Service and Number of Facilities ■ Examples: ■ Barnes Noble provides its Required customers with books on the Number same day but requires of Facilities hundreds of stores to achieve this goal for most of the United States ■ Amazon,in contrast,takes a few days to deliver a book to its U.S.customers,but it uses about 20 locations to store Desired its books. →Response Time SEIEE AU406 4-11
+ - SEIEE AU406 4-11 Service and Number of Facilities Examples: Barnes & Noble provides its customers with books on the same day but requires hundreds of stores to achieve this goal for most of the United States Amazon, in contrast, takes a few days to deliver a book to its U.S.customers, but it uses about 20 locations to store its books
Inventory Costs and Number of Facilities Inventory Costs ▣ With fewer facilities, Amazon is able to turn its inventory about 10 times a year ▣Barnes&Noble,with hundreds of facilities, achieves only about 3 turns per year. Number of Facilities SEIEE AU406 4-12
+ - SEIEE AU406 4-12 Inventory Costs and Number of Facilities With fewer facilities, Amazon is able to turn its inventory about 10 times a year Barnes & Noble, with hundreds of facilities, achieves only about 3 turns per year
Transportation Inbound transportation costs are the costs incurred in bringing material into a facility Outbound transportation costs are the costs of sending material out of a facility. Outbound transportation costs per unit tend to be higher than inbound costs because inbound lot sizes are typically larger.(Why?) Increasing the number of warehouse locations decreases the average outbound distance to the customer and makes outbound transportation distance a smaller fraction of the total distance traveled by the product. SEIEE AU406 4-13
+ - SEIEE AU406 Transportation Inbound transportation costs are the costs incurred in bringing material into a facility Outbound transportation costs are the costs of sending material out of a facility. Outbound transportation costs per unit tend to be higher than inbound costs because inbound lot sizes are typically larger.(Why?) Increasing the number of warehouse locations decreases the average outbound distance to the customer and makes outbound transportation distance a smaller fraction of the total distance traveled by the product. 4-13
Transportation Costs and Number of Facilities Transportation Cost Why the transportation cost is decreasing first and increasing later when the number of the facilities increases? Number of Facilities SEIEE AU406 4-14
+ - SEIEE AU406 4-14 Transportation Costs and Number of Facilities Why the transportation cost is decreasing first and increasing later when the number of the facilities increases?
Facility Costs and Number of Facilities Facility Costs Number of Facilities SEIEE AU406 4-15
+ - SEIEE AU406 4-15 Facility Costs and Number of Facilities