3. Why Multiple Production
Facilities???
Reach the local markets
Increase production facilities to meet
the higher local demand
Locate in low wage areas
Near parts suppliers
Avoid higher tax areas/states
4. Advantages of Increasing No
of Production Facilities
Avoid production disruption due to
Worker Agitation
Supply Disruption
Reach the local markets
Increase production facilities to meet the
higher local demand
Locate in low wage areas
Near parts suppliers
Avoid higher tax areas/states
6. How Gateway decides which
production facility will produce
and ship a customer order
Primaryobjective: Reduce overall cost
and increase maximum returns
Whichever is near to the customer
Whichever has less transportation cost
Whichever has less response time
Whichever can avoid taxation/Trade Barriers
7. Factors Considered When
Deciding Which Plant to Close
Primary objective: Reduce overall cost and
close loss making/costly production facilities
When market demand reduces or shifts to other
substitutes, whichever factory caters that market will
be the first one to go
Wherever raw material is least
available/transportation is costly
Whichever facility requires higher transportation cost
Whichever factory has higher production cost
Least available workforce/costly manpower
Power/Energy costs
Whichever factory goes through more trade barriers
while catering to international market
8. Why not carry any finished
product inventory?
Storage cost
Accidents may lead to higher costs
Maintenance cost
Management/Operations cost in connection to
the warehouse
Be more competitive; can introduce new
products in a short notice
Intel’s new chips can be integrated as soon as they
hit the market
Avoid loss from cases where some products are
not sold when the demand shift to substitutes
9. Should a firm with an investment in
retail stores carry any finished
goods inventory?
For those products for which customers
can wait for a few days there is no need
to have finished goods inventory
For those products for which customers
cannot wait for the time required for the
product to reach the customer from the
production facility there needs to have
a production facility
10. Characteristics of products that
are most suitable to be carried in
finished goods inventory
Nonperishable goods can only be stored
Goods that have least possible storage cost
Goods that have fluctuating/seasonal demand
Where SCM/CRM systems are not adequate to have
knowledge of the market demand
Retailers store goods that have stable demand
in the local market in the local market
Where there is a time gap between supply shipments
from the manufacturer
Where there is a chance of import tariffs to increase
When there is a chance of the product price to
increase
11. Characterizes products that are
best manufactured to order
Where there is a demand from the
customers for product customization
If it’s possible to manufacture as per the
customer’s demand; the production
process needs to be cost effective
12. Is the Dell model of selling directly without
retails stores always less expensive than a
supply chain with retail stores???
Generally
Incase of Customization; retail stores will incur
higher cost for storage
However, it is not necessarily more
profitable:
If customer demand is higher for retails stores
where they can check out the product first
hand;
If customer is satisfied with online shopping
13. What are the supply chain implications
of Gateway’s decision to offer fewer
configurations???
Supplier
Suppliers needs to send fewer varieties of
components
Management/Operational complexity/costs reduces
Internal Supply Chain: Transport of components
within the factory is much less complex
Suppliers needs to send fewer varieties of
components
Management/Operational complexity/costs reduces
Retailers/Dealers:
Suppliers needs to send fewer varieties of
components
Management/Operational complexity/costs reduces
