Table of Contents

Preface   xvi

Part I: Introduction and Basic Building Blocks

Chapter 1: THE VALUE OF SUPPLY CHAIN NETWORK DESIGN   1

Chapter 2: INTUITION BUILDING WITH CENTER OF GRAVITY MODELS   23

Chapter 3: LOCATING FACILITIES USING A DISTANCE-BASED APPROACH   37

Chapter 4: ALTERNATIVE SERVICE LEVELS AND SENSITIVITY ANALYSIS   63

Chapter 5: ADDING CAPACITY TO THE MODEL   83

Part II: Adding Costs to Two-Echelon Supply Chains

Chapter 6: ADDING OUTBOUND TRANSPORTATION TO THE MODEL   99

Chapter 7: INTRODUCING FACILITY FIXED AND VARIABLE COSTS   127

Chapter 8: BASELINES AND OPTIMAL BASELINES   139

Part III: Advanced Modeling and Expanding to Multiple Echelons

Chapter 9: THREE-ECHELON SUPPLY CHAIN MODELING   157

Chapter 10: ADDING MULTIPLE PRODUCTS AND MULTISITE PRODUCTION SOURCING   177

Chapter 11: MULTI-OBJECTIVE OPTIMIZATION   207

Part IV: How to Get Industrial-Strength Results

Chapter 12: THE ART OF MODELING   217

Chapter 13: DATA AGGREGATION IN NETWORK DESIGN   237

Chapter 14: CREATING A GROUP AND RUNNING A PROJECT   261

Part V: Case Study Wrap Up

Chapter 15: CASE STUDY: JPMS CHEMICALS CASE STUDY   277

Index   295

Promotional Information

Using strategic supply chain network design, companies can drive consistent dramatic savings throughout their global supply chains. Now, logistics experts at IBM and Northwestern University have brought together both the rigorous principles and the practical applications supply chain designers need to master to improve the flow of physical products across the globe. Readers learn how to use network design techniques to:

• Select the right number, location, and size of warehouses, plants, and production lines
• Specify territories associated with each facility
• Optimize flow of all products through the supply chain
• Decide what to manufacture internally, where to make these products, which products to outsource, and which suppliers to use
• Manage tradeoffs such as cost vs. service level
• More effectively integrate analytics throughout supply chain management, optimizing regularly for even greater savings

This book brings together industry best practices, expert methods in logistics, optimization and analytics, and cutting-edge, illustrative case studies: everything professionals need to maximize the value of global supply chain network design and modeling.

About the Author

Michael Watson is currently the world-wide leader for the IBM ILOG Supply Chain Products. These products include the network design product, LogicNet Plus XE. He has been involved with this product since 1998 when the product was owned and produced by LogicTools and then sold to ILOG in 2007 prior to being acquired by IBM. During this time, he has worked on many network design projects, helped other firms develop network design skills, and helped shape the direction of the group and product. He is an adjunct professor at Northwestern University in the McCormick School of Engineering, teaching in the Masters in Engineering Management (MEM) program. He holds an M.S. and Ph.D. from Northwestern University in Industrial Engineering and Management Sciences.

Sara Lewis is currently a world-wide technical leader for the IBM ILOG Supply Chain Products. She has run many full-scale network design studies for companies around the world, she has conducted hundreds of training sessions for many different types of clients, leads a popular network design virtual users group, and helps create educational material for network design. She has been involved with this group since 2006 when the network design tool was owned and produced by LogicTools. Prior to LogicTools, she held various supply chain roles at DuPont. She holds a Bachelor’s degree in Business Logistics and Management Information Systems from Penn State University and is a fre- quent guest lecturer on the topic of network design at several U.S. universities.

Peter Cacioppi is the lead scientist for IBM’s network design product, LogicNet Plus XE. He also holds the lead scientist role for IBM's inventory optimization solution. He first began developing network design engines in 1996 as employee number one for LogicTools, a supply chain planning company that was sold to ILOG in 2007 prior to being acquired by IBM. His responsibilities include translating business design issues into formal mathematical problems. His scientific contributions have ranged from developing a targeted network design computational engine to designing both the GUI and the engine for network design multi-objective analysis. He holds an M.S. in Computer Science (with a thesis in Operations Research) from the University of Chicago, and a BA in Computational Physics from Dartmouth College.

Jay Jayaraman currently manages the ILOG Supply Chain and Optimization consulting services team within IBM. This team solves clients’ most challenging supply chain and optimization business problems. He brings extensive hands-on expertise in supply chain network design and inventory optimization, with projects ranging from large scale, global supply chain network design strategy to implementing production planning and inventory optimization projects at the tactical level. He has successfully led and managed consulting projects for clients around the world and in many different industries such as chemicals, consumer packaged goods, retail, transportation, pharmaceutical, and many others. Prior to joining LogicTools (later acquired by ILOG and then IBM), he worked for Kuehne & Nagel, helping run network design projects and implement the results. He holds an M.S. in Industrial Engineering from the University of Florida, and a Bachelor’s degree in Industrial Engineering from Anna University, India.