For 1.1) The total transportation cost (TC) is

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

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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.

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

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).


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). 

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