribution centers?

1. Dealers are typically visited on multi-stop routes from a distribution center. There are two basic approaches to modeling multi-stop deliveries in a network flow structure, the most common supply chain design model. Fixed dealer clusters account for cost to the entire group. Modeling with individual dealers means the route costs must be duly divided. How does the chosen approach affect the resulting supply chain? How should multi-stop route cost be "duly divided" among individual dealers?

2. Ford makes regular visits to the dealers. It is currently assumed that each dealer is visited three times per week. This allows the computation of average shipment sizes by calculating the overall demand and dividing by the delivery frequency. Average shipment sizes have been used in this supply chain design process. Is this realistic? How does it affect the resulting supply chain? What alternative modeling methods should be considered?

1. Ford is considering enhanced service by delivering every day. How is this going to affect their cost?

2. Since the multi-stop routes can be very long, Ford is considering the use of pool points for dealer delivery. These pool points would provide a similar function as a distribution center, namely transshipment, without carrying any inventory. They can be thought of as parking lots where trailers or loads can be exchanged. Is this a viable option? Where would you locate pool points? How would you operate a supply chain that includes pool points?