Defense Supply Chain

January 11, 2006January 11, 2006 Charu Chandra, University of Michigan - Dearborn

Defense Supply ChainA Logistics Lifecycle Management for TACOM’sExtended Enterprise

A Short Workshop on Developing and Implementing Supply Chain

5th Annual U.S. Army Vetronics Institute Winter Workshop Series U.S. Army, TACOM, Warren, Michigan

January 9-12, 2006

Presenter: Charu Chandra, Ph.D.Associate ProfessorIndustrial and Manufacturing Systems Engineering DepartmentThe University of Michigan-DearbornEngineering Complex 22304901 Evergreen Road, Dearborn, MI 48128-1491Phone: 313-593-5258; Fax: 313-593-3692; E-mail: [email protected]: http://www-personal.engin.umd.umich.edu/~charu/

mailto:[email protected]

January 11, 2006January 11, 2006 Charu Chandra, University of Michigan - Dearborn 22

Main Topics

Module I: Supply Chain Management -Concepts and ApplicationsModule II: Supply Chain Informatics -Theory and ConceptsModule III: Military Supply Chains -Issues and PerspectivesWrap-up

Module I: Supply Chain Management

Concepts and Applications


Presentation Outline

Supply Chain: Background and PerspectivesSupply Chain Applications– Logistics Network Design– Inventory Management

Supply ContractsManaging the Bullwhip Effecte-Business Models

– Design for Logistics– Mass Customization

Supply Chain

Background and Perspectives


Supply chain

Definition:A network of independent business organizations with common goalsformed to optimize their resources to meet customers’ needs through sharing of information, expertise (technology), and resources for mutual benefits.


A supply chain

Supply

Sources:plantsvendorsports

RegionalWarehouses:stocking points

Field Warehouses:stockingpoints

Customers,demandcenterssinks

Production/purchase costs

Inventory &warehousing costsTransportation costs Inventory &

Warehousing costs

Transportation costs

Time


Supply chain network: A general representation

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2

Distributioncenter 1



Customer 1

Customer 2

Customer 3

Customer 4

Supply stage Production stage Distribution stage Consumption stage

S upp

ly N

o de (

s)(s

o urc

e )S i

(+)

Dem

and

Nod

e(s)

(sin

k)D

j(-)

c ij, t ij

(f ij, u ij

)

Trans-shipmentnode(s)

Independent businessEntity (with uniqueobjectives and independentresources)

END-CONSUMEROEM END-PRODUCTMANUFACTURER

DISTRIBUTOR /WAREHOUSER / RETAILER

Notations:c , = cost of movement of goods from node i to node j

ijt = time elapsed in movement of goods from node i to node jij

f = flow of goods (in units) from node i to node jij

uij = capacity of arc connecting node i to node j


Supply chain management

Definition:Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, so as to minimize total system cost subject to satisfying service requirements.


Supply chain management

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4


OEM END-PRODUCTMANUFACTURER

DISTRIBUTOR /WAREHOUSER / RETAILER

END-CONSUMER

Vert

ical

Int

egra

tion

Demand Forecasts

Inventory Replenishment

Supply Echelon

Supply Networks Demand Networks

Horizontal Integration


Conflicting objectives in the supply chain

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4


Purchasing Manufacturing Warehousing Customers

•Stable Volume Reqmts.•Flexible DeliveryTime•Little Variations in Mix•Larger Order Quantities

•Long Production Run•High Quality•High Productivity•Low Production Cost

•Low Inventory•Reduced Transportation

Costs•Quick Replenishment

•Short Order Lead Time•High in Stock•Large Product Variety•Low Prices

Function

Minimum Total System Cost


Supply chain costs

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4


Management Costs

•Production / AssemblyCosts

•Raw Materials PurchaseCosts

•Transportation Costs•Raw Materials Inventory

Holding Costs

•Production Costs•Purchase Costs•Set-up Costs•Start-up Costs (FixedCosts)

•Transportation Costs•Work-in-ProcessInventory Holding Costs

•Warehousing Costs•Finished Goods

Inventory Holding Costs•Ordering Costs•Transportation Costs

•Marketing Costs

CostClassification


Supply chain: the magnitude

In 1998, American companies spent $898 billion in supply-related activities (or 10.6% of Gross Domestic Product).– Transportation 58%

– Inventory 38%

– Management 4%

Third party logistics services grew in 1998 by 15% to nearly $40 billion.


Supply chain: the magnitude(continued)

It is estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics strategies.– A typical box of cereal spends 104 days getting

from factory to supermarket.

A typical new car spends 15 days traveling from the factory to the dealership.


Supply chain: the magnitude(continued)

Compaq computer estimates it lost $500 million to $1 billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them.

Boeing Aircraft, one of America’s leading capital goods producers, was forced to announce write-downs of $2.6 billion in October 1997.The reason? “Raw material shortages, internal and supplier parts shortages…”. (Wall Street Journal, Oct. 23, 1997)


Supply chain: the potential

Procter & Gamble estimates that it saved retail customers $65 million through logistics gains over the past 18 months.

“According to P&G, the essence of its approach lies in manufacturers and suppliers working closely together …. jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain”. (Journal of Business Strategy, Oct./Nov. 1997)


Supply chain: the potential(continued)

Dell Computer has outperformed the competition in terms of shareholder value growth over the eight years period, 1988-1996, by over 3,000% using

- Direct business model

- Build-to-order strategy


Supply chain: the potential(continued)

In 10 years, Wal-Mart transformed itself by changing its logistics system. It has the highest sales per square foot, inventory turnover and operating profit of any discount retailer.


Supply chain: the complexity

National Semiconductors:• Production:

– Produces chips in six different locations: four in the US, one in Britain and one in Israel.

– Chips are shipped to seven assembly locations in Southeast Asia.

• Distribution– The final product is shipped to hundreds of facilities all

over the world.– 20,000 different routes.– 12 different airlines are involved.– 95% of the products are delivered within 45 days.– 5% are delivered within 90 days.


Supply chain challenges

Achieving Global Optimization– Conflicting Objectives– Complex network of facilities– System Variations over timeManaging Uncertainty – Matching Supply and Demand– Demand is not the only source of

uncertainty


Sequential Optimization vs. Global Optimization

Procurement Planning

ManufacturingPlanning

DistributionPlanning

DemandPlanning

Sequential Optimization

Supply Contracts/Collaboration/Information Systems and DSS

Procurement Planning

ManufacturingPlanning

DistributionPlanning Demand

Planning

Global Optimization

Source: Duncan McFarlane


What’s New in Logistics?

