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Designing Your Network

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It’s often useful to think about your supply chain as a network. Networks are made up of nodes and links. As Figure 4-1 shows, every stop that a product makes between raw materials and a customer is a node of the network. A factory is a node; so are a warehouse, a distribution center, and a retail store. Nodes are connected by links. Generally speaking, links are forms of transportation, such as a ship, a railroad, a truck, or a drone. Products move through a supply chain, flowing through links and stopping at nodes.


FIGURE 4-1: Nodes and links in a supply chain.

Your goal for any supply chain is to deliver maximum value at the lowest cost. One way to achieve this goal is to change the nodes and the links. Perhaps you can lower the costs of your raw materials by sourcing them from a different supplier, which means you’d be changing one of your nodes. Changing a node also means changing the links that connect that node to the rest of your supply chain.

Making changes in the links and nodes is called network optimization. One approach to network optimization is called value-stream mapping (VSM). Figure 4-2 shows a simple example of a VSM. The more of your supply chain that you’re trying to optimize, the larger — and more complex — your VSM becomes.


FIGURE 4-2: Example VSM.

VSM is an important part of a Lean professional’s tool kit, as you see in the next section, but network optimization can be done on a larger scale with sophisticated mathematical analysis. Several supply chain software platforms are available to help with analyzing supply chain flows, starting with spreadsheets and moving up to complex supply chain modeling tools. In addition to factoring in the costs for buying materials and transporting them between nodes, some network optimization tools can factor in variables such as supplier performance and the effects of tariffs and taxes. The sections on supply chain modeling software and business intelligence software in Chapter 12 discuss this topic in more detail.

Supply Chain Management For Dummies

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