cult, largely because both parties have implemented different processes using different information systems. In such
cases, supply chain network design software can develop a
realistic estimate of the cost savings from merging the companies’ distribution chains.
Collaborative supply chains, in which unrelated and even
competing companies share distribution and transportation
resources, are generating some interest, particularly in
Europe. Although the concept is an attractive one, to date
only a handful of supply chain collaborations have been consummated. To succeed, both parties must understand their
costs. Supply chain design tools are helpful for modeling collaborations because they enable both parties to understand
their current costs, project how collaboration will affect their
cost structure, and estimate their partners’ costs.
Centralization of supply chain functions, often driven by
a shift from country-based to regional management, is
another common trigger for a network redesign. A good
example of a regional approach can be seen in North
America, where U.S. companies have long regarded that
continent as a single market and manage their supply
chains on that basis. In Europe, by contrast, it is really only
in the last decade that companies began to replace the tra-
ditional nationally designed and managed supply chain
functions with pan-European ones. That has required
major shifts in transportation and distribution patterns. It’s
common nowadays for a European supply chain design to
encompass manufacturing in China, importing via
Rotterdam, a primary distribution center in the Benelux
countries, and secondary DCs some distance away, in places
like Spain, Northern Italy, or Romania. For a company to do
this properly, it must first model its supply chain to deter-
mine the optimal location for manufacturing, primary
DCs, and secondary DCs as well as transportation routes.
5You experience a major service failure. An impor- tant customer has just called and expressed dissatis- faction concerning a service failure. If this is not the
first time that problem has occurred, then you may have a
systemic problem, and a redesign could help prevent it from
happening again.
A common cause of supply chain service failures is a lack
of robustness in supply chain design. Lean supply chains in
particular can be fragile, as by definition there is little stock
to buffer things going wrong.
This lack of redundancy or buffer stock can make it difficult for companies to manage variability, a situation that
can also cause service failures. This is especially true when
there is variability in multiple factors, such as demand levels, on-time delivery rates, and manufacturing uptime. You
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