Designing supply routes is a challenge for any large retailer, particularly under conditions of rapid growth. When faced with significant uncertainty, many untestable assumptions and limited resources, choosing a network design can feel more like a shot in the dark than a rigorous, informed decision.
Let us consider a retailer of a rapidly growing fresh food business, who wishes to develop a light-weight model to evaluate costs and generate insights into the trade-offs between multiple supply network designs under a variety of future business conditions.
This retailer expects significant growth in his/her emerging fresh food business, which includes high-perishable items such as sandwiches, salads and parfaits shipped in totes. Currently, the company receives freshly-made products from a supplier at a distribution Centre, where it is immediately consolidated with non-perishable items and sent to stores.
The system works with relatively low fresh food volumes. The retailer, however, expects demand to increase from 3x to 5x current levels. As demand increases, the company is concerned
about the adequacy of this network design in every region. Will consolidation continue to make sense? Will shipping directly to stores increase freshness, and at what cost? Should the supplier be co-located with the distribution Centre?
A. Describe, for this retailer, the FOUR (4) phases in the framework for network design decisions. (12 marks)
B. As the retailer begins to question the current design with the possibility of redesigning the network, describe THREE (3) factors which would influence any supply chain network design decisions to be made by the company. (12 marks)
C. Relate the basic characteristics of forecasts that this retailer needs to be aware of. (8 marks)
D. Explain the importance of calculating forecast error. (3 marks)
(Total 35 marks)
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