Global competition

Shorter product life cycle

New, low-cost distribution channels

More powerful well-informed customers

Internet and E-Business strategies


New Concepts

Push-Pull strategies

Direct-to-Consumer

Strategic alliances

Manufacturing postponement

Mass Customization

Dynamic Pricing

E-Procurement


Supply Chain ManagementKey Issues

Distribution Network ConfigurationInventory ControlSupply ContractsDistribution StrategiesSupply Chain Integration and Strategic Partnering

Outsourcing and Procurement StrategiesInformation Technology and Decision Support SystemsCustomer Value


Supply Chain ManagementProblem-Solving Approaches

Implementing Enterprise Resource Planning (ERP) Decision Support Systems

Information Technology and Decision Support Systems

Statistical Process Control, Total Quality Management, Service Level Maximization

Customer Value

Managing risk, payoff tradeoffs with Outsourcing vs. Buying

Outsourcing and Procurement Strategies

Collaborative Planning, Forecasting and Replenishment (CPFR)

Supply Chain Integration and Strategic Partnering

Warehousing and Transportation Costs ManagementDistribution Strategies

Global OptimizationSupply Contracts

Forecasting and Inventory ManagementInventory Control

Network Flow OptimizationDistribution Network Configuration

Problem-Solving ApproachesIssues

Supply Chain Applications

Logistics Network Design


The Logistics Network

The Logistics Network consists of:

Facilities:Vendors, Manufacturing Centers, Warehouse/ Distribution Centers, and Customers.

Materials: Raw materials and finished products that flow between these facilities.


Decision Classifications

Strategic Planning: Decisions that involve major capital investments and have a long term effect

1. Determination of the number, location and size of new plants, distribution centers and warehouses

2. Acquisition of new production equipment and the design of working centers within each plant

3. Design of transportation facilities, communications equipment, data processing means, etc.



Tactical Planning: Effective allocation of manufacturing and distribution resources over a period of several months

1. Work-force size

2. Inventory policies

3. Definition of the distribution channels

4. Selection of transportation and trans-shipment alternatives



Operational Control: Includes day-to-day operational decisions

1. The assignment of customer orders to individual machines

2. Dispatching, expediting and processing orders

3. Vehicle scheduling


Network Design: Key Issues

Pick the optimal number, location, and size of warehouses and/or plantsDetermine optimal sourcing strategy– Which plant/vendor should produce which

product

Determine best distribution channels– Which warehouses should service which

customers


Network Design: Key IssuesThe objective is to balance service level against

Production/ purchasing costs

Inventory carrying costs

Facility costs (handling and fixed costs)

Transportation costs

That is, we would like to find a minimal-annual-cost configuration of the distribution network that satisfies product demands at specified customer service levels.


Aggregating Customers

Customers located in close proximity are aggregated using a grid network or clustering techniques. All customers within a single cell or a single cluster are replaced by a single customer located at the centroid of the cell or cluster (referred to as a customer zone).


Comparing Output

Total Cost:$5,796,000Total Customers: 18,000

Total Cost:$5,793,000Total Customers: 800

Cost Difference < 0.05%


Product Grouping

Companies may have hundreds to thousands of individual items in their production line

1. Variations in product models and style

2. Same products are packaged in many sizes

Collecting all data and analyzing it is impractical for so many product groups


Within Each Source Group, Aggregate Products by Similar Characteristics

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

0.000 0.010 0.020 0.030 0.040 0.050 0.060 0.070 0.080 0.090 0.100

Volume (pallets per case)

Wei

ght (

lbs

per c

ase)

Rectangles illustrate how to cluster SKU’s.


Sample Aggregation Test:Product Aggregation

Total Cost:$104,564,000Total Products: 46

Total Cost:$104,599,000Total Products: 4

Cost Difference: 0.03%


A Typical Network Design Model

Several products are produced at several plants.

Each plant has a known production capacity.

There is a known demand for each product at each customer zone.

The demand is satisfied by shipping the products via regional distribution centers.

There may be an upper bound on total throughput at each distribution center.


A Typical Location Model

There may be an upper bound on the distance between a distribution center and a market area served by it

A set of potential location sites for the new facilities was identified

Costs:– Set-up costs– Transportation cost is proportional to the distance– Storage and handling costs– Production/supply costs

Inventory Management


Inventory

Where do we hold inventory?– Suppliers and manufacturers– Warehouses and distribution centers– Retailers

Types of Inventory– Raw materials– Work-in-process (WIP)– Finished goods

Why do we hold inventory?– Economies of scale– Uncertainty in supply and demand


Goals: Reduce Cost, Improve Service

By effectively managing inventory:– Xerox eliminated $700 million inventory from its supply

chain– Wal-Mart became the largest retail company utilizing

efficient inventory management


Goals: Reduce Cost, Improve Service

By not managing inventory successfully– In 1994, “IBM continues to struggle with shortages in their

ThinkPad line” (WSJ, Oct 7, 1994)– In 1993, “Liz Claiborne said its unexpected earning decline

is the consequence of higher than anticipated excess inventory” (WSJ, July 15, 1993)

– In 1993, “Dell Computers predicts a loss; Stock plunges. Dell acknowledged that the company was sharply off in its forecast of demand, resulting in inventory write downs” (WSJ, August 1993)


Understanding Inventory

The inventory policy is affected by:– Demand Characteristics– Lead Time– Number of Products– Objectives

Service levelMinimize costs

– Cost Structure


Cost Structure

Order Costs – Fixed– Variable

Holding Costs– Insurance– Maintenance and Handling– Taxes– Opportunity Costs– Obsolescence


Types of inventory

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4


•Finished Goods •Shelved Goods •Fixed (Ordering)•Variable•Holding

InsuranceMaintenance and HoldingTaxesOpportunity Obsolescence

Fixed (Ordering)

Inventory CostsCriteria•Raw Materials /

Assembly•Raw Materials /

Assembly•Work-in-Process•Finished Goods

•Demand Pattern•Lead Time•No. of Products•Objectives

Service LevelMinimum Costs


Inventory / Production policies

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4


Fixed (Ordering)

Postponement

•Make-to-Stock•Make-to-Order

•Consolidation•Cross Docking•Third-party Logistics

•Push•Pull•Push - Pull


Factors that Drive Reduction in Inventory

Top management emphasis on inventory reduction (19%)Number of SKUs in the warehouse (10%)Improved forecasting (7%)Use of sophisticated inventory management software (6%)Coordination among supply chain members (6%)Others

Inventory Management: Supply Contracts


Supply Contracts

Manufacturer Manufacturer DC Retail DC

Stores

Fixed Production Cost

Variable Production Cost

Selling Price

Salvage Value

Wholesale Price


Supply Contracts


Stores



Selling Price

Salvage Value

Wholesale Price


Supply Contracts


Stores



Selling Price

Salvage Value

Wholesale Price


Supply Contracts: Key Insights

Effective supply contracts allow supply chain partners to replace sequential optimization by global optimizationBuy Back and Revenue Sharing contracts achieve this objective through risk sharing


Supply Contracts (Risk Pooling)

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4


Fixed (Ordering)

exibility

evenue Sharing

Back Sales Rebate

Quantity Fl

RBuy-

Inventory Management: Managing the Bullwhip Effect


The Dynamics of the Supply Chain

Ord

er S

ize

CustomerDemand

CustomerDemand

Retailer OrdersRetailer OrdersDistributor OrdersDistributor Orders

Production PlanProduction Plan

TimeSource: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998


The Bullwhip Effect and its Impact on the Supply Chain

Consider the order pattern of a single color television model sold by a large electronics manufacturer to one of its accounts, a national retailer.

