Dynamic Modelling For Supply Chain Management Book

Part I An Introduction to Dynamic Modelling for Supply Chains

1 On the Definition of Dynamic Simulation 3

1.1 An Introduction to Dynamic Simulation 3

1.1.1 Systems, Models and Simulation 3

1.2 Time Handling In Dynamic Simulation Models 5

1.2.1 Type of Dynamic Computer Simulation Models 5

1.2.2 Difference Equations in Discrete Time Models 5

1.2.3 Differential Equations in Continuous Time Models 5

1.2.4 Computer Simulation Models Time Advance Methods 6

1.2.5 Executable Timelines 6

1.3 Deterministic and Stochastic Simulation 7

1.4 Dynamic Modelling Methodology and Tools 7

1.4.1 System Dynamics 7

1.4.2 System Dynamics Modelling Tools 8

1.4.3 System Dynamics Software Tools 11

1.5 Model Validation vs Usefulness 12

1.6 Dynamic Modelling Approach Followed in this Book 13

1.7 References 15

2 Current Supply Chains Management Issues 17

2.1 Current Issues in SCM 17

2.2 SCM Issues and Related Problems 17

2.3 Network Configuration and Competition 18

2.4 Sharing Information through ICTs 21

2.5 Developing Collaborative Planning Activities 24

2.6 Suppliers Management. Expanding the Purchasing Role 28

2.7 Approaching Markets Differently 29

2.8 References 29

3 Models for SCM Simulation and Analysis 33

3.1 SCM and Dynamic Simulation 33

3.2 Continuous Time Simulation Models for SCM 35

3.3 Classifying Hi-tech SC Dynamic Models in this Book 36

3.3.1 Overview 36

3.3.2 Front-end Dynamics Modelling 37

3.3.3 Modelling Back-end Issues in SCM 39

3.3.4 Modelling Integration Issues in SCM 39

3.4 References 40

Part II Modelling Front-end Issues in SCM

4 Understanding a Customer's Decision to Buy 45

4.1 Selecting Potential Markets 45

4.2 A Case Study for Market Segmentation 46

4.3 The Monitor Purchase Process. A Case Study 51

4.4 Concluding Remarks 55

4.5 References 55

5 Understanding Financial Implications of Strategy 57

5.1 Overview 57

5.2 The Price as Source of Revenue Stream 57

5.2.1 Characterising Pricing Options 57

5.2.2 The Pricing Setting Process and Framework 60

5.3 The Cost Structure and the Value Chain 62

5.4 The Value-driven Planning Process. A Case Study 66

5.5 References 73

6 Understanding Hi-tech Business Growth 75

6.1 Characterising Hi-tech Business Planning Process 75

6.2 Hi-tech Business Growth. A Case Study 77

6.2.1 Reasons for this Modelling Effort 77

6.2.2 Fuzzy and Soft Marketing 78

6.2.3 Understanding the Business Process Better 79

6.2.4 Understanding the Requirements of a Business Process Model 80

6.2.5 Introducing the Marketing Intelligence Team 81

6.2.6 Validating the Model and Preserving the Chain of Belief 81

6.2.7 Concluding Remarks of the Case Study 83

6.3 References 84

7 Modelling a Hi-tech Business Growth 85

7.1 Model Overview 85

7.2 Modelling Customer's Decision to Buy 86

7.3 Modelling a Customer Perception of a Product 88

7.4 Modelling Competition. Value Provided and Perceived 89

7.5 Modelling Marketshare, Revenue, Gross and Net Operating Profit 90

7.6 Modelling Profit Contribution Growth 93

7.7 Transforming a Dynamic Simulation Model into a DSS 97

7.8 Sample DSS and Case Study 98

7.8.1 Introduction 98

7.8.2 From a Simulation Model to a Decision Support System 101

7.9 Managerial Implications 102

7.9.1 Respond to Market-driven Demand 102

7.9.2 Segment According to Customer Purchase Priorities 103

7.9.3 Focus on the Vertical Dimension of Business Planning 103

