Figure 13.5 Base Supply Chain Network Source: Used with permission from IBM.
Other alternatives can be modeled to investigate other supply chain design options. In some cases, supply chain design tools can systematically evaluate a series of alternatives such as determining the optimum number of warehouses between 3 and 10. In other cases, when the number or production mix of plants is under investigation, the analyst must identify and evaluate each option separately. This again emphasizes the need to critically assess each alternative regarding its feasibility.
Figure 13.6 Alternative Supply Chain Network Source: Used with permission from IBM.
Although the supply chain design tools are increasingly sophisticated, there are a few issues that must be considered in their application. The first concerns the treatment of inventory carrying cost. As illustrated in Chapter 12, inventory carrying cost should theoretically increase at a decreasing rate as the number of distribution centers increases. While this is generally true, there may be exceptions such as when a regional distribution center is used to provide backup stock for slow-moving items at five market area warehouses. Even though the total number of warehouses is increased to six, it likely that the total inventory to provide equivalent service would actually decrease because of the pooling of backup or slow moving inventory. Similarly, many of the supply chain design tools do not have standardized processes to determine the inventory implications of different design alternatives. Since there is no standardized process, it is important to understand and make any appropriate adjustments to the inventory carrying cost computed by supply chain design tools.