 All right, welcome back. Hopefully you had a good time talking with each other. And so what we want you to do now is send in your response to our question, which was, one, should they invest in expanding their existing kitchen in Sacramento? Or two, should they create a new kitchen somewhere else? And if you choose option two, the question is where? How many and where? So use this time now to enter that in what your choices are. And in the meanwhile, I'll answer a question that someone entered in earlier, Joanne, added this. I wanted to know about how do you add risk management considerations into network design? Really, how do you add in uncertainty, whether it's uncertainty of demand, of supply, any of this kind of stuff? It's hard. There's different mathematical techniques. You can use the cast the optimization. That requires you to solve a much larger problem. You're solving different state spaces essentially, what you think the possible value should be of the uncertainty. A cheaper way to do this is something I showed in SC2X is where you optimally solve a number of iterations, where you randomize whatever it is that you think is uncertain, the demand. So I think I did it for one of the nerd ones, the root beer, I think, where I had the demand change. I did a random sampling with demand. And then where would the optimal DCs be in each one of these cases? And if you do hundreds or a couple hundred runs, you start seeing, oh, are there some that are always open? Are there some that only make sense occasionally? And you can build in more robust design that way. The other way, because I think what you were hinting at is how do you handle unexpected disasters? If you're getting kind of into a dual, I always want to have two for dual, like dual sourcing, I always want to have two facilities. One is a backup of the other. That's something else you can think of or having extra capacity. So you always design things to be running at 85%, for example. So you can always surge up. You rarely want to design a warehouse to meet just your existing demand, right? Because you assume your demand's gonna go up. So there's some different strategies you can do to either buffer against uncertainty or try to find the most robust solution under uncertainty, whether it's uncertainty of supply, process, or demand. So let me just answer that. So now have we gotten any responses back? Room one. Okay, what are they saying? It says expanding kitchen is not enough. We need to open additional kitchen. Bakersfield is preferred choice and trade-offs. Additional cost versus level of service. Okay. So the question is what is level of service here? I'm guessing level of service is time to deliver. And so if you could expand, what room was that room? That was room one. Yeah, what do you mean by level of service? Because as you should know by now, level of service is a many-splendid thing. It means different things to different people. Like yes, in this case, it means speed of delivery. But it'd be interesting to see for that. And then after the cost, I'd be curious to understand what specific additional costs are you anticipating? Yeah, so that was one. So room one said expand and they picked Bakersfield. This is from Breakout 2. Increase efficiencies in current kitchen. Open a new kitchen subject to running an optimization model but from the map that looks like Bakersfield. Trade-offs are positive and negative. Positive are increased service levels. Assuming that you open multiple kitchens it looks like. Reduction in delivery costs potentially. Negative trade-offs are higher capital investment costs, right? Right, new kitchen. Delivery costs and set-up costs. Although they're suggesting that there'd be a reduction in delivery costs, which makes sense, yeah, because you're just doing local deliveries. You don't have that long conveyance. Now one thing that isn't being considered here, and to be honest, a lot of companies don't do this. We actually had Chris Sultemar, who's the ex-SVP of Walmart's logistic and supply chain organization. We have a case that we wrote with him that's looking at this to set up. Where should they set up a new DC for their fresh food? And a lot of it dealt with the WOD, which is the weighted average distance to the stores, right? Which makes sense. It's like facility location using the Weber model. Same thing that we did. But then we asked them, do you ever look at the inbound costs? Because I don't think you guys look at the inbound costs, because the inbound costs will now go up if you have two kitchens. Because I'm delivering to two locations, two separate locations, which means instead of one truckload, it's two half truckloads, for example. So whenever you move multiple DCs for this case or multiple kitchens, yes, your outbound transportation goes down, your inbound goes up. Now by how much, you'd have to figure that out. Usually the last mile delivery, whether that's really last mile or last 50 miles, is more expensive than the inbound. Outbound is typically always expensive than outbound because I can consolidate my inbound. Both by creating two kitchens, I'm breaking up that consolidation. I'm actually breaking my demand in half. So your inbound transportation might go up. Well, your inbound, the cost of the procurement is going to go up also, because for the provider, and assuming that even if you use the same provider, they're delivering to do different locations. Right. The assumption would be that you would source from local facilities, which means you're not getting as much of a volume discount, if you will. Yeah, that's right. Because we argue in here that you tend to buy from smaller non-industrial farms. And so if you're a local farm, you're probably picking things close to your area, the local area in Sacramento kitchen. The nice thing about here, if you've never been to California, this is where, I don't know what