Supply chain activities and

designing supply chain

network
Supply chain and Logistic management
OSCM 5140
K. Wanniarachchi C.Eng., MIEE, FCIM,MBA,PMP
Learning objectives
• Describe supply chain activities
• Identify global supply chains
• Design supply chain network – understanding
simulation tools
• Mathematical analysis of supply chain options

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Supply chain major activities

• Documentation, agreements and other information

that is expected throughout the supply chain
• Movement of physical goods from one location or to
another organisation
• Storage of goods until they are needed
• Stock and inventory tracking and management
• Demand and supply management
• Onward logistics and distribution of goods to the end
customer

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The need for supply chain management

• The need to manage orders and inventories across

supply chain
• Increasing competition
• Increasing outsourcing
• Increasing globalization
• Increasing ecommerce

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Global supply chains

Challenges in Global supply chains

• Distance and lead times

• Dealing with different languages, cultures and currencies
• Additional modes of transportation
• Dealing with intermediaries – freight forwarders, custom brokers
• Risk of damage, disruptions and terrorism
• Supply chain network design for optimization

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 Main Objectives of Supply chain management

• Achieve customer satisfaction

• Increased efficiency in supply chain activities
• Reduce cost related supply chain activities
• Reduce risk in supply chain
• Increased profits

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Cost associated with Supply chain activities

• Cost of goods / raw material

• Production cost
• Transportation (freight) cost
• Warehouse cost
• Holding cost
• In transits
• safety
• Insurance

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Designing supply chain networks

Design of supply chain network

Challenge in supply chain management is to

identify these costs well in advance in your
network design and identify best options to meet
customer demand needs with least cost option.

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Designing supply chain networks

Simulation tools help you to design

complex networks by :
• Optimize inventory expenses
• Coordinate and streamline ordering policies with
suppliers
• Analyse the network structures
• Reduce transportation cost

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Designing supply chain networks

Simulation tools can integrate with multiple

system to ease complex decisions :
• Supply chain
• Fleet management
• Production planning
• Demand planning
• ERP
• Other software tools

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Designing supply chain networks – use of simulation
tools
Website for design applications : https://www.routeique.com/en/resources
https://www.anylogic.com/supply-chains/
https://www.anylogistix.com/

Example simulation models by vendors

https://youtu.be/Fuyh-sM6WQI

https://www.youtube.com/watch?v=C-ShDqb1OaI

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Designing supply chain networks –
difference of analytical optimization and dynamic optimization

For further knowledge: (not tested)

White paper
Supply Chain Optimization
and Simulation
Under article section uploaded to Moodle
Technology Overview

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Determining delivery alternatives

Determine which delivery alternative, one day or three days is best when the holding cost of
the item is $ 1000 per annum, the one day delivery transportation cost is $ 40 and the three
day delivery transportation cost by train $ 30 and by truck $ 35. Which delivery option is
cheaper.
The holding cost (H) is $ 1000 per year

Hint: Total cost of delivery = Freight cost + in transit holding cost

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Determining delivery alternatives – class assignment

Electronic part is to be transported from China to Europe. The annual demand for the part is
23,000 units. Price is $ 210 per unit. Annual holding cost rate is 20 % of unit price. There are two
transportation options.

Air cargo: takes 7 days (door to door) and costs $ 52 per unit
Ocean freight: takes 35 days and costs $10 per unit

Because of the variability of transportation time and demand, two weeks of demand will be
kept at the destination as safety stock (Consider 52 weeks in a year) if air cargo is used. If
Ocean freight is used 8 weeks of demand will be kept as safety stock. Assuming that order
quantity will be the same in both cases, calculate the total annual freight, in transit holding
cost for each mode. As the supply chain manager of this company select the best option.

Hint: Total Annual cost = Freight cost + In transit holding cost + safety stock, and the safety
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 In class case study

Tackling supply chain

challenges Telsa model 3

Assignment questions:
1. Describe Telsa’s business model (5marks)
a) What are Telsa model 3 competitive advantages (5 marks)
b) What are the treats and weakness (5 marks)
2. Assess the relevance and appropriateness of its model 3 supply chain to becoming a large
scale car maker. What are the supply chain constraints ? ( 20 marks)
3. What do you recommend to manage the supply chain risks of model – 3 ? ( 20 marks)