Order Stream

Huang at el. (1996), Working paper, Philips Lab



Point-of-sales Data-Original

POS Data After Removing Promotions



POS Data After Removing Promotion & Trend


Higher Variability in Orders Placed by Computer Retailer to Manufacturer Than Actual Sales

Lee, H, P. Padmanabhan and S. Wang (1997), Sloan Management Review


Increasing Variability of Orders Up the Supply Chain

Lee, H, P. Padmanabhan and S. Wang (1997), Sloan Management Review


The Bullwhip Effect:Managerial Insights

Exists, in part, due to the retailer’s need to estimate the mean and variance of demand.The increase in variability is an increasing function of the lead time.The more complicated the demand models and the forecasting techniques, the greater the increase.Centralized demand information can reduce the bullwhip effect, but will not eliminate it.


Coping with the Bullwhip Effect in Leading Companies

Reduce Variability and Uncertainty- Point-of-Sales (POS)- Sharing Information- Year-round low pricingReduce Lead Times- Electronic-Data-Interchange (EDI)- Cross DockingAlliance Arrangements– Vendor managed inventory– On-site vendor representatives


Distribution Strategies

WarehousingDirect Shipping– No Distribution Centers needed– Lead times reduced– “smaller trucks”– no risk pooling effects

Cross-Docking


Supply Chain Integration: Dealing with Conflicting Goals

Lot Size vs. InventoryInventory vs. TransportationLead Time vs. TransportationProduct Variety vs. InventoryCost vs. Customer Service


What are the Causes….

Promotional salesVolume and Transportation discountsInflated ordersDemand ForecastLong cycle timesLack of Visibility to demand information


Consequences….

Increased safety stockReduced service levelInefficient allocation of resourcesIncreased transportation costs

Inventory Management: e-Business Models


The Future is Not What it Used to Be

A new e-Business Model– Reduce cost– Increase Profit– Increase service level– Increase flexibility


Reality is Different…..

Amazon (Book)Peapod (Grocery)Dell (Computers)Cisco (Network Management)


The e-Business Model

e-Business is a collection of business models and processes motivated by Internet technology, and focusing on improving the extended enterprise performance– e-commerce is part of e-Business– Internet technology is the driver of the business

change– The focus is on the extended enterprise:

Intra-organizational Business to Consumer (B2C)Business to Business (B2B)


A new Supply Chain Paradigm

A shift from a Push System...– Production decisions are based on

forecast

…to a Push-Pull System– Parts inventory is replenished based on

forecasts– Assembly is based on accurate customer

demand


From Make-to-Stock Model….

Suppliers ConfigurationAssembly


Push-Pull Supply Chains

The Supply Chain Time Line

Push-Pull Boundary

PUSH STRATEGY PULL STRATEGY

Low Uncertainty High Uncertainty

CustomersSuppliers


….to Assemble-to-Order Model

Suppliers ConfigurationAssembly


Business models in the Book Industry

From Push Systems...– Barnes and Noble

...To Pull Systems– Amazon.com, 1996-1999

And, finally to Push-Pull Systems– Amazon.com, 1999-present

7 warehouses, 3M sq. ft.,


e-Business in the Retail Industry

Brick-&-Mortar companies establish Virtual retail stores– Wal-Mart, K-Mart, Barnes and Noble

Use a hybrid approach in stocking – High volume/fast moving products for local

storage– Low volume/slow moving products for browsing

and purchase on line

Channel Conflict Issues


e-Fulfillment Requires a New Logistics Infrastructure

Traditional Supply Chain e-Supply Chain

Supply Chain Strategy Push Push-Pull

Shipment Type Bulk Parcel

Inventory Flow Unidirectional Bi-directional

Reverse Logistics Simple Highly Complex

Destination Small Number of Stores Highly Dispersed Customers

Lead Times Depends Short


Matching Supply Chain Strategies with Products

Pull Push

Pull

Push

IComputer

II

IV III

Demand uncertainty

Delivery costUnit price

L H

H

L

Economies of Scale


Locating the Push-Pull Boundary


Organizational Skills Needed

RawMaterial Customers

Push Pull

High Uncertainty

Short Cycle Times

Service Level

Responsiveness

Low Uncertainty

Long Lead Times

Cost Minimization

Resource Allocation


e-Business Opportunities:

Reduce Facility Costs– Eliminate retail/distributor sitesReduce Inventory Costs– Apply the risk-pooling concept

Centralized stockingPostponement of product differentiation

Use Dynamic Pricing Strategies to Improve Supply Chain Performance


e-Business Opportunities:

Supply Chain Visibility– Reduction in the Bullwhip Effect

Reduction in InventoryImproved service levelBetter utilization of Resources

– Improve supply chain performanceProvide key performance measuresIdentify and alert when violations occurAllow planning based on global supply chain data

Design for Logistics


Design for LogisticsConcept

Design for Logistics addresses three keycomponents to manage trade-offs between inventory and service levels:

– Economic packaging and transportation.– Concurrent and parallel processing.– Standardization.


Economic packaging and transportation

Products that can be packed compactly– are cheaper to transport,– Use up less storage space,– Facilitate cross-docking operations,– Impact handling costs because of lesser

handling needed.


Concurrent and Parallel Processing

Modifying the manufacturing processes from sequential and dependent structures to concurrent and parallel processing.– Implement decoupling of manufacturing

processes so as to make them more flexible.Benefits: reduced manufacturing lead time, lower inventory costs through improved forecasting, and reduced safety stock.


Standardization

Standardization can lower inventory costs and increase forecast accuracy.Standardization involves introducing concepts of:– Product Modularity

Product assembled in modules allowing flexibility.

– Process ModularityAllows implementing discrete manufacturing operations so that inventory can be stored in partially manufactured form between operations.


Approaches to Standardization

Part StandardizationProcess StandardizationProduct StandardizationProcurement Standardization


Part Standardization

Commonality among parts.Common parts are introduced among products.Common parts reduce required part inventories due to risk pooling and reduce part costs.


Process Standardization

Involves standardizing as much of the process as possible for different products, and then customizing products as late as possible.Manufacturing process starts by making a generic or family product that is later differentiated into a specific end-product.– Also termed as postponement or delayed

product differentiation strategy.Most of the time requires redesigning the process, such as re-sequencing.