the percentage is. 50% of all fruits and vegetables in the US come from right in that region that we outlined. The Southern California region is just incredibly fertile. The San Joaquin Valley is spoiled, all the California consumers, because everything they get there is fresh. Yeah. But this is consistent with the comment, I think that the room one came back and they said that they were talking about time to serve. It said it's a critical matter in food delivery. Right. Yeah, that's fair. So you've got time, you know, so the faster you get it in, right, the more shelf life you have, because that's really a clock starts ticking as soon as you pull the tomato off or anything like that, especially if you're dealing with higher end stuff. If you're dealing with industrial tomatoes, they are, some of these industrial designed fruits and vegetables, they're engineered to last a long time. For here, you're dealing with freshness, so you're right. You have a short time window and every day longer it takes to get to your kitchen wherever is a day you lose of shelf life. And for here, since we're preparing the meals, I agree that the last mile is most important as far as time wise. I agree. Any last things you wanna say about the case? Well, you know, I think that makes a lot of sense. In many cases, it comes down to what the consumer is willing to pay for. So if the consumer is willing to pay for basically the second kitchen, which would get them a fresher product, but at a higher cost because you'd have a higher procuring cost, although your transportation cost would be a little bit lower. Well, the outbound certainly, inbound unclear. Outbound, yeah, inbound different, you're right about that. But also labor, you know, you doubling your labor, it's not like it's going to be exactly half and half because it doesn't split that way. So you don't have economies of scale in the process and have it one kitchen, right? Or the consistency, that's another question. Oh, that's a good one. That might be a concern. So, but again, in the end, it's likely to cost more for the consumer. And then the question is, is the market thick enough for the consumer, consumers willing to make that commitment to support the business to be economically feasible? Right, okay. All right, so hopefully you enjoyed the case. You guys had good discussion. I mean, this is a trade-off that every company is making. Do I centralize or decentralize? That's essentially what we did. Do I centralize my kitchen or do I start creating satellite kitchens? I know that Blue Apron had, I want to say two, and they opened up this mega third kitchen, I think. And that's what's kind of saddling them with a lot of costs right now. And so it's a challenge. It's a tough industry right now. All right, so this wraps up SC2X. Let me just take a minute to talk about to give you a reminder of your final exam and talk about the next course if you want to continue with this. SC3X kind of picks up with all the issues that Jim and I were just talking about is where things break down a little bit, things get a little more complex. And so we talk about how you operate in this complex environment because every supply chain really has a lot of complexity. And so we talk about something called system dynamics. And this is how a system operates. How are the dynamics within a system, the different players within the system? We'll talk about feedback loops. We'll talk about causal loop diagrams. We'll talk about stock and flow. It's a nice way to map the interactions in a complex system because a lot of times there are unintended consequences. So one of those is something we talked about when sales are marketing, for example, which I always paint as the bad guy, but they're not. They want to introduce a new product. There are unintended consequences. Adding a new skew increases your inventory. It increases the amount you need for managing that inventory. The transportation, it has ramifications all the way down the supply chain that are not always considered in the decision. So we'll talk to you about that and talk about different ways you can incorporate this. We'll also talk about exogenous factors, exogenous things that affect the supply chains. Everything else we've talked about so far has been within your control, your transportation, your inventory level, your warehousing. Now we'll talk about what happens if you're shipping across a border because when you have global supply chains, things are different. And so a lot of times the tax ramifications dwarf and you hear cost ramifications. So we'll talk about that. Dr. Bruce Arnson will spend two weeks discussing the ins and outs of global supply chain management. And then Professor Yossi Sheffi will come in and talk about disruptions. That's another exogenous factor. You cannot control earthquakes. You cannot control some of these natural events or man-made events. The question is how do you minimize the effect? How do you protect yourself against that for your firm? And we'll talk about other exogenous factors in turn. There's a lot of regulations coming online where you need to track and trace certain products for provenance. You need to report certain things. There's a lot of interesting stuff coming out that directly impacts supply chains. So that's what we do in SC3X. It's all about making it real. We start talking about the real issues you're gonna face and how they fit with all the models, the great models that we taught. And it was kind of dovetailed together. My last reminder is that your final exam opens up starting tomorrow, November 29th at 1500 UTC. Remember, you have one week to finish it. Has to be done by December 6th, 1500 UTC. And once you start, you have four hours. Four hours to complete it. So good luck on the final. I'm sure you guys will do well. And I look forward to seeing you guys in the future. Yeah, thanks very much. Bye bye.