Methodology for designing the supply chain of a manufacturer with a network of distributors

In today's competitive environment, having a methodology for supply chain design is a determining factor for the success of any manufacturer with a network of distributors. The configuration of the supply chain not only defines its structure, but also the sequential interconnections between the components of the system, such as the location of facilities, production policies, and the allocation of distribution resources and modes of transport. When approaching the design of this methodology, it is crucial to consider both structural decisions, such as the location and capacity of the facilities, such as coordination decisions, the selection of suppliers, choosing a base software for logistics distribution and inventory allocation. This comprehensive approach seeks to optimize supply chain performance, achieving a balance between cost efficiency and responsiveness. In this article, we will explore the key methodologies for supply chain design in a manufacturer that operates with a network of distributors, with the objective of identifying the configuration that maximizes performance and competitiveness in the market.Digitize and efficiently manage your supply chain with Mobilvendor. Contact us hereSupply chain managementContents hide 1 How to design a supply chain in a manufacturer with a distribution network? 2 Methodology that you can use to design the supply chain2.1 Mixed Integer Programming Model MIP2.1.1 Objective: Minimize Total Cost (TotalCost) 2.1.2 Breakdown of the formula:2.1.3 Real example:3 Conclusion How to design a supply chain in a manufacturer with a distribution network? Designing an efficient supply chain for manufacturers with dealer networks is critical, especially in the face of common problems such as lack of coordination, limited visibility, logistical problems and inefficient inventory management. These obstacles can result in delivery delays, high costs and lower customer satisfaction. To face these challenges, it is essential to consider seven key decisions in the design of the supply chain:The choice between manufacturing or purchasing (outsourcing) .The selection of suppliers.The production planning policy.The mode of transport.The location decisions.The capacity of the facilities.The assignment of production and services.supply chain managementThe relationship between these decisions requires an approach comprehensive to optimize performance and reduce costs throughout the system. Mobilvendor offers specific solutions to overcome these challenges without directly intervening in production processes, but integrating effectively with existing ERP systems (Learn about Mobilvendor's integrations here). Through real-time synchronization, logistics optimization and data analysis, a more coordinated and visible supply chain is achieved, allowing manufacturers to ensure product availability, reduce operating costs and improve customer satisfaction. These tools not only enhance efficiency in inventory management and logistics, but also provide manufacturers with the ability to respond quickly to fluctuations in demand, ensuring a more fluid and effective flow of operations throughout the network of distributors. Methodology that you can use to design the supply chainNext, we are going to introduce you to a supply chain design methodology based on the mixed integer programming model MIP. :Mixed integer programming modelThe mixed integer programming (MIP) model is a mathematical tool used to design the supply chain of a manufacturing company with a network of distributors. This model helps to make optimal decisions about the location of plants and warehouses, production capacities, and the flow of materials along the different stages of the supply chain. Basically, the production policies and modes of transport that each company in the chain will carry out are encoded in a chromosome. From there, the MIP model, with the help of logistics, backoffice and data analysis software, resolves to determine the best locations for plants and warehouses, as well as the capacities needed in each facility to meet demand. Here we can see a simple example of how it works: Objective: Minimize the Total Cost (TotalCost) TotalCost=≤i=1N (FixCost_i×X_I) +≤i=1N (VarCost_i×Cap_i) +XMP (TransCost_IJ×YIJ) Breakdown of the formula:Fixed investment cost (FixCost): Cost associated with opening a plant or warehouse in location i.Binary variable Xi: Indicates if the plant or warehouse in location i is open (1) closed (0) .Variable operating cost (VarCost): Cost associated with operating CAP_i capacity in the plant or warehouse in location III.Capability cap_i: Capacity operating of the plant or warehouse at location III.Transportation cost (TransCost): Cost of transporting materials or products from location i to location J.Material flow Yij: Amount of material or product transported from location iii to location JJ.Real example: Suppose you have two possible locations for plants (A and B) and two possible warehouses (X and Y). The formula would help you decide which to open, what capacity to assign them, and how to move products between them to minimize the total cost.FixCost_A = $100,000 (Open Floor A) FixCost_B = $150,000 (Open Floor B) VarCost_A = $50/unit (Variable Cost in Floor A) VarCost_B = $60/unit (Variable Cost in Floor B) TransCost_AX = $10/unit (Transportation Cost from A to X) TransCost_by = $15/unit (Cost of Transportation from B to Y) TotalCost= (100,000×X_A)) + (150,000×X_B) + (50×Cap_A) + (60×Cap_B) + (10×Y_AX) + (15×Y_BY) Here, the objective is to choose XA (1 if you open, 0 if not) and the quantities CAPa, CAPb, YAX, YBY that minimize total cost.ConclusionDesigning an efficient supply chain for a manufacturing company with a network of distributors involves making strategic and complex decisions that range from the location of facilities to production policy and modes of transportation. Implementing a model such as the MIP helps to minimize the total cost of the system by considering variables such as fixed and variable costs, transportation costs, and inventory costs. However, due to the complex and often non-linear nature of these decisions, an approach that combines genetic algorithms, mixed programming and simulation is required to obtain accurate and practical results. In this context, Mobilvendor presents itself as a key solution to face typical challenges in supply chain management. Mobilvendor offers real-time synchronization, logistics optimization and data analysis that help improve coordination, increase visibility and efficiently manage inventories. If you want to know more about how Mobilvendor integrates into your supply chain transformation process, contact us here