Supply Chain Modelling: Process, Steps, and Benefits

This report discusses the importance of supply chain management and the process of supply chain modelling. It covers the steps involved in designing a supply chain, production planning, procurement, and the benefits of supply chain modelling. The report emphasizes the need for flexibility in supply chain management to stay competitive in a dynamic business environment.

SUBJECT
SUPPLY CHAIN MANAGEMENT
UR NAME
UNI
MBA/OR XYZ
SUBMITED TO
MR/MRS
XYZ.
TITLE
SUPPLY CHAIN MODELLING
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SUMMARY !
Supply chain management is one of the vital and important part of any company /
organization like a oxygen to the business.
Supply chain modeling is the process to improve cooperate between production to
distribution, she also improve the efficiency and effectiveness and empower to the
management to take right decision , create the strategies , helps the process of
production like how to control fixed cast etc like this, she start from sourcing ,
manufacturing , distribution and logistics.
The process of supply chain modeling is start from the point of view of its role in
the strategy of a organization and its influence on the overall organizational
performance.
The aim was to ex-amine the supply chain modeling process, its objectives, and the
factors influencing the forming of the model. Also, there is an analysis of the cur-
rent situation in the company and its strategy.
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TABLE OF CONTENTS PAGES
INTRODUCTION ……………………...………………………….…..04
MODELLING OF SUPPLY CHAIN.................................................... 04
STEPS IN SUPPLY CHAIN DESIGN...................................................05
PRODUCTION PLANNING................................................................. 06
SUPPLY CHAIN MODELING PROCESS………………………….. 07
PROCUREMENT…………………………………………………...….09
CONCLUSION…………………………………………………..……..09
RECOMMENDATIONS………………………………………………10
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INTRODUCTION!
Supply Chain is generally knows as an important part of almost any business
process. According to a business dictionary, it is the management of material and
information flow in a supply chain to provide the highest level of customer
satisfaction at the lowest possible cost.
One can state that effective SCM can help a company to achieve a competitive
advantage which means having higher profitability than a normal of all the
companies in the industry.
This report was focused on one the development of the Supply Chain modelling
process.
Modelling of Supply Chain
Supply Chain Network Design Method. This method of modelling requires
determination of the production location, locations of stocking and sourcing
facilities, as far as channels the products take through them. In its basics, first
introduced in 1974, this mod-el aims to optimize finished product flows from
plants to the distribution centers and customers.
MIP Optimization Modelling. The MIP (Mixed-Integer Programming) type
includes various important supply chain models. This includes most models for
vehicle routing and scheduling, facility location and sizing, shipment routing and
scheduling, freight consolidation and transportation mode selection. Mixed-integer
models are often difficult to optimize, as there can be an exponential number of
possible decision alternatives.
Stochastic Programming and Robust Optimization Methods. Stochastic
programming deals with a class of optimization models and algorithms in which
some of the data may be subject to significant uncertainty. Uncertainty is usually
characterized by a probability distribution on the parameters. Such models are
appropriate when data evolve over time and decisions need to be made prior to ob-
serving the entire data stream. In robust optimization, the uncertainty about
problem data is treated as deterministic, unknown-but-bounded (e.g., via intervals
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of confidence for the data). A robust solution is one that tolerates changes in the
problem data up to a given bound known as a priori.
Steps of supply chain design
First and foremost, it is essential to clearly define the objectives. The decision
making persons have to clarify first what targets does the supply chain strategy
aims. This, in turn, depends on the overall business targets. There are several
complicated questions to be answered during this step. What is the production
process of the company? How should the inventory be carried out? The “where”
question related to the location driver of sup-ply chain management. How should
the logistics and transportation be planned? How will the information flow
integrate all together? Obviously, all these questions contain a wide range of
smaller questions. Hereby, it is clear that this step is the most important during the
design of supply chains. Clearly selected targets will create the right direction of
develop-Supply Chain Modelling.
Secondly, the supporting data must be collected. In order to make correct decisions
concerning the questions above, the appropriate data should be collected. This
includes the product demand data, customer value data, transportation costs,
transportation times, warehousing costs, inventory costs, production costs,
procurement costs etc. (Profit Point 2003.)
The third step is modeling of a supply chain network. Nowadays, there is a wide
choice of software for simulation processes. It is up to the decision makers whether
to use one of those for running different supply chain models or to make modeling
manually. The model components to test includes capacity, customer requirements,
and costs of different options, operating capabilities etc.
The fourth step is analyzing. After the supply chain model has been created, it is
very important to analyze it. There are a lot of “what if” scenarios to be considered.
In order to make a proper analysis, there is a need for a deep knowledge of both the
business processes and the software solutions. A good analysis is essential for the
final design of a supply chain. (Profit Point 2003.)
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The last, the fifth step is implementation. After the theoretical part is done, it is
time to apply the strategy into real life. Here, the implementation part takes place.
It is important to realize, that there are no static business situations. Every-thing
changes all the time. Hereby, all these processes have to be reconsidered after a
defined period of time. New customers appear costs changes, laws and regulations
might change as well.
Production planning
The production process in supply chain management refers to storing the product,
assembling it or its actual production. Factories and warehouses are considered as
facilities of the production driver. In a simple form, the questions of what, how and
when to produce have to be answered during production planning stage.
