V. Cruz-Machado

Supply Chain Redesign for Resilience using Simulation

Daniel Dumke — Mon, 13 Aug 2012 07:30:40 +0000

Today we have a look at current research regarding the improvement of resilience within a supply chain.
In their 2012 paper “Supply chain redesign for resilience using simulation” Carvalho et al. analyze supply chain resilience on the basis off a Portuguese automotive parts manufacturer.

Methodology

As indicated by the paper’s title the authors main method is a simulation study. The simulation model is based on the results of a case study. Semistructured interviews were conducted to gather the relevant data off a Portuguese automotive supply chain.

But first, the authors analyze the current literature on supply chain design and resilience (figure 1).

Figure 1: Literature Review Supply Chain Design (Carvalho et al., 2012)

Simulation model

The structure of the supply chain model is shown in figure 2. The Portuguese automaker has a capacity of over 180,000 vehicles per year and all vehicles are customized.

Figure 2: Supply Chain Structure (Carvalho et al., 2012)

Arena 9.0 in conjunction with Microsoft Excel has been used to implement the model of the supply chain.
The processes which have been identified rely on the SCOR process definitions. Figure 3 shows the simulation model flowchart.

Figure 3: Supply Chain Processes (Carvalho et al., 2012)

Supplier lead-times were estimated together with the case study participants using triangular distributions (figure 4).

Figure 4: Input Data Lead Times between Suppliers (Carvalho et al., 2012)

Performance was measured using two key performance indicators: lead-time and total cost.
Overall six scenarios were designed by the authors. One containing the base scenario without using any strategy to reduce risk, one using a redundancy-strategy, and another one implementing a flexibility-strategy. These scenarios were then duplicated to generate one group with a disruption in the material flow between supplier 2_1 and 1_1 and another group without any disruption.

Figure 5 shows the total cost performance in different scenarios. Scenarios to 4 and 6 are affected by the disruption.

Figure 5: Simulation Results in different Scenarios (Total Cost, Carvalho et al., 2012)

The authors conclude

Two strategies widely used to mitigate disturbance ad- verse effects on SCs were considered (flexibility and redundancy) and six scenarios were designed. To evaluate the different scenar- ios designed, two performance measures were defined and com- puted for each SC entity, Lead Time Ratio and Total Cost.
The results of the simulation allowed to compare SC behavior after the occurrence of the disturbance under the two SC resilience design strategies. Both strategies are effective in reducing the neg- ative effects of the disturbance on SC performance. When the flexibility strategy is applied the Total Cost of the SC is less, in comparison with the redundancy strategy and the Lead Time Ratio is better.

Conclusion

Since my own research revolved in parts around my own simulation model I have two comments on this specific implementation, but I would like to share with you:

I’ve seen this already in other papers: the description of the scenarios is really bad. For one there is no overview summarizing the key differences between each of these scenarios, furthermore the description of how these scenarios are implemented in the supply chain model lack in detail.
Another key aspect to simulation modeling is the validation off the model’s output. In this case the authors are using real input data from the case study, but there is no mention if they also compared the model’s output with the real supply chain.

The conclusion of the authors also highlights the difficulty of interpreting simulation results. What could one learn from this study? Redundancy and flexibility can be used to reduce risk?
For me this insight does not qualify as a groundbreaking revelation. At least not in 2012.

