1、VP International OperationsSystems Modeling CorporationIntroduction:This paper intends to discuss the use of simulation for those companies currently in the process of evaluating their supply chain to gain performance improvements (such as customer service, cost cutting, etc.) for their operations.
2、This document does not cover in great detail features and applications of this technology, rather it focuses on the benefits of using simulation as an effective tool to manage and understand your supply chain. There is substantial information available from vendors on the Internet on supply chain te
3、chnology such as the Supply Chain Council or for simulation at the Society for Computer Simulation. Some basics on these technologies first:Simulation (discrete-event) can be defined as: creating a computer model of a real or proposed system and conducting experiments on the model to describe observ
4、ed behavior and/or predict future behavior before investing any time or money. Because experimenting on a real system could be costly and/or impractical, simulation has become an extremely important tool for designing and analyzing complex systems; it is a cost-effective way of testing proposed syst
5、ems, plans, or policies before incurring the expense of prototypes, field tests, or actual implementations. In fact, many managers have come to view simulation as an inexpensive insurance policy. Simulation sometimes gets confused with Business Process Flowcharting, Work Flow Modeling or Process Mod
6、eling. In actuality, simulation has origins in the factory floor - most frequently used in the automotive industry for over twenty years. More recently with all the changes in the business world due to “downsizing”, “rightsizing” and mergers/acquisitions, many firms realize the benefits of using sim
7、ulation by studying processes (like a factory) to show the effect of change on their company. Todays simulation software tools require end-user input through testing and evaluation (what-if analysis) to get a final “optimized system.” In the end, though, simulation is a cost saving tool. It has save
8、d companies millions of dollars by offering insight for management decision-making on complex systems; a benefit that is difficult to match using other technologies or mathematical methodologies.Supply Chain Management has been defined by logistics professionals as: (the) managing of the flow of mat
9、erials and products from the source to the user. The four basic processes of Plan, Source, Make and Deliver are most usually noted in this industry. Sounds simple but actually is quite complex due to the interdependencies in a supply chain. This flow typically includes aspects of purchasing, manufac
10、turing, capacity planning, operations management, production scheduling, manufacturing requirements planning (MRP II), distribution system planning, transportation systems, warehousing and inventory systems, and demand input from sales and marketing activities. It can be from a single product line o
11、r production plant to a complex chain that includes multiple demand sources, suppliers, distribution means or factories. supply chains are being “managed” these days by software called Advanced Planning and Scheduling (APS) systems. Companies in this industry include I2 Technologies, Manugistics, Nu
12、metrix, SAS Institute and more. These tools offer the ability to rapidly and simultaneously plan and schedule customer demand while considering materials and capacity constraints. They provide the ability to increase revenues, improve customer service and cut costs by synchronized management of the
13、complete supply chain. The potential in improved business performance is enormous. The APS market space is exploding, roughly $700m USD in 1998 and expected to triple in the next 2-3 years. These APS systems also appear to be infringing on the huge Enterprise Resource Planning (ERP) market as noted
14、by many of the industry journals these days. ERP is the term used to describe integrated computer systems for corporate computing sometimes called the “transactional backbone” of a company. Many of the large ERP suppliers such as SAP, Oracle, PeopleSoft and Baan have plans to introduce supply chain
15、management functionality into their software in the near future.Finally, depending on the scope of the problems in the supply chain, there are typical core methodologies known as “solver technologies” which include; heuristics, constraint management, linear programming, mixed-integer programming and
16、 network programming that provide the results or outputs of the APS tools. Conversely, simulation it is not a “solver technology” rather it is a methodology to evaluate detailed solutions and alternatives in the supply chain. Todays enterprise environment: If you could summarize in a few phrases the
17、se days about basic internal or external environmental conditions that most companys face today, I am sure most would say they are experiencing: constantly changing operations - (production line, factory, warehouse,distribution systems ,pening/closing/expanding/contracting) mergers, acquisitions or
18、joint ventures information systems changing/merging increasing competition increasing customer expectations demands for higher profits complex systems integration conflicting management objectives - centralize, decentralize, etc. automation and outsourcing needs mass customization pressures changing
19、 inventory policiesmany more for sure.The point is that all businesses are defined by constant change and variability. At ever increasing rates of speed, faster and faster.Then, why use Simulation?Those companies that do not change to improve certainly eventually go out of business or lose marketsha
20、re in some way. Simulation is the friend of change and can capture the randomness of systems. By this, it is meant that simulation can model the corporate dynamics in the complete supply chain, from source to the user in throughout the Plan, Source, Make and Deliver process. How can simulation captu
21、re the variability? This is mainly due to the statistical nature of simulation tools. The output is both statistical data and performance animation to view the system dynamics. Simulation can reliably capture and predict the effect of multiple changes in corporate systems. If somebody said, “ I can
22、offer you a view of how your system will perform” most sane individuals (with their careers in consideration) will consider the simulation . Sadly, though, often simulation is considered only after systems are installed and working improperly or do not work at all. Simulation is an insurance policy
23、to predict system performance to provide optimal results. The key to understand supply chain performance is to understand the variability of the processes in the system. All those items mentioned above clearly affect supply chain efficiency. Those companies that can gain the knowledge of the system
24、dynamics can make better evaluations (test drive or perform “what-if analysis”) of the supply chain to improve the performance. A simulation project forces the understanding in a step-by-step method, of system operations and thus defines the system clearly and therefore minimizes multiple (mis)inter
25、pretations as to the complexity and variability of the processes. If you can understand supply chain dynamics and variability behavior, better performance from the supply chain can be expected (e.g. lower inventories, better customer service.) A simulation project is inexpensive relative to the cost
26、 of supply chain software installation and management. The ROI of a project is easily justified in avoided costs that will be evident in the results of the project.What are some examples of system randomness and variability?As noted above, there is much change in our business environment today. Ther
27、e are many everyday occurrences that make the decision making process difficult due to the fast changing information put before management. Following are some of the problems needing to consideration for your supply chain model.Manufacturing: Stock out situations Parts not arriving on time for subas
28、sembly operations Machines breaking and disrupting production Labor problems Machine set up/retoolings New product line introductionsWarehousing/Distribution: Automated material handling systems broken Trucking/Shipping/Air/Rail systems deliver late Spacing constraintsInformation Technology: Changin
29、g business processes due to mergers/acquisitions Constantly changing business computer systemsMarket Conditions: Customer changing demand Economic conditions Currency conditionsWhat specifically can simulation do to improve supply chain performance?There are many areas to consider using simulation i
30、n your supply chain management.First from an aggregate point of view, a key question always to consider in supply chain management is “What are the trade-offs to achieve high customer service levels vs. associated costs (and related profits) to provide this service?” A high level simulation model co
31、nsisting of the many parameters in the various supply chain links with appropriate statistical data will provide valuable insight into this question. You can “test drive” your policies of distribution/transportation rules, manufacturing rates, inventory levels, etc. to see the effect on the complete
32、 system.Second, typically the key components of the supply chain include: Forecasting seeks to predict the levels of activity that will effect product demand. Advanced Planning sets production over time horizons of months or years using constraint models that treat both materials and capacity. Dynamic Scheduling deals with a few days to weeks of production, then takes information from the ERP or APS systems then generate
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