7.9.4 Traction from Precise Go-to-market Strategy 103

7.10 Conclusions and Further Research 104

7.11 References 104

Part III Modelling Back-end Issues in SCM

8 Back-end Issues Related to Supplier Management 109

8.1 Contract Structures for Supplier Management 109

8.2 Competitive Prourement Strategies: Global and Multiple Sourcing 109

8.3 Types of Contractual Relationships with Suppliers 110

8.4 Procurement Risk Management at HP. A Case Study 112

8.4.1 Procurement Uncertainties 112

8.4.2 Technical Challenges in Managing Procurement Uncertainties 114

8.4.3 Measuring Uncertainty. The Scenario Approach 114

8.4.4 Managing Risks. Structuring Contracts with Suppliers 115

8.4.5 The PRM Business Process 117

8.4.6 Benefits from Implementing PRM at HP 118

8.5 References 119

9 Modelling a Portfolio of Contracts with Suppliers 121

9.1 Overview 121

9.2 Formal Characterisation of the Contracts with Suppliers in a Dynamic Volatile Business Environment 122

9.2.1 Notation of the Model Material and Information Flow Variables and Parameters 122

9.2.2 Characterisation of Supplier Contracts in a Volatile Business Environment 123

9.2.3 Modelling the Procurement System. Material and Information Flows 126

9.3 Modelling Accountability of the Procurement System 130

9.4 Modelling Forward Contract with Suppliers 133

9.5 Modelling Commodity Options Contracts with Suppliers 135

9.6 Selecting a Suitable Contract Portfolio with Suppliers 136

9.7 Managerial Implications of the Work 141

9.8 Concluding Remarks of the Chapter 143

9.9 References 143

10 Modelling Back-end Issues in Manufacturing 145

10.1 Introduction to the Modelling of Manufacturing Issues 145

10.2 Case Study in Semiconductor Fabs 146

10.3 Introduction to the Case Study 146

10.4 Pros and Cons of LP Models to Deal with PM Scheduling 148

10.5 Dynamic Simulation to Deal with PM Scheduling in Fabs 151

10.5.1 Introduction and Notation 151

10.5.2 Modelling Tool's Age 152

10.5.3 Modelling Tool Availability 153

10.5.4 Modelling Maintenance Activities Backlog 153

10.6 Modelling Preventive Maintenance Policies 154

10.6.1 Overview 154

10.6.2 Age Based Maintenance Policy 155

10.6.3 Age and Availability Based Maintenance Policy 155

10.6.4 Age and In-front Buffer Maintenance Policy 158

10.7 Specific Wafer Production Flow Scenarios 158

10.8 Simulation Results 161

10.8.1 Introduction to Results of the Case Study 161

10.8.2 Results for Scenario 1 161

10.8.3 Results for Scenario 2 163

10.8.4 Confidence in Simulation Results 164

10.9 Concluding Remarks of the Case Study 166

10.10 References 166

Part IV Modelling Integration Issues in SCM

11 Different Supply Chain Integration Models 171

11.1 SC Integration Opportunities 171

11.1.1 Overview 171

11.1.2 The Factory.com Case Study 172

11.1.3 How the Factory.com CME Works 173

11.1.4 The FN Architecture 175

11.1.5 Business Intelligence, Configuration Tailoring and Integration 176

11.1.6 Partnering Options with Factory.com and Modelling Opportunities 177

11.2 Characteriation of SC Materials and Information Flows 179

11.2.1 Material and Information Variables 179

11.2.2 Characterisation of SC Materials and Information Flows 180

11.2.3 Modelling Information Flows According to the Integration Sequence 181

11.3 Modelling a Non-integrated Supply Chain 182

11.4 Modelling PI SC with Sharing Sell-through 183

11.5 Modelling PI SC with Shared Inventory Information 183