Product Standardization

A large variety of products may be offered, but only a few kept in inventory.Resort to downward substitution when a product not kept in stock is ordered.– Product is substituted with product

offering a superset of features.


Procurement Standardization

Standardizing processing equipment and approaches, even when the product itself is not standardized.– Example: Integrated Circuits.


Selecting a Standardization Strategy

IMSE 565, Winter 2003 Instructor: C. Chandra, University of Michigan-Dearborn

Operational Strategies for Standardization

ProcurementStandardization

ProductStandardization

ProcessStandardization

PartStandardization

Product

Modular

Non-Modular

Non-Modular Modular

Process


Supplier Integration into New Product Development

Involve suppliers in the design process.Potential benefits:– Reduced Purchased Materials costs– Increase in Purchased Materials quality– Decline in development time and cost– Decline in manufacturing cost– Increase in final product technology levels


Spectrum of Supplier Integration

None– Supplier is not involved in design.

Materials and subassemblies are supplied according to customer specification and design.

White Box– Informal consultations between supplier and buyer when

designing products and specifications.Grey Box– Formal supplier integration into the design process.

Formal supplier / buyer teams work on joint development.

Black Box– Supplier independently designs the product according to

requirements given by the buyer.


Strategic Planning Process for Supplier Integration

Proposed by the study at Michigan State University (1997):– Determine internal core competencies– Determine current and future new

product developments– Identify external development and

manufacturing needs


Keys to Effective Supplier Integration

Select suppliers and build relationships with them.Align objectives with selected suppliers.

Mass Customization


Mass CustomizationConcept

Mass customization involves the delivery of a wide variety of customized goods or services quickly and efficiently at low cost.


Attributes for Implementing Mass Customization Strategy

Rapid response to customer demands through quick linkages of production modules and processes.Linkages should be costless, that is, add very little cost to processes.Linkages should be seamless so customer service does not suffer.Networks or collections should be formed with little overhead.


Techniques to Manage Inventories due to Product Proliferation

Build-to-Order Model utilizing product postponement and push-pull strategiesKeep large inventories at major distribution centersOffer fixed set of options that cover most customer requirements

Module II:Supply Chain Informatics

Theory and Concepts


Presentation outline

System and System DesignSupply Chain InformaticsReconfigurable systemsMotivation and general guiding principles of researchProblem solving frameworkAlgorithmic modeling of reconfigurable supply chain – Information support system– Decision modeling system– Decision support systems prototype

Examples of representative research problems

System and System Design


System: A Definition

A system may be defined as an assemblage of sub-systems (components, modules, etc.), and agents and mechanisms (people, technology, and resources) designed to perform a set of tasks to satisfy specified functional requirements and constraints.


General Systems TheoryBackground

Ludwig von Bertalanffy formulated a new discipline, General System Theory (GST), and defined its subject matter as “formulation and derivation of those principles which are valid for systems in general whatever the nature of the component elements and the relations or forces between them”. GST enunciated the principle of unification of science, and its essence was interdisciplinarity. It produced a new type of scientific knowledge: interdisciplinary knowledge.According to Bertalanffy, there is some element of isomorphism (state of similarity), which allows extension of one scientific discipline to other sciences.


Concept of System in GSTUnity, Parts, and Relationship

Unity (‘consistent whole’, ‘complex whole’, ‘wholeness’, ‘synergy’, etc.).Parts (‘elements’, ‘constituents’, ‘components’, etc.).Relationship (‘interrelationship’, ‘interactions’, ‘structure’, and ‘organization’).

Unity

Relationship

Part

Environment

Source: Dubrovsky (2004).


Role of System in an Organization

System gives organization a formal structure, a purpose, a goal (s) [objectives], and above all a basis for integration. Such a structure is beneficial for an organization in managing its complexity, integration of its functions, and aligning its product-process-resource structure.System provides the framework that an organization needs for designing and implementing models, methodologies, tools and techniques for aligning its business (es) and improving productivity.


How do System and Organization complement each other?

System has a structure (or organization). Organization is a class of system and thus inherits its (system’s) structure.System needs an organization (and its structure) for a formal representation of an enterprise. On the other hand, organization needs a system (and its framework) for formalization.


Issues Related to System Design

How should a complex system be designed? – Top-down vs. bottom-up

How should the complex relationships between various components of a system be coordinated and managed?– Modular with process flow interface

How can the stability and controllability of a system be guaranteed? – Satisfying the Design Axioms


Domain of System Design

CAs DPs PVsFRs

PhysicalDomain

FunctionalDomain

ProcessDomain

CustomerDomain

Source: Suh, 1998


Design Axioms

Axiom 1: The Independence AxiomMaintain the independence of the

Functional Requirements (FRs).

Axiom 2: The Information AxiomMinimize the information content of the

design.


Inferences from Design Axioms

Uncoupled Design: When each of the FRs can be satisfied independently by means of one DP. Decoupled Design: When the independence of FRs can be guaranteed, iff the DPs are changed in the proper sequence.Coupled Design: When the design violates the Independence Axiom (or Axiom 1).When several functional requirements must be satisfied, designers must develop designs that are either uncoupled or decoupled.Among all the designs that satisfy the Independence Axiom (or Axiom 1), the design that has the least information content is the best design.


Influence of GST on System Design

The biggest influence that GST has had on System Design is in its formalization. For example, system is designed to recognize its whole-part relationship instantiated in its environment (both internaland external). The concept of isomorphism has facilitated system design by recognizing similarity (or commonness) across entities, relationships, and environmental variables. Similarity implicitly recognizes relationships, thereby improving a system’s representation and eventually impacting its performance (quality, reliability etc.).Another useful feature of GST in system design is separating information needs (and associated knowledge) at the domain independent (or generic) level from that of domain dependent (orspecific / problem) level. Such an approach ensures that the system captures both breadth and depth of knowledge. Since the latter is embedded in the former, the captured knowledge has a larger context, thereby ensuring interactions and thus larger relevance. It also ensures that the knowledge does not become redundant.


Influence of GST on System Design Some key principles

Unity: All system (and its components) is whole (or unity) depending on the context where they are represented.Commonality: All systems in the universe of systems share common universal characteristics.Isomorphism: Similarity (and therefore commonality) among system components and associated relationships.Reuse: Commonality leads to reuse and eventually standardization, conformity and reliability.Abstraction: Enables managing complexity by abstracting features of system’s components. It also allows representation of relationships such as, whole-part, and generalization-specialization. Polymorphism: Creates classes of systems and reusing them for specialized functions.Encapsulation: Enables encapsulating knowledge and information-hiding on objects (and classes) to create uniqueness of objects (and classes).Independence: Domain independent vs. domain dependent knowledge creation.Inheritance: Enables avoiding information redundancy and information-hiding by clustering information representation where they rightfully belong.

