Managing inventory in global supply chains facing port-of-entry disruption risks

Ports-of-entry are critical components of the modern international supply chain infrastructure, particularly container seaports and airfreight hubs. The potential operational and economic impact resulting from their temporary closure is unknown, but is widely believed to be very significant. This paper investigates one aspect of this potential impact, focusing specifically on the use of supply chain inventory as a risk mitigation strategy for a one supplier, one customer system in which goods are transported through a port-of-entry subject to temporary closures. Closure likelihood and duration are modeled using a completely observed, exogenous Markov chain. Order lead times are dependent on the status of the port-of-entry, including potential congestion backlogs of unprocessed work. An infinite-horizon, periodic-review inventory control model is developed to determine the optimal average cost ordering policies under linear ordering costs with backlogged demand. When congestion is negligible, the optimal policy is state invariant. In the more complex case of non-negligible congestion, this result no longer holds. For studied scenarios, numerical results indicate that operating margins may decrease 10% for reasonable-length port-of-entry closures, that margins may be eliminated completely without contingency plans, and expected holding and penalty costs may increase 20% for anticipated increases in port-of-entry utilization

Optimising Supply Chain Performance via Information Sharing and Coordinated Management

Supply chain management has attracted much attention in the last decade. There has been a noticeable shift from a traditional individual organisation-based management to an integrated management across the supply chain network since the end of the last century. The shift contributes to better decision making in the supply chain context, as it is necessary for a company to cooperate with other supply chain members by utilising relevant information such as inventory, demand and resource capacity. In other words, information sharing and coordinated management are essential mechanisms to improve supply chain performance. Supply chains may differ significantly in terms of industry sectors, geographic locations, and firm sizes. This study was based on case studies from small and medium sized manufacturing supply chains in People Republic of China. The study was motivated by the following facts. Firstly, small and medium enterprises have made a big contribution to China’s economic growth. Several studies revealed that most of the Chinese manufacturing enterprises became aware of the importance of supply chain management, but compared to western firms, the supply chain management level of Chinese firms had been lagging behind. Research on supply chain management and performance optimisation in Chinese small and medium sized enterprises (SMEs) was very scarce. Secondly, there had been plenty of studies in the literature that focused on two or three level supply chains whilst considering a number of uncertain factors (e.g. customer demand) or a single supply chain performance indicator (e.g. cost). However, the research on multiple stage supply chain systems with multiple uncertainties and multiple objectives based on real industrial cases had been spared and deserved more attention. One reason was due to the lack of reliable industrial data that required an enormous effort to collect the primary data and there was a serious concern about data confidentiality from the industry aspect. This study employed two SME manufacturing companies as case studies. The first one was in the Aluminium industry and another was in the Chemical industry. The aim was to better understand the characteristics of the supply chains in Chinese SMEs through performing in-depth case studies, and built models and tools to evaluate different strategies for improving their supply chain performance. The main contributions of this study included the following aspects. Firstly, this study generalised a supply chain model including a domestic supply chain part and an international supply chain part based on deep case studies with the emphasis on identifying key characteristics in the case supply chains, such as uncertainties, constraints and cost elements in association with flows and activities in the domestic supply chain and the international supply chain. Secondly, two important SCM issues, i.e. the integrated raw material procurement and finished goods production planning, and the international sales planning, were identified. Thirdly, mathematical models were formulated to represent the supply chain model taking into account multiple uncertainties. Fourthly, several operational strategies utilising the concepts of just-in-time, safety-stock/capacity, Kanban, and vendor managed inventory, were evaluated and compared with the case company's original strategy in various scenarios through simulation methods, which enabled quantification of the impact of information sharing on supply chain performance. Fifthly, a single objective genetic algorithm was developed to optimise the integrated raw material ordering and finished goods production decisions under (s, S) policy (a dynamic inventory control policy), which enabled the impact of coordinated management on supply chain performance to be quantified. Finally, a multiple objectives genetic algorithm considering both total supply chain cost and customer service level was developed to optimise the integrated raw material ordering and finished goods production with the international sales plan decisions under (s, S) policy in various scenarios. This also enabled the quantification of the impact of coordinated management on supply chain performances

