Optimisation Based Strategic Configuration of Distribution Network

The design and configuration of an effective supply chain has been widely recognised as being of fundamental importance to the business performance of all companies within the present competitive market. In supply chain structure, outbound physical distribution channel can be regarded as the key stage which will meet the customers’ demand and requirements directly. This paper mainly involves strategic configuration of distribution network by using mathematical optimisation method. The objective of this study is to obtain an optimal strategic scheme of distribution network which can meet customer demand with minimum operating cost and time. Especially within the electronics manufacturing in Asia-Pacific, application of postponement concept leads to importance of Bill of Distribution (BOD) in distribution processes. The model in this paper will consider the constraints of these special requirements. Finally, this optimisation model is applied to design the distribution network structure of a computer manufacturing company. INTRODUCTION In today’s competitive business environment industry has recognised the importance of efficient supply chain management. Due to the recent trends in international procurements, new information technologies, increasing pressure from customers on responsiveness and reliability and the globalisation of operations and markets, supply chain management has become a challenge and an opportunity. Ganeshan [1999] addressed the supply chain management as follows: A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. A typical supply chain structure is shown in Figure 1. Supply chain includes its upstream supplier network and its downstream distribution channel. As a final part of supply chain, the distribution channel is always regarded as the segment to face the final customers directly. Therefore, the management of distribution channel also becomes more critical [Cohen and Lee, 1988]. A firm’s external downstream/outbound supply chain as illustrated in Figure 1 encompasses all the downstream distribution channels, processes, and functions that the product passes through on its way from the product source---plants to the end customer. For example, an automotive company’s distribution network includes its finished goods and pipeline inventory, warehouses, dealer network, and sales operations. This particular distribution channel is relatively short. Other types of supply