Supply Chain Informatics


Concepts

Supply Chain Informatics is the basis for applying Information Science to supply chain problems.The primary thrust of this area is on investigating design and modeling issues in information management of logistics in production networks.Specifically, it applies the concept of Information Economics to managing technology, aided by knowledge from multi-disciplinary topics in seeking solutions for supply chain problems.


Motivation

SystemsScience

SystemsEngineering

Management ScienceDecision ScienceIndustrial EngineeringOperations Research

Theory

Application

Tools & Techniques

Explore research in cross- cutting areas

Apply this knowledge to investigating emerging public policy areas / issues


Support Integrated Product Life Cycle System

Product-Life-Cycle

Supply Chain Process-Life-Cycle(Plan, Source, Make, Deliver, Return)Suppliers Customers

ERP SystemsPDM Systems

(CAD/CAM/CAE,Expert Systems)

Cyber-Infrastructure(Internet, eBusiness)


Enable Co-Design of Product Systems

Logical Systems Design(Designing Inbound/Outbound Logistics)

Physical Systems Design(Designing Product-Process Interface)

Virtual Systems Design(Product Delivery Configuration)

Integrating consumer-supplier interface requirements concurrentlyat design time


Reconfigurable Systems

Manufacturing Systems that can be:– Designed, modeled, and

configured according to specific applications flexibly and with agility, and

– Upgraded and reconfigured rather than replaced.

With a reconfigurable system, new products and processes can supposedly be introduced with considerably less expense and ramp-up time.

Reconfigurable supply chain

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Plant 1

Plant 2




Customer 1

Customer 2

Customer 3

Customer 4



Reconfigurable supply chainTriggers

Introduction of new product(s), or upgrade for existing product(s).Introduction of new, or improvement in existing process(es).Allocation of new, or re-allocation of existing resource(s).Selection of new supplier(s), or de-selection of existing ones.Changes in demand patterns for product(s) manufactured.Changes in lead times for product and / or process during its life cycle in the supply chain.Changes in commitments withinand between supply chain members.

IssuesAssessing impacts of one or more of following factors / activities in order to make (economic) decisions to implement reconfigurable systems:

–Flows due to materials, inventory, information, and cash.

–Throughput due to movement of product.

–Capacity utilization.–Costs at various stages of product

development life cycle.–Lead time in product development.–Batch and lot sizing.–Process redesign. –Product development strategies.–Procurement and / or allocation of

resources.–Strategic, tactical, and operational

policies on the supply chain.


General guiding principles

Supply chain is a System; hence General System Theory principles can be applied for its study through an inter-disciplinary focus– Managing complexity– Isomorphic frameworks– Formal theoretical

reference models– System research and

design

Application of system design theory principles to develop an axiomatic system design for supply chain– Designing configurable

system architectures through integrating FRs/DPs/PVs, Cs and flows, while maintaining design axioms


General guiding principles

Supply chain is an organization system with a set of managerial issues at:

– Technical level– Organizational level– Institutional level

Supply chain knowledge representation is carried out through process modeling of its workflows

– Modeling supply chain workflows

– Capturing and organizing knowledge for workflow management

– Delivering process / problem knowledge to decision modeling tools

System integration comprises integration of information resources and collaboration based on common problems

– Horizontal collaboration vs. hierarchical management

– Shared understanding of common problems and tasks

– Distributed environment for linking diverse information systems

Systematically capturing organization and problem knowledge

– Ontology for supply chain knowledge modeling

– Semantic Web Services for knowledge share and reuse


Problem solving

PrinciplesScalability of system(s)Meta modeling of system(s)Coordination withinand between system(s)Information sharing within and between system(s)

Strategies

Developing:

1. Domain independent solution(s) [templates] at the macro level

2. Capability models for application specific domain dependent problems at micro level.

3. Coordination models to integrate models developed in (1) and (2)


Taxonomy of supply chain reconfiguration models

S-C STRUCTURAL MODEL Domain IndependentModeling Context

S-C ARCHITECTURE REPRESENTATION MODEL

Domain IndependentMethodological Constructs

S-C WASTE MANAGEMENTMODELS

Domain IndependentProblem-Solving Context

S-C PROBLEM SPECIFICMODELS

Domain DependentProblem-Solving Context

SC Reconfiguration Model Types

• SC System Taxonomy Model

• SC Organization Structure Model• SC Process Model• SC Ontology Model• SC Database Model

• SC Multi Agent Model• SC Agreement Model

• SC Forecast Management Model• SC Inventory Management Model• SC Capacity Planning Model


Supply chain modeling system

Supply chainmodelingsystem

Informationsupportsystem

Decisionmodelingsystem

Processmodeling

Knowledge& Agent Modeling

OptimizationSimulationModeling

InformationModeling

Forecasting& Inventory

Management

Information support system provides supply chain information support.

Decision modeling system is used to investigate and solve supplychain management problems.

Modeling overview

Information Support System (ISS)


Motivation

Make decision support system effectiveDevelop systematic approaches for information modeling

Use the best breed of available information technologies and resources

Integrate information system with decision modeling system

Support supply chain management activities

Design information systems to meet supply chain management requirements

Integrate processes and activities across the supply chain

Integrate information resources across the supply chain


Information support systemScope


Information support systemThrust areas

Information modelingSystem taxonomy – standardization of domain structure and content

Problem taxonomy – systematic representation of supply chain managerial issues

Ontology – Organization and problem knowledge conceptualization with formal models

Information system architectureKnowledge intensive information system design

Ontology utilization by information system components in both temporal dimensions (development and run-time)

Knowledge portal and Ontology server design


Information modeling framework


“System” behind system taxonomy

Input: information, Resources Materials

Output: Designed System, Paradigm, Product, Service

Mechanisms: Control, Action, Performance, Behavior, Program, Management, Strategy, Structure, and Feedback.

Processes: Information flow, Energy flow, Material flow, Transformation, Synthesis, Event.

Objectives: Goals, Means.

Agents: Owner, Role, Actor, and Customer.

Environment: Relevant systems, Dependencies, Constraints, Boundaries.

ProcessesInput Output

ObjectivesEnvironment

MechanismsAgents

Supply chain system taxonomy development objectives• System taxonomy provides standardization of terms and definition, thus ensuring

shared vocabulary across the supply chain system domain.

• System taxonomy also provides unified structure for a formal representation, ensuring that data and knowledge can be represented in a format consumable by supply chain system members’ software applications.


Problem taxonomy

Classification of supply chain problems

Classification of problem solving methodologies for supply chain management

Identification of problem requirements

Problem model projection from system taxonomy


Ontology modeling

OntologyOntology is a domain or problem knowledge formulated in the formof concepts and relationships with a set of axioms, used in problem reasoning algorithms, and implemented in a common language understandable by software development tools.

