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Supply Chain Model. An Overview. Supply Chain Fundamentals. Material flows Supply of raw material: Lead Times, storage.. Production: scheduling, batch and continuous processes, changeover time, batch Warehousing: dispatch, replenishment, stock policies…

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Supply Chain Model

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supply chain model

Supply Chain Model

An Overview

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supply chain fundamentals
Supply Chain Fundamentals
  • Material flows
    • Supply of raw material: Lead Times, storage..
    • Production: scheduling, batch and continuous processes, changeover time, batch
    • Warehousing: dispatch, replenishment, stock policies…
    • Market: customer service level and expectations, storage, On Time In Full (OTIF)…
    • Transportation: simple or complex?, travel times, variability, small, big orders…
    • Third Parties: Outsourcing or Third Party Supply may be a factor at any stage…
  • Information flows
    • Forecasts: customer demand, Supply Chain forecasting, manual, automatic…
    • Actual orders: Order size and frequency profiles, seasonality…
    • Processing: Automated or manual, ERP?, Information sharing, emergency orders…

Typically a Supply Chain consists of:

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supply chain fundamentals3
Supply Chain Fundamentals

Result:Customer Service Level Agreements (SLAs) are necessary

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Service Levels

Lead Time, OTIF…

Service Levels

Lead Time, OTIF…

Service Levels

Lead Time, OTIF…

Service Levels

Lead Time, OTIF…

Service Level Agreements through the Supply Chain

Service Levels and metrics

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supply chain fundamentals5
Supply Chain Fundamentals

Why the difference between perfect and real Supply Chain? : Uncertainty

Market Demand

Consumer or customer demand may be variable

More importantly demand patterns may be difficult to predict

Demand is often forecasted poorly. Automated systems with manual interference are typical

Market demand forecasts, Supply Chain forecasts and factory forecasts are calculated in isolation from each other, leading to duplication of effort and to the amplification of errors


Often production efficiency is at the expense of overall Supply Chain goals

Production batch sizes may be larger than necessary

Long forecasting horizon may allow production scheduling to be optimised but lengthens lead time

Various unknowns combine so that production schedule adherence is not 100%


Information about existing stock is not shared adequately through the system

Safety stock calculation is likely to be less than optimal

A replenishment policy which “works” is likely to be in operation rather than one that is best


Steady predictable demand is handled similarly to volatile demand in the Supply Chain

Transportation may be unreliable or unpredictable

Raw material supply may be unreliable or unpredictable

Arrangements with Third Parties may reduce visibility and information sharing

Order Processing may require work-arounds

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Supply Chain Fundamentals

Why the difference between perfect and real Supply Chain? : Uncertainty



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What can Simulation do?

Discrete Event Simulation is an approach aimed precisely at accounting for uncertainty:

  • Mocsim’s Supply Chain Model was built using using Extend* simulation software with an interface created in Microsoft Excel

* Note: Similar logic could be coded into any other DE package. The choice of simulation software is not key. The advantages of Extend are that it:

    • has Runkit and Player versions and so models can easily be ported and share amongst users
    • is fast
    • is object oriented which allows for easy configuration of different Supply Chain networks once the core modules have been designed
    • has adequate animation
    • Links easily with spreadsheets

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Supply Chain Model output

Results can be formatted to suit client conventions or for easy translation into value

  • For each Product Type, SKU the following output information is available instantaneously and against time:
    • Stock quantities at each location
    • Service level measures such as OTIF for each stage of the Supply Chain or overall
    • Lead Times and Lead Time variance for each stage of the Supply Chain or overall
    • Production metrics
    • Orders in transit
  • All output can be converted to units of Orders, Quantity or Value
  • Output can be viewed dynamically for training or demonstration purposes or analysed when runs are complete

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Supply Chain Model dynamic interface

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Case Study

Client applied Supply Chain Simulator to:

  • Prototype and design an alternative Supply Chain
  • Train the Supply Chain organisation
  • Demonstrate and sell advantages of the proposed Supply Chain structure across the business

Project Stages were:

  • Configuration of the model to match existing Supply Chain conditions and proposed alternative structures
  • Collection, analysis and processing of historical data
  • Tuning the model to match As-Is conditions
  • Design of simulation scenarios
  • Completion of simulation runs and compilation of results
  • Run training courses based on the scenarios tested

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Case Study detail

Sample of scenarios tested:

All variability/uncertainty parameters switched off to demonstrate the “perfect-world” Supply Chain:

Lead Times are a minimal (equal to production or transport times only)

Service levels (On Time In Full - OTIF) are 100% at each Supply/Demand stage

Introduce demand variability (order frequency, order size, then both)

Then adjust safety stock levels to increase OTIF values

Repeat runs until OTIF is at acceptable levels

Repeat the previous experiment for different types of uncertainty and variability:

Forecast accuracy

Production schedule adherence

Supply Chain accuracy

Carry out runs to show the effect of increasing agreed Lead Times relative to the average possible throughput times

In this case a build-up of stock occurs because orders often arrive earlier than expected. This stock would have to be either acceptable to the and customer or held until a suitable delivery point by the supplier.

Show impact of changes to Supply Chain production batch size

Bigger batch size improves production efficiency but means increased stock must be held downstream in the Supply Chain

In this case it was possible to reduce the negative impact of small batch sizes on factories be designing an optimum production sequence which minimised changeover times.

The model was able to quantify the overall benefits, even in scenarios where conditions were worse for manufacturing

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Case Study detail

Planned scenarios include:

Carry out runs to show the impact of changing the length of

Review period (for each warehouse a review period can be set. This makes warehouse management simpler but effectively increases Lead Time)

Scheduling horizon (Increasing this makes production scheduling easier but increases Lead Time)

Customer types split into segments with different Customer Service Levels

Model would help to quantify the benefits of splitting customers in different ways for example it might be rational to separate stable predictable demand from more unpredictable.

Show the benefits of increased visibility and information sharing

The model was configured to account for three strategies: Make to Stock, Make to Order and Vendor Managed Inventory

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