11.6 Modelling Integrated (Sales and Inventory) Supply Chains 184

11.7 Results About Integration Sequence Implications 184

11.8 Concluding Remarks 186

11.9 References 187

12 Modelling Financial Implications of Integration Strategies 189

12.1 An Introductory Case Study 189

12.1.1 Overview 189

12.1.2 Understanding Financial Problems in Contract Manufacturers 190

12.1.3 Defining New Schemes 191

12.2 Modelling Materials, Information and Financial Flows 194

12.2.1 SC Financial Variables 194

12.2.2 Considerations About Financial Statements 195

12.2.3 Modelling Financial Flows 196

12.3 Integration with Financial Limitations 197

12.4 Results with No Financial Limitations 200

12.5 Integration with Financial Limitations for All Nodes 200

12.6 Financial Limitations at a Single Node 205

12.7 Concluding Remarks 205

12.8 References 206

13 Exploring the Use of Manufacturing Control Techniques in Virtual SC 207

13.1 Virtual Manufacturing in Modern Supply Chains. Comparing SC Integration Levels to Push-pull Manufacturing Schemes 207

13.2 Hybrid Push-pull Manufacturing Schemes Used for SCM 208

13.3 Sample CONWIP Driven Virtual Supply Chain 208

13.3.1 Introduction to the Case Study 208

13.3.2 The CONWIP SC Approach 209

13.3.3 CONWIP in a Production System vs CONWIP in an SC 210

13.3.4 Modelling a CONWIP SC vs an FI SC 213

13.3.5 CONWIP SC Equations 217

13.3.6 Validation of the Behaviour Patterns of the Main Conwip SC Model Variables 222

13.3.7 Simulation Study for the Comparison of SCM Policies 225

13.3.8 Conclusions of the Case Study for Comparison of SCM Policies 233

13.4 References 233

14 Capacity Constraints Analysis for SCM 237

14.1 An Introduction to the Problem 237

14.2 Constrained Supply Chain Modelling in the Literature 238

14.3 Modelling the Constrained Supply Chain 239

14.3.1 Inventory Control Policy Models 239

14.3.2 Model Notation 240

14.3.3 The Decentralised Model 242

14.3.4 POS Decentralised Model 244

14.3.5 Centralised Model 245

14.4 Perfonnance Metrics, Experiments and Discussion 246

14.4.1 Supply Chain Performance Metrics 246

14.4.2 Experimental Sets: Assumption and Parameter Vectors 247

14.4.3 Data Analysis 247

14.4.4 Discussion 251

14.5 Concluding Remarks 253

14.6 References 253

15 Modelling Diversity Integration in the Organisation 257

15.1 The Meaning of Diversity in Organisations 257

15.2 Affirmative Action and Equal Opportunity Policies 257

15.3 A Business Case for Cultural Diversity 258

15.4 Dynamic Modelling and Cultural Diversity. A Case Study 259

15.4.1 Purpose of the Modelling Effort 259

15.4.2 Building the Simulation Model 259

15.4.3 Simulating the Model 262

15.4.4 Concluding Remarks of the Case Study 267

15.5 References 269

Part V Dynamic Modelling Projects

16 Presenting SCM Dynamic Simulation Projects 273

16.1 The Project Alternatives 273

16.2 One Point Solution 274

16.3 Decision Improvement Process 274

16.4 Infrastructure Solution 274

16.5 Organisational Independence 275

16.6 Combination of Alternatives 275

16.7 A Modelling Value Proposition. A Case Study 278

17 Capturing the Learning of a Modelling Project 283

17.1 The Project Technical Closure 283

17.2 The Project Technical Closure Case Study 285

17.2.1 Model Purpose and Strategy 285

17.2.2 Archives, Files and Documents 286

17.2.3 Model Structure 286

17.2.4 Model Use 287

17.2.5 Maintenance 288

17.2.6 Technical Learning 288

17.3 Reference 289

Index 291