Ontology conceptualizationComponents

(1) Data, (2) Axioms (constraints, rules) and (3) Algorithms (problem solving methods)

Stages(1) Business process modeling, (2) problem domain requirements identification, (3) analysis, (4) design, (5) implementation and evaluation


ISS Reference Model

Proposition 1. System consists of things (entities) related to each other.Proposition 2. Supply Chain problems can be introduced as a combination of two formalisms, viz., problem object model and problem formal model .Proposition 3. To better serve the needs of problem solving tools and provide reusability of problem models, the information representing their content is captured at different levels of abstractions. Particularly, problem formal model is proposed to have two representation levels: generic and specific.Proposition 4. Relationships in Supply Chain problem domain can be classified into two types: vertical and horizontal. The former is for building domain structure. The latter is for linking outputs of some problems with inputs of others.


ISS Reference Model: notations I

Notations related to system taxonomy– System

– Thing symbolizing the elements of a system– Relationships among things of a system defined on T

Notations related to problem taxonomy– Set of thing pertinent to a specific state of the SC

system– Set of relationships pertinent to a specific state of

the SC system among things of a system state defined on

– Problem representation– Vertical representation– Horizontal representation

Notations related to general problem representation– Generic problem model– Attribute– Set of instances of attribute– Variable that can be assigned to attribute for

generic problems– Set of possible values that variable may have– Observation channels for

STR

wT

wR

PRwT

VH

GPiatiAtivv

iatiat

i iati ivv

– Set of possible states of observation channels

Notations related to specific problem representation– Object model– Backdrop

– Set of backdrop states– Specific problem model– Variable that can be assigned to attribute for

specific problems– Set of possible values that variable may have– Observation channel for backdrop – Set of possible states of channels – Observation channel for attributes – Relationship between object system and problem

system– Class instances of S for SC domain (general

representation of )

Notations common for specific and general problem representations

– Relationship between specific and generic systems – Relationship between – Relationship between

iWW iww

Obib

iB ibSP

iv

iV

iat

iviw

ibiW

iwio iat

W

Õ

iW

Ê,i iV VV,j jW WW

iejk

RR

VVww


ISS Reference Model: notations II

Notations for Ontology

––– Data model for SC domain

– Ontological commitments. Functions interpreting characteristics into variables

– Set of variables

– Observation channels for defining variables, constraints, and algorithms respectively

– Set of Interpretation functions

– Data model for SC problem

– Constraints on data

– Ontology model

– Set of axioms

– Algorithm or heuristics

– Set of equations

MIV

, ,B B Bc w hJ

MwCOA

HG


ISS Reference Model:System Taxonomy

( , R)S T=Thing

System Relationships

( )T I O E A F M P⊆ × × × × × ×

{ }1 2, ,..., nI i i i= { }1 2: _ _ , ,...I i i has properties I I=

{ }( , ) ( , ) : ( , )R I O i o i o I O⊆ ∈ ×Input Output

Thing YThing X

{ }( , ) ( , ) : { }^ { }^R X Y x y y Y x X x y= ∈ = ∀


ISS Reference Model: Problem Taxonomy

{ }|wT T w W= ∈ { }|wR R w W= ∈

( , R )w w wS T= { }|wS S w W= ∈

( ), , , Ê,ÕwT Ob GP SP=

Relationship (GP,SP)Object model

Relationship (Ob,SP)General problem Specific problem

({( , ) | },{( , ) | })i i n j j mOb at At i N b B j N= ∈ ∈

({( , ) | },{( , ) | })i i n j j mGP vv VV i N ww WW j N= ∈ ∈

({( , ) | },{( , ) | })i i n j j mSP v V i N w W j N= ∈ ∈


ISS Reference Model: Problem Taxonomy

Ê ({( , , ) | },{( , , ) | })i i i n j j j mVV V e i N WW W e j N= ∈ ∈

Õ ({( , , ) | },{( , , ) | })i i i n j j j mAt V o i N B W w j N= ∈ ∈

( )w wRV ,RHwR =Vertical relationships Horizontal relationships

{ }1,3 1 2 1 2( , ) ( , ) : { }^ { }^ | 1, 2w w w w wRV T T x y y T x T x y w w W= ∈ = ∀ ∈

{ }{ }1,2 1 2 1 2( , ) ( , ) : ( , ) | 1, 2w w w w wRH T T x y x y T T w w W= ∈ × ∈


ISS Reference Model: Ontology

( , C, H)O M=Data model

Ontology

( B )CC C V= → ∪Constraints Problem solving method

( B )HH H M= → ∪

( , I)w wM S=

( B )w wI V T= → ∪

Observation channels

Ontological commitment


System taxonomy building – Upper level

InputInformationRes ourc es

+Input+Materials+Cost+Lead Time+Material Attributes+Requirement

Env ironment+Constraints+Financial+Envorinment1+Organizational behavior+Market

SC Sy s tem Tax onomy

Func tions+Goals1+Means1+Objectives

Mec hanis mManagementRelat ions hip_ ManagementStrategiesStruc ture

+Mechanisms+Decisions

AgentsSCA1

+Members+Agents+GSCA+Role+Management agents+Operational agent

O utputSC_ Produc ts

+Output+SC Services

Proc es s es+Processes+Flows+Transformation+Synthesis


System taxonomy building–Mechanisms

Mechanisms

ManagementProduc tioAndMater ialsSalesAndMarketing

+Management+Accounting+HumanResource

Relationship_Management+SC Members Relationships+Open Market Negogiation+Cooperation+Coordination+Colleboration+Relationship Type+Partnership

Strategies+Strategies+Policy+Decision making+Relationship Coordination+Supply+Optimization+Business+Inventory+Manufacturing lots+PRoduction+Distribution

Dec is ions

-Information:int-Trnasportation:int-Location:int-Inventory:int-Supply:int-Production:int

Struc ture+Product+SC Structure+Project+Components


Problem Ontology engineering

Supply Chain Model

Process decomposition according to SCOR model

Process type

Process category

Process element

Workflow Conceptual Model

Process models

Process views

IDEF Process models

UML Process models

Ontology Model

Ontologies

Ontology Calculus

SCML


Supply chain workflow modeling

Supply Chain Operations Reference (SCOR) modeling technique integrates concepts of business processes, benchmarking, and best practices into a cross-functional framework.

Workflow or process modeling aims to represent processes specified in SCOR third level as a collection of tasks executed by various resources within a SC.

Workflow modeling can be captured by using explicit models: IDEF methods and UML language.


