Supply chain network design to minimize total landed cost

Abstract

In recent years, markets and supply chains have become increasingly global in nature. Increased competition has driven the need for more efficient and cost-effective supply chain strategies and production methods. Firms have effectively used analytical techniques to develop manufacturing and supply chain solutions at the strategic, tactical, and operational levels. One such analytical technique for assisting in the development of a strategic network design is the use of a supply chain network optimization model. As part of this study, a supply chain network optimization model was implemented for use by an undisclosed company. This company is in the middle of a cultural shift in focus, from that of manufacturing for economies of scale to manufacturing in support of an integrated and efficient supply chain. As part of this transition, the company must develop analytical techniques and tools to support decision-making on questions ranging from strategic to operational in nature. The primary question posed in this study is "How can this company assess supply chain strategies with the goal of minimizing total landed cost?" To address this question, and support strategic discussions on the topic, a supply chain network optimization model was developed using the IBM ILOG LogicNet Plus software package. The model addresses this question by outputting a supply chain network design that minimizes the total landed cost of supplying products to customers. Case studies were conducted to demonstrate the model's ability to inform strategic decision-making. Inputs to the comprehensive total landed cost function were manipulated to show the impacts and tradeoffs associated with the various cost components and to assist in finding robust and sustainable solutions.