1. Chapter 06
Summary

2. SUPPLY NETWORK DESIGN Every operation has two core components:
1. suppliers
2. customers
For example the Tous Les Jour(TU LISUIRE) bakery doesn’t produce wheat , sugar, milk or coca for their operation function instead they depend on their suppliers for the same.
Again, the suppliers of flour(the ingredient for baking bread) to the bakery depend on mills.
The mills depend on the farmers who cultivate the wheat, therefore we can call Tous Les Jour as a customer for flour producers and flour producers as supplier for the bakery.

3. Supply network
A network of supplier and customer operation can be called supply network.
core activity of suppliers include the following:
Deliver materials
Deliver information
Deliver Ideas
Deliver Parts for the production

4. SUPPLY SIDE
The chain of suppliers and suppliers’ suppliers that provide the parts, information or services.
Demand side
The chain of customers and customers’ customers.
First – tier supplier
Who directly supply to the operation or production of goods and services.

5. Second –tier supplier
who supply indirectly or supply to the first –tier supplier.
Total supply network
All the suppliers and customers who are involved in the supply chains.
The reasons for considering the whole supply network.
To understand competitiveness
to understand the links in network.
to focus on the long – run uses.

6. Design supply networks
Three decisions or aspects for designing network.
Network configuration and outsourcing
location
capacity
Vertical integration
Form of operation where all the stages of production of a good or service from the acquisition of raw materials to the retailing of the goods and services are controlled by the company. For example oil industry. In Vietnam petro Vietnam can be considered as an example.

7. Supply network design reshaping the responsibilities
reduce the number of direct suppliers.
Disintermediation
Technique of an operation in supply network that separates two operations.
Or cutting the middle men.
For example many travel services are becoming online and reducing the role of travel agencies.

8. Co-opetition This stands for co-operative competition.
Any business is surrounded by 4 types of players:
Customers
Suppliers
Competitors
Complimentors – vinaphone selling Apple phones.

9. Outsourcing
No business produces everything that is required by itself.
for example the bakery depend on flour supply for baking the bread.
Outsourcing means obtain goods and services from outside party.
The purpose of outsourcing is to reduce the cost.

10. Explain do or buy decision.
Do or buy situation is standing for out-sourcing or in -sourcing .No single business does everything that is required to produce its products and services. Bakers do not grow wheat, and banks do not check their credit by themselves. Most companies always outsource some of their activities. Out-sourcing is done to reduce the cost. Again out-sourcing will increase the flexibility and quality.

11. Do or buy decision is taken according to the following questions?
the scope of business
what the organization do itself?
what the organization should buy?
If a company produces everything by itslef for the production of goods and services, we can call the vertical integration and if it depend on outside sources we call horizontal integration.
Long term strategic importance also important while taking decision on do or buy.

12. Location design reasons for location decision changes in demand
Changes in supply
For examples a mining unit will relocate if the amount of minerals for mining decreased.
What are the objectives of location decisions?
The cost of the operation with the location.
The service that operation able to provide customers.
Revenue

13. Two major factors in location decision making
supply side
demand side
Different techniques for location based decision making.
Weighted –score method – method comparing the attractiveness of different options.
The centre of gravity method – method used to find a location which minimizes the transportation cost.

14. Capacity design
capacity means the facilities used for the production of goods and services.
For example machines, factories, machines
Capacity leads demand – timing the introduction of capacity according to the demand.
Capacity lags demand – timing the introduction of capacity when demand is equal or greater than the present capacity.

15. Smoothing inventory
using the excess capacity of period to produce inventory for the under capacity of another period.