Problem classification

Supply Chain

Plan Source Return DeliverMake

Identify, Prioritize, & aggregate Production

Requirements

Select Final Suppliers and

negotiate

Select Final Suppliers and

Negotiate

Schedule Production Activities

Route Shipment and Select Carrier

Forecasting

Schedule Finishing Capacity

Determine Purchase

Requirements for Outsourcing

Plan Production Schedule Production

Schedule Load Capacity

General Production plan

SCO

R P

roce

sses

Task

s an

d A

ctiv

ities

w

ith ID

EF


Problem-solving methodology classification


Problem model

0..*

1

0..*

1

1..*

1

0..*1

0..*1

0..*1

SteelSupplyChain

Agent

Resource

-NumberofHours:int-ResourceName:int-Shift:int-TotalCapacity:int

ProductionUnit

-Stage:int-PUID:int-PUName:int

Transportation

-TransportationDate:in-TransportationTime:in-TransportationType:in-Destination:int

ResourceAttributes

-Capacity:int-ScheduledRate:int-Yield:int-ProductID:int

Cost

-FixedCost:int-OtherCost:int-TransportationCost

ProductProduction

-ProductionTime:int-SetupTime:int-Resource:int-BreakDownDurationP1:int-BreakDownDurationP2:int-BreakDownDurationType:int-DeffectivenessP1:int-DeffectivenessP2:int-DeffectivenessType:int-BreakDownFrequencyP1:int-BreakDownFrequencyP2:int-BreakDownFrequencyType:i

Product

-ProductType:int-ProductStatus:int-ProductSize:int-ProductID:int-ProductName:int-ProductQuantity:int

Output

Demand

-QuantityAccumulative:in-DemandNet:int-Costomer:int-Period:int

ProductCost

-InventoryHoldingCost:i-ProcessingCost:int-ProductSetupCost:int-ProductCost:int-Period:int

ProductStructure

-Quantity:int-MaterialID:int-ProductID:int

Structure

Mechanism


Conceptual framework: Ontology engineering

Scenario narration

Informal knowledge representation

Formal axioms with ontology calculus

Axioms Implementation with a computer language

Axioms classification

Two ontology development specifications are proposed

For knowledge engineers: Situation and predicate calculus

For Software engineers: XML language specification

For each process item (process, task, or activity), ontology or a set of ontologies is designed consisting of three components: (1) model, (2) axioms defining constraints and rules held on data model, and (3) algorithms, which are step-by-step conditional descriptions of process flows.


Ontologies

• Ontology calculus is utilized for capturing and representing the dynamics of supply chain processes.

• A supply chain markup language (SCML) for presenting knowledge about SC is being proposed.

( , r )Exist demand p oduct ( , )Less MaxInventory CurrInventory( (( * * ) ) ) ( )Poss do L AVG z STD s Il MakeOrder s Il+ = > ≡ −


Supply chain markup language schema


Supply chain markup language schema


Ontology server


Ontology-driven information system components

Semantic WebWeb Services

AgentsOntology serverProcessing logic

and inference engine

Vocabulary and annotation

Semanticsand structure

Distributes DMBS,Repositories,

et setera.

G a t h e r i n g

M a n a g e m e n t

I n t e r f a c e

O n t o l o g y

Management component is implemented through software agents. Interface component is implemented with Semantic Web and Semantic Web services.Ontology component is the library and the ontology server to support their capture, assembly, storage and dissemination.Gathering components is the same as in traditional IS, but with taxonomic links to common ontologies.


Inventory model visualization

Modeling overview

Decision Modeling System


Decision modeling system

ObjectivesTo develop a framework for

integration of different supply chain configuration models

– To elaborate a comprehensive supply chain configuration methodology

– To improve understanding of issues in SC configuration through analysis of models

– Validation through application

Goal– The ultimate goal is to

establish both robust and flexible supply chain configuration by exploring the problem from different points of view


Design principles

Emphasis of common featuresSynergies between modelsData integrityModeling efficiencyReusabilityOpenness


Supply chain configuration problem

Backbone for other supply chain management decisionsExisting models have limited scope adequacy– Uncertainty– Dynamic factors– Interactions between

decision making levels– Interactions between

supply chain members

Supply chain configuration problem in the context of an enterprise-wide information systems– Information systems

engineering dimensionData availabilityModeling effort


Decision Modeling System

Forecasting

Strategic level optimization

Operational planning

Simulation

Final results

Adjust parameters andconstraints?

YES

Supp

ly c

hain

mod

elin

g da

ta b

ase

Prescriptive supply chain modelingModels use outputs from other models as their input dataModeling parameters and constraints are iteratively updated Modeling data base is used as unified source of information


Supply chain configuration process

1. Identify objectives and main constraints; assess impact of expected configuration decisions

2. Gather required data3. Establish a decision making plan (i.e., models

used, situations to be evaluated, acceptance criteria)

4. Pre-selection. Reduce a number of alternatives5. Selection. Establish the configuration6. Sensitivity analysis. Return to step 5, if necessary7. Acceptance of results8. Implement the configuration decisions9. Evaluate the configuration decisions implemented


Multiple views

Information systembased on the

common data model

Genericoptimization

model

Stochasticprogramming

modelHybrid model

Simulationmodel

Results


Data model

Structures data required for supply chain configurationProvides uniform source of data for different types of models– Reduction of model building efforts– Reduction of errors– Integrity of results


Configuration models

Generic MIP modelSimulation model associated with the MIP modelStochastic programming modelHybrid model for modeling impact of dynamic factors


Reconfigurable supply chain modeling software prototypeArchitecture

Integration of prominent commercially available tools

Microsoft Excel,Decision modeling

shell

Internet browser,Application controls

LINGO,Optimization

ProModel (orARENA),

Simulation

SAP R/3,Data

management

ARIS,Processmodeling

Together J,Knowledge

analysis CommandsData

Data transferprograms

XML Spy,knowledge

design

Non-automatic link


Reconfigurable supply chain modeling software prototype


Decision modeling system software template

Modeling steps controls

Example of modeling

results

Handling of modeling

results Input data


Some applications analyzed by this researcher

Stamping supply chainInvestments in flexible manufacturing facilitiesAffordable vehicle programHealthcare supply chain


Some recent research topics explored by this researcher1. A coordinated supply chain dynamic production planning model

(integrated modeling, operational planning).2. Reconfiguration of multi-stage production systems to support

product customization using generic simulation models (simulation modeling and analysis).

3. Modeling floating supply chains (reconfigurable supply chains, supply chain modeling).

4. Application of multi-steps forecast to restrain the bullwhip effect (bullwhip effect in forecasting, inventory management).

5. Knowledge based lot-sizing (operational planning).6. Relationships among lot-size planning parameters and

environmental settings under stochastic demand (operational planning, forecasting management).