Reference:

Carvalho, H., Barroso, A.P., Machado, V.H., Azevedo, S., & Cruz-Machado, V. (2012). Supply chain redesign for resilience using simulation Computers & Industrial Engineering, 62, 329-341 DOI: 10.1016/j.cie.2011.10.003

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Demand Forecasting, Resilience and Mapping (Book Review)

Daniel Dumke — Mon, 31 Oct 2011 14:30:00 +0000

I am a huge fan of Open Access in research and a while ago I was made aware of a book on supply chain management, which has recently been published under an open access license. The full book can be downloaded on the web site of the publisher.
The book contains 27 chapters / articles on a range of supply chain related topics, such as optimization, public sector supply chains, modeling and simulation, but also several papers which addressed supply chain risks in one way or the other.
I was especially interested in the risk related chapters, so I will give you a short overview on three of the papers:

A Hybrid Fuzzy Approach to Bullwhip Effect in Supply Chain Networks, by H. Tozan and O. Vayvay

The authors of the first paper propose a fuzzy-neural-network approach for demand forecasting. In supply chain management a test case for demand forecasting, has always been the bullwhip effect. The better your demand forecasting the less pronounced the bullwhip effect will be. And this can be a real money saver.

A simulation of their new approach shows that for a three tier supply chain (customer, retailer, factory) especially the fluctuations at the retailer can be reduced quite drastically (figure 1 a and b).

Figure 1: Orders and Production in the Base vs. Proposed Model (Tozan and Vayvay, 2011)

Integrating Lean, Agile, Resilience and Green Paradigms in Supply Chain Management (LARG_SCM), by H. Carvalho and V. Cruz-Machado

The second article I would like to highlight, tries to integrate the supply chain concepts of lean, agile, resilience and sustainability / green. One of the weaknesses in supply chain management research has always been the strong focus on one of the concepts, neglecting the fact that successful companies often have to integrate different aspects in one supply chain. A supply chain of a high-end computer manufacturer for example might have to be green and agile at the same time, a military supply chain probably should integrate the concepts of agility and resilience to be successful.
First the authors introduce the mentioned concepts and compare them in a nice table view.

Next they build a graphical model of the supply chain and added vectors to symbolize how the different concepts influence decisions in the supply chain.
Figure 2 aggregates the results.

Figure 2: Impact of different Concepts on Supply Chain Management Decisions (Carvalho and Cruz-Machado, 2011)

Supply Chain Resilience Using the Mapping Approach, by A.P. Barroso, V.H. Machado and V. Cruz-Machado

The last paper analyzes supply chain resilience using the example of a supply chain in the automotive industry. Supply chain mapping is a simple technique where the elements and connections of a supply chain are drawn on a map. The elements and connections are the enriched with additional information like inventory levels and policies or lead times.
After describing the methodology the authors use a case study to analyze the resilience of the chain. The supply chain mapping enables them to unveil several points for improvement:

The assembler has no alternative suppliers for part B. An identical situation is found for all the other parts.
Like the assembler, the 1st Tier B has no buffer stock. There is no inventory of raw materials, work in progress, and final products.

Conclusion

The first paper shows a quite interesting approach to demand forecasting, which (at least in the simulation) was able to produce much better results than more traditional approaches. If you are interested in this topic, I already discussed several other aspects of forecast risk and problems with forecasting, but I also touched other methods to improve forecasting (e.g. by information sharing).

The second paper contributes to the understanding of the effect of different aspects of some generic concepts in supply chain management. Even though it only considers a small amount of supply chain decisions, the results are quite clear: It is not possible to easily combine the different concepts and it highlights the need either to find trade-offs or to develop new approaches to satisfy all goals.

The third paper introduces the supply chain mapping methodology, which is quite simplistic in nature, but in my point of view one of the most powerful methods to analyze supply chain risks in practice. The case study should be read as an example only and gives a few hints on how to implement the methodology and analyze the results.

Reference:

Tozan, H., & Vayvay, O. (2011). A Hybrid Fuzzy Approach to Bullwhip Effect in Supply Chain Networks Supply Chain Management, 49-72

Carvalho, H., & Cruz-Machado, V. (2011). Integrating Lean, Agile, Resilience and Green Paradigms in Supply Chain Management (LARG_SCM) Supply Chain Management

Barroso, A.P., Machado, V.H., & Cruz Machado, V. (2011). Supply Chain Resilience Using the Mapping Approach Supply Chain Management

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