10 ADDING MULTIPLE PRODUCTS AND MULTISITE PRODUCTION SOURCING

In the previous chapters, we have focused on various aspects of network design, including center of gravity models, service levels, and transportation cost modeling. All of these are key elements to understanding network modeling. However, we have yet to focus on differentiating between various types of products as they move through the supply chain. In this chapter, we will look at adding multiple products to the analysis and understanding its importance as it relates to network design.

Why Model Products?

Firms typically have thousands if not tens of thousands of products or SKUs that they manage and distribute through their supply chain. As we have seen in previous chapters, it is often common practice to use overall product weight to represent their movement within network models. We are in essence trying to estimate and represent the transportation costs associated with moving these products to meet customer demand. And as we have learned, transportation costs are heavily impacted by weight. Therefore, for modeling purposes, the appropriate costs will often be captured if we ensure that the total weight is accurately represented in the model. This also assumes that all products are rated uniformly using the same transportation rates. If that holds true, it is safe to assume that our results would be equivalent when modeling this weight moving in the form of 1 generic product or 100 defined products.

However, in this chapter we will learn that there are several cases where modeling a generic product may not be appropriate—in fact, when doing so, our model may yield incorrect results. These cases include the following:

· ? When our overall pool of products includes large variations in storage and logistics characteristics

· ? When some product types require specific customer service levels and therefore require specific transport modes

· ? When products come from different source locations

Let’s review each of these cases in further detail.

Variations in Logistics Characteristics

As we have discussed before, firms typically carry and distribute thousands, if not tens of thousands, of SKUs across the supply chain. It may be likely that these SKUs fall within different product-family designations, each with its own distinct characteristics, therefore requiring the modeling of separate products to accommodate the logistical differences as well.

Let’s take the example of a retailer. The SKUs carried by the retailer may include dry packaged goods (such as boxes of cereals, cans of soup), fresh produce items (apples, bananas, lettuce and so on), and frozen products (such as frozen dinners, frozen vegetables, and ice cream).Please ensure the post is 250 to 350 words.

Application

Answer question 2 on page 215 in your Supply Chain Network Design text. Discuss the answer to this question using ideas presented in the text and the Prasad, Subbaiah, and Rao article.