1. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 1 OUTLINE Questions? Comments? Quiz Stories or experiences with supply chains? Background Quiz Results Questionnaire Results Team Questionnaire Results Examples of innovation uncertainties Chapter 5 - Network Design

2. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 2 Background Quiz Results

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7. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 7 Performance – Uncertainties – Rate of innovation What do you think Western Union thought of the telephone in 1876? ______________________________________________ 1981 – Bill Gates thought ________ memory ought to be enough for anybody Engineer’s comment at the Advanced Computing Systems Division of IBM, 1968, about the microchip________________ A Yale University management professor: “The concept of reliable overnight delivery service is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." Who do you think had written that paper?_____________ ”We don't like their sound, and guitar music is on the way out." - Decca Recording Co. rejecting the __________________, 1962. How long do you think it took the inventor of xerography to convince a company to develop a commercial copier?________

8. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 8 Performance – Uncertainties – Rate of innovation This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." - Western Union internal memo, 1876. “640K ought to be enough for anybody." - Bill Gates, 1981. "But what... is it good for?" - Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip. The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." - A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.) ”We don't like their sound, and guitar music is on the way out." - Decca Recording Co. rejecting the Beatles, 1962. Chester A. Carlson 1938 to 1957 (Haloid to what became Xerox)

9. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 9 Network Design - goal A manager's goal when locating facilities and allocating capacity and demand should be: –maxi­mize the overall profitability of the supply chain –provide customers with the appropriate responsiveness

10. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 10 Network Design – Location and capacity Models of supply chains are used to decide on: –locations where facilities will be established –the capacity to be assigned to each facility Managers must make this decision considering a time horizon over which locations and capacities will not be altered (typically in years).

11. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 11 Network Design – Demand Allocation Models of supply chains are also used to decide on: –assigning current demand to the available facili­ties –identifying lanes along which product will be transported Managers must con­sider this decision at least on an annual basis as demand, prices, and tariffs change

12. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 12 Network Design – Required Information Location of supply sources and markets Location of potential facility sites Demand forecast by market Facility, labor, and material costs by site Transportation costs between each pair of sites Inventory costs by site as well as a function of quantity Sale price of product in different regions Taxes and tariffs as product is moved between locations Desired response time and other service factors

13. FACILITIES PLANNING ISE310L SESSION 6 February 1, 2016 Geza P. Bottlik Page 13 Example – Capacity and Selection