For phase four as discussed in Figure 2, it is necessary to

identify precise location therefore, gravity method as suggested by (Chopra and

Meindl, 2010) can be useful to identify new global distribution center for

ASML. As first step mentioned by (Chopra and Meindl, 2010) it is necessary to

identify the geographic location where potential site will be considered. Gravity

model can help determine location which can minimize the cost of transporting

parts. A gravity model assumes that both markets and supply sources can be

located as grid points on plane. Here

gravity model is discussed because it is suitable for locating a single

facility. As ASML decides to open one global distribution center this model can

help ASML in identifying optimal location for its global distribution center

(Chopra and Meindl, 2010). The inputs for this model are:

, :

Coordinate location of either a market or supply source n

:

Cost of shipping one unit for one mile between the facility and either market

or supply source n

:

Quantity to be shipped between facility and market or supply source n

If (x,y) is the location selected for the facility , the distance between facility (x,y) and the supply source

or the market n is given by :

= ( 1.1)

The total transportation cost (TC) is given by

TC= (1.2)

The optimal location is the one that minimizes total TC in

equation 1.2. By using this method one can identify the coordinates for new

location of global distribution center. This model has limitations as the

coordinates provided by this model may not correspond to a feasible solution. (Chopra

and Meindl, 2010). Advanced software which use discrete modelling or linear

programming can be used to model more parameters (provided in Figure 3 ) to

identify ideal location.

1.

Trade-off principles and concept:

“A network designer needs

to consider product characteristics as well as network requirements when

deciding on the appropriate delivery network.” (Chopra and Meindl, 2010, pp

93-94).

For ASML trade-off

principle is cost and service level, ASML strives to increase its

responsiveness towards the customer, for this reason cost is a trade -off with

service responsiveness towards its customers. Having more distribution centers

can increase the costs significantly, but if this trade-off increases service

level towards customers, ASML would invest in having more regional distribution

networks (Chopra and Meindl, 2010).

2.

Conclusion:

For ASML redesigning its

regional distribution network and opening a new global distribution center

could bring long term benefits. In context of ASML network design decisions

fall under strategic planning, as it is very expensive to close or open new

distribution centers. Using qualitative as well as quantitative methods will

help ASML in optimizing its distribution network. An appropriate distribution

network will help ASML to become more responsive towards its customers (Chopra

and Meindl, 2010). There is a direct relationship between increase in number of

distribution centers and decrease in response time towards customers, however inventory

and costs will increase significantly. A company like ASML could consider

trade- off between cost and responsiveness towards its customers. Customer

service and cost factors are the primary reasons to evaluate different distribution

network design, therefore it is important to be sure that the strengths of

distribution network that will fit with the organizations supply chain strategy

(Chopra and Meindl, 2010).