Total supply chain cost model

Abstract

Sourcing and outsourcing decisions have taken on increased importance within Teradyne to improve efficiency and competitiveness. This project delivered a conceptual framework and a software tool to analyze supply chain costs associated with a specified supply chain design. Determining total supply chain cost is a complex challenge. This work developed the concept of a hierarchical, inter-related, multi-level supply chain cost architecture. Within this architecture, supply chain costs can be expressed as a sum of only 5 supply chain cost factors (material, labor, logistics, inventory holding, and overhead costs). The reduction of a large number of potential cost factors eases communication about total supply chain costs within an organization. An interactive Excel VBA software was developed which allows the user to experimentally model changes to a specific supply chain design. The VBA program automatically recalculates the supply chain costs based on the changes made. The output of the program is a comparison of costs associated with different supply chain designs. In a case study, the total supply chain cost model was applied to evaluate different supply chain node locations in Southeast Asia for one of Teradyne's testers.