A Representation of Tactical and Strategic Precursors of Supply Network Resilience Using Simulation Based Experiments

Modern supply chains are becoming increasingly complex and are exposed to higher levels of risk. Globalization, market uncertainty, mass customization, technological and innovation forces, among other factors, make supply networks more susceptible to disruptions (both those that are man-made and/or ones associated with natural events) that leave suppliers unavailable, shut-down facilities and entail lost capacity. Whereas several models for disruption management exist, there is a need for operational representations of concepts such as resilience that expand the practitioners’ understanding of the behavior of their supply chains. These representations must include not only specific characteristics of the firm’s supply network but also its tactical and strategic decisions (such as sourcing and product design). Furthermore, the representations should capture the impact those characteristics have on the performance of the network facing disruptions, thus providing operations managers with insights on what tactical and strategic decisions are most suitable for their specific supply networks (and product types) in the event of a disruption. This research uses Agent-Based Modeling and Simulation (ABMS) and an experimental set-up to develop a representation of the relationships between tactical and strategic decisions and their impact on the performance of multi-echelon networks under supply uncertainty. Two main questions are answered: 1) How do different tactical and strategic decisions give rise to resilience in a multi-echelon system?, and 2) What is the nature of the interactions between those factors, the network’s structure and its performance in the event of a disruption? Product design was found to have the most significant impact on the reliability (Perfect Order Fulfillment) for products with high degrees of componentization when dual sourcing is the chosen strategy. However, when it comes to network responsiveness (Order Fulfillment Cycle Time), this effect was attenuated. Generally, it was found that the expected individual impact these factors have on the network performance is affected by the interactions between them

The Benefit of Information Sharing in a Logistics Outsourcing Context

The goal of this article is to examine the value of information sharing in outsourcing of logistics activities. Our examination is in the context of a fairly complex network in which location and capacity of carriers are considered. The current research also examines the moderating effect of network settings on the benefit of information sharing. A core component of our methodology is use of computational experiments to provide a variety of logistics network conditions under which we investigate information sharing value. The investigation involves comparing two strategies, namely full and no information sharing. Underlying the experiments are procedures to optimise the network under each strategy. The procedures are based on exact methods that combine integer linear programming with exhaustive enumeration. To gauge the robustness of the insights, we applied formal analysis of variance techniques to the data from the numerical experiments. The obtained insights are helpful to managers for selecting appropriate logistics service providers and level of information exchange

The Bullwhip effect in complex supply chains

This paper reviews the various methods of modelling the dynamics of supply chains. We then present recently documented causes of the Bullwhip effect in production supply chains, and the methodologies used to describe and measure the importance of these causes. We examine the limitations of these methodologies and suggest a combined approach discrete event-continuous simulation modelling approach to further study this phenomenon in complex production supply chains

Discrete event simulation and production system design for Rockwell hardness test blocks

Thesis (M. Eng.)--Massachusetts Institute of Technology, Dept. of Mechanical Engineering, 2009.Cataloged from PDF version of thesis.Includes bibliographical references (p. 41).The research focuses on increasing production volume and decreasing costs at a hardness test block manufacturer. A discrete event simulation model is created to investigate potential system wide improvements. Using the results from the simulation a production work-cell is proposed that will allow a single worker to operate 7 machines at a rate that exceeds existing production rates. This results in the workforce being reduced by a factor of four while reducing product lead-time by 30% and increasing throughput by 50%.by David Eliot Scheinman.M.Eng

Total cost reduction through an improvement of the use and inventory management of consumables and spare parts

Thesis (M.S.)--Massachusetts Institute of Technology, Sloan School of Management, 1996, and Thesis (M.S.)--Massachusetts Institute of Technology, Dept. of Mechanical Engineering, 1996.Includes bibliographical references (p. 109-111).by Kevin Mark Thompson.M.S