Question

Describe the factors that influence supply chain network design decisions.

Answer 1

The supply chain network can be said as the system that helps in easy and smooth movement of goods and materials by linking various points to reach to the end customers. A supply chain network basically connects the inbound logistics with internal logistics altogether to outbound logistics.

Factors that  influence supply chain network design decisions:

1)Strategic factors.

A company's competitive strategy has an important impact on decisions regarding supply chain network design. Companies that focus on cost will try to create a cost-effective system similarly the one who focuses more on changing market tend to place a facility near the market.

2)Technological factors.

if the production facility is advanced and if high economies of scale are being maintained then a few high capacity sites and networks are being maintained.

3)macroeconomics factor.

The factor such as tax, customs duty , exchange rate, and various other economic factors too affect the supply chain network design. These factors have a great impact on failure and success regarding the supply chain network.

4)Political factors.

The producer or manufacturer always wants a facility located at a place that is politically stable. An unstable political environment causes various disruptions. A stable political environment means clear terms related to trade rules and other related things.

5)Infrastructure factors.

Good infrastructure helps in setting up a facility for the long run. Poor infrastructure will only add up the cost.

6)Competitive factors.

While designing a supply chain network companies must take into consideration the size, location, and strategy of the competitor.it's always better to have one's network or facility away from the competitors.

7)Cost of logistics and facilities.

Cost is a big factor that impacts any decision. A company must always consider costs related to logistics and facilities. For example, if economies of scale is compromised then the transportation cost will increase which will lead to over all increase in the prices.