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Updated: Nov 26, 2018

The fierce competition in today’s markets and the swift changing of customers’ preferences, together with the rapid development of technology and globalization, have forced organizations to operate as members of a supply chain (SC) instead of acting as individual enterprises.

The success of a SC depends on the integration and coordination of its all entities to form an efficient network structure; an efficient network leads to cost-effective operations throughout the chain and helps it to react quickly in response to customers’ needs. SC network design is the most basic decision of SC management, which influences all other decisions concerning an SC and has the most extensive effect on the chain’s return on investment and its overall performance.

SC network design deals with long-term strategic decisions of the chain, such as the number, location and capacity of entities in each echelon of the chain. However, the network structure of the chain strongly influences the later operational decisions of flow management throughout the chain, so in addition to strategic locating and capacity setting costs, the resulting operational inventory holding and transportation costs should be considered at the network design stage.