In order to satisfy the customer order, there are a lot of processes triggered within
the supply chain .Generally; there are four applications for the production planning
process.
Make-to-stock (MTS). Within this application, the production process takes place
before the customer order. The received orders are to be fulfilled with the products
from stock and the stocks are then replaced with new products. The advantages of
such approach are, obviously, immediate response time for the customer order and
cost-efficiency regarding the organization of the production process. However,
inventory holding costs causes big risks in case of losing the customers or low
demand.
Assemble-to-order (ATO). Within this environment, the products are assembled
after the customer order is received, however, the spare parts are produced in
advance. This strategy is very efficient in case of high variability of options for the
final product.
Make-to-order (MTO). This approach refers to the pull strategy as the entire
production process is triggered with the customer order. If the customers are
willing to wait for its product and having, in-stead, the unique features – this is the
optimal solution.
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Supply Chain Modelling process
The importance of supply chains comes from the fact that they constitute a large
segment of economic activities. To improve their activities, to gain competitive
advantage companies are interested in effective and efficient supply chain
operations that meet customer expectations.
Therefore the supply chain management (SCM) or logistics tasks to produce and
distribute products in the right quantities to the right locations at the right time,
while keeping costs down and customer service levels up. In essence, SCM aims to
solve these tasks by searching for good trade-offs between system costs and
customer satisfaction. Thus, SCM is interested in the efficient and cost-effective
integration and coordination of the following supply chain
Other point of view a supply chain system can be considered as a network that
controls the flow of entities from production to vending. Similarly other networks a
supply chain consists of nodes and arcs, where nodes represent suppliers,
manufacturers, distributors, and vendors, as well as their inventory facilities for
storing products and transportation facilities for shipping products among nodes.
Arcs represent routes connecting the nodes along which goods are transported in a
variety of modes (trucking, railways, airways, and so on).
Supply chains are essentially a feed-forward network structure, with upstream and
downstream components arranged in stages. Raw materials, parts, products, and so
on flow downstream, payments flow upstream, and information flows in both
directions. However, there are supply chains where entity flows may not be strictly
directional because products may be returned for repair or refund. The key supply
chain stages are as follows:
• The supply stage feeds raw material or parts to the manufacturing operations.
• The production stage converts raw material and parts to finished product.
• The distribution stage consists of a distribution network (warehouses, distribution
Centers and transportation facilities) that move finished products to vendors.
• The vendor stage sells products to end-customers.
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In practice, the complexity of supply chains creates a broad range from simple
supply chains where each stage is a single node, to complex ones where each stage
is itself a complicated network consisting of a large number of nodes and arcs. For
example, the production stage may be hierarchical such that upstream factories
provide parts to a downstream factory that assembles the parts into more elaborate
intermediate or final products. In a similar way, a distribution network can consist
of a large number of warehouses arranged hierarchically from distribution centers
to wholesalers and retailers. In fact, supply chains may cross international
boundaries and extend over multiple continents.
After collection of all the required information, targets determination and analyses
implementation, the modelling process took place. The analytical approach was
used in order to suggest the most optimal solution regarding the overall supply
chain network for the case company.
This was only possible after considering of all the aspects of different option for
the new strategy. This included inventory calculations for different suppliers.
Those calculations needed to be done separately due to different lead times of the
vendors.
Moreover, the costs aspect is also very important for the supply chain modeling.
The analyses of the costs, times, delivery and order processing were implemented
in order to form a decision. Further, the most optimal solutions were found and the
new model was created.
During one of the stages of the project, the author faced the need to re-search the
logistics matters between China and Finland. This was success-fully implemented
by searching for information about general situation in this area, analyses of
possible transportation methods, costs and time analyzes and, of course, taxation
issues related to the import process.
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Procurement
Procurement is the process of purchasing or buying goods and services. production
driver of supply chain management, the procurement from business point of view
was presented.
In a modern business environment, there is no more space for a traditional belief
that procurement only relates for purchasing of goods and services in order to
respond the internal needs of a company.
First and foremost, purchasing department has to understand the business
requirements. This means buying products from the right source, for the right
price. The product must meet the customer requirements. Thereby, purchasing
process is closely linked with business strategy.
There is a wide range of activities to be taken in order to achieve these goals. The
three very basic steps of efficient procurement process are identifying
opportunities, managing the internal operations and achievement of objectives.
CONCLUSIONS
It should also be stated that Supply Chain Management is a dynamic process.
Thus, the offered model has to be modified and adapted in case there are changes.
Whether these are internal changes or general market changes, the management of
the company has to be flexible in order to stay competitive.
First, there is a flexible model of optimizing the supply chain in the nearest future,
when the sales are expected to grow. Secondly, the planning approach was
presented, providing a powerful tool for the management board to plan and
develop its supply chain strategy in accordance with its overall business strategy.
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Recommendation
Align supply management strategy with overall company goals.
Handle total expenditures from all departments of the organization.
Try to use spend analysis across the company in both product and services.
Make strategies according to the objectives of the company.
Use forecast analytics and advance technological supply chain management
software’s.
Study micro-level supply plans which directly influences on
strategies.
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