The Role of Modelling and Simulation in Supply Chain

Management

SURAJ KUMAR BOTHRA – PGDM IB (06)

CHANDAN TREHAN – PGDM OPS (160)

AMIT KUMAR PRASAD – PGDM OPS (102)

The Supply Chain Operations Reference model

It focuses on a particular company and is based on five distinct

management processes:

Plan Source Make Deliver Return

Tete-a-tete with the Article Fundamental nature of a supply chain

(a) The system under study is the supply chain of a given enterprise

Internal (Integration of previously separate operations) or

External (Cooperation between the enterprise and the other actors)

(b) The supply chain under study is a network of enterprises

Supply chain is a “network of organisations that are involved”

Long range (strategic) decisions supply chain configuration: number

and location of suppliers, production facilities, distribution centres

Medium and short range decisions

(tactical and operational)

material management, inventory management,

planning processes, forecasting processes,

etc.

“Closed loop” dynamic system

** how to exchange/share information?

** how to solve problems of mutual interest?

** how to set up global supply chain indicators ?

Role of Simulation in SC Performance evaluation

(a) Analytical methods, such as queuing theory

(b) Physical experimentations

(c) Monte-Carlo methods, such as simulation or emulation

A modelling and simulation approach is the only practical recourse The ability to carry out “what if“ analysis that lead to a “best” configuration

Here is how simulation helps!1. Supply chain design decisions: Localisation, Selection of Suppliers, Size, Stock Level

2. Supply chain control policies: Inventory Management, VMI (Vendor Managed Inventory), CPFR (Collaborative Planning, Forecasting and Replenishment), Info Sharing

Simulation focuses primarily on the dynamics of the physical and decision processes in the supply chain

Application of Modelling and simulation on SCM

Problem

1. Degree of Systematic decomposition of SCM model:- Decision system- Information system- Physical system

2. Distribution level of the system:- Centralized - Decentralized

Reduction of execution simulation time

Enhancing tolerance to simulation failures

Preparation of SC control changes

SIMULATION APPROACHES TO SCM

1. Continuous approachForester

- Dynamic system paradigm: not possible to differentiate individual entities.

- Management control: performed by making variation on rates (production rate etc.)

2. Discrete approach

- Time bucket driven- Event driven

Time bucket driven:

- Time is divided in periods of given length.

- Time is incremented step-by-step- Lead time is more than time

bucket- States are the states of the set of

resources

Event driven:

- Used extensively in job-shop simulation

- States are the states of the various items

- A time advance algorithm that suitably manages a future event list is mandatory

- State changes are characterized by appropriate logic conditions

Decision systems and simulation models (simulation vs. emulation)

The inherently distributed nature of a supply chain

Modularity of the control (i.e., management) system and the shop-floor model must be retained

Centralized SCM –Physical system, control system and Information system –Simulation model built by appropriate model from one or more of these subsystems.

Distributed SCM- Same as centralized however different simulation models on different computers.

Simulation Models

Centralized Simulation-Single Simulation model

• Strategic (for long term objectives)

• Operational (for short term goals)

MAS-Multi Agents Systems decision simulation

• Dynamic environments • Agents representing SC

entities take specific roles within supply chain structures

• Different agents may represent different structure

Simulation for Product Driven Systems• Planning & Scheduling Agents along with Agents representing physical elements

corresponding to products• Autonomous decision making features• Simulation Model formed in 2 parts

• Emulation model-entities represent items without attributes • Control model- Information flow originating from events in emulation model.

• Hybrid Architecture- RFIDs• Optimization abilities of Centralized control systems • Responsiveness and Robustness of decentralized control systems

Problem features that impact the nature of

simulation model

Degree of Systematic decomposition (Decision

system, information system, physical system)

Distribution level of the system (Centralized and

De-centralized)

Simulation MethodologyProblems

with Simulations

• Understanding Model Structure and Model Behavior

• Number of Objects and Number of Events may become very large

Restricting the Size of Simulation

• Abstraction• Aggregation• Reduction

Simulation Methodology

Conclusion

Simulation is the most powerful technique to gain insights into SC, but a lot of investigation needs to be carried out to deal with inherently distributed nature of Supply Chain.

Thank you!