Some recent research topics explored in this research

7. Supply chain coordination and information availability (supply chain coordination, information support).

8. Integrated approach to supply chain configuration (integrated modeling, supply chain configuration).

9. Elaborating process models for supply chain reconfiguration (process modeling).

10. Supply chain reconfiguration: Designing information support with system taxonomy principles (taxonomy modeling).

11. Supply chain reconfiguration: Domain and problem-solving ontology construction (ontology modeling).

12. Methodology and architectural framework of multiagent system for supply chain network management (agent modeling).


Supply chain design checklistRequirements Definition

– Gather and Synthesize Domain Independent Knowledge

Industry / CompanyProduct

– Make Only General Inferences About the Problem

Identify a few potential problem areas– Select related problem(s)

– For the Selected Problem(s), IdentifyScopeObjectivePerformance MetricsA General Method of Inquiry & Problem-SolvingSchedule

– Write a Formal Document– Review the Document with Project Team

and Industry / Company Sponsors– Obtain Buy-in and Formal Approval of

Project Team and Industry / Company Sponsors

Develop a Design Framework– Clearly outline System -- formulation,

deduction, interpretation and validation issues

Design a System Architecture– Propose a Problem-Solving Hypothesis– Incorporate Design Components -- Structure, Control,

Optimization– Perform Value Analysis for Process, Order and

Information Life-Cycles– Identify Relationships between System Components

through --Process Flow DiagrammingEstablishing Decision-Making HierarchiesDefining Controls

– Create an Integrated Framework withFlows and Decision Modes represented hierarchicallyControls defined within and between system componentsLife-cycles represented within the product and process structures


Supply chain design checklist (continued)

Analyze the System in a Specific Domain(Post-Modeling Analysis)– Perform Comparative Analysis

Check system fidelity w.r.t. “As-Is” system environmentCheck system fidelity w.r.t. “To-Be” system environment

– Validate Domain Specificity w.r.t.Performance MetricsBusiness Scenarios

Report Findings of Analysis– Document and report results w.r.t

Requirements Document– Offer problem specific and industry

/ company generic conclusions

Analyze the System in a Specific Domain(Pre-Modeling Analysis)– Develop a System Analysis Methodology

“As-Is” System Analysis– Identify system elements

Identify areas for improvement and approaches consistent with the problemDevelop analysis criteriaEstablish analysis mode

– Conduct Pre-Modeling AnalysisMake specific inferences about the problem

Develop Model to Represent System Analysis

– Model specific to problem domainRepresent design components --structure, control, optimization using problem inferences

Module III:Military Supply Chains

Issues and Perspectives


Presentation Outline

Military Supply Chain: BackgroundMilitary Supply Chain: General ProblemMilitary Supply Chain: A Generic ConfigurationCommercial vs. Military Supply ChainsTrends and Paradigms in Military Supply ChainsIssues and Complexities in Military Supply ChainsMilitary Supply Chains TaxonomyPotential Military Supply Chains Configuration?


Background

Military supply chains are designed primarily to support military operations– Military operations characterize events with national /

international significanceDuring peace time military consumes resources for preparedness for war time operationsDuring peace time military supply chain is similar to a business supply chain– Both emphasize on minimizing – cost and lead time– Both target improving efficiency in operations– Both strive to adopt best practices


Background(continued)

Decision-making for military supply chains– Strategic decisions for war time are taken during

peace time, considering level of threat and force capabilities

Supply levels at various echelonsLogistics goals and policies

– Operational and tactical decisions are taken during war time, considering theatre environment, and specific scenarios

Supplies to commit for theatre deploymentCombat unit’s logistics



Motivation for designing and optimizing military supply chains is planning, implementing, and controlling– Supplies– Resource mobilization– Procuring and Moving ordnance– Maintenance activities– Medical resources



The aim of the Defense Logistics Agency is to provide an integrated defense logistics infrastructure by:– Streamlining the military’s supply chain

system– Harnessing information technology– Cutting costs by adopting practices from

the corporate world


General Problem

Design a military supply chain that effectively responds to battlefield needs during a military operation in a specific theatre scenario by optimizingallocation of resources underconstraints of force size and capability, theater environment, enemy size and capability, nature of threat, and doctrine


A Generic Configuration

Corps Division Brigade Battalion Company Platoon Squad

Theatre


Commercial vs. Military Supply Chains

Military supply chain by and large mimics a consumer goods supply chain– Manufacturers (to make products)– Warehouses (to store products)– Retail stores (general supply units)– Local stores (direct supply units)


Commercial vs. Military Supply Chains

Unstable (dynamic)Generally stable (static)Structure

Extensive - complexIntensive – simpleInventory type

Strict – customer-centric, mission critical (war readiness), high reliability (almost 100%)

Relaxed – internal (profit maximization, cost minimization, lead time minimization)

Service Measures

MacroMicroModeling Approach

MassiveSparseFlow

Secondary Primary minimizationCost

Allocation of resourcesDemand, cost, lead timeUncertainty

Short-term, rareLong-term, routineOperation

MilitaryCommercialCriterion


Trends and Paradigms

Velocity ManagementTrade mass for velocityJust-in-case vs. Just-in-timeLean operationsFlexible operationsQuick response (maximize response)


Issues and Complexities

Massive size and scopeDefined by the term “Mission Critical”Extensive inventories for wide range of products comprising large number of SKU’s across varied classes of supply itemsVast, complex, and unique distribution systemUnique metrics, very different from commercial supply chains


Military Supply Chains Taxonomy

Three types of supply chains:– Fast, low volume chain [moves food, medicine,

clothing, etc.]– Slow, large items transport and maintenance

chain [moves weapons system]– Deployment chain [moves large number of

troops and materials]Supply chain characteristics:– Forward pipeline– Reverse pipeline– Lateral pipeline


How to contact me?

Charu Chandra, Ph.D.Associate ProfessorIndustrial and Manufacturing Systems Engineering

DepartmentUniversity of Michigan – DearbornEC2230, 4901 Evergreen RoadDearborn, Michigan 48128-1491, USATel: 313-593-5258; Fax: 313-593-3692E-mail: [email protected]: http://www.engin.umd.umich.edu/~charu/

January 11, 2006 Charu Chandra, The University of Michigan-Dearborn, MI

Defense Supply ChainA Logistics Lifecycle Management for TACOM’s Extended Enterprise



January 9-12, 2006



Industry ExampleFor reference purposes only.

Please do not distribute

January 11, 2006 Charu Chandra, The University of Michigan-Dearborn, MI 3

Food Product Supply ChainBench Markers -- Lead Time, Inventory and Information Sharing

Share Harvest Plans Share Production Plans Share Logistics Plans

Inbound Logistics Operations

Outbound Logistics Marketing Service

RawMaterials

Food Ingredients

Negotiate & commit LTp

Provide INp updates

Share Plan Progress

FinishedGoods

DistributedGoods

Processed Food Packaged Food

Share Plan Progress

Negotiate & commit LTm

Provide INm updates

Share Plan Progress

Negotiate & commit LTo

Provide INo updates

MarketedProduct

Labeled Food

Share Program Progress

Negotiate & commit LTs

Provide INs updates

ServicedProduct

S-C Members Farmer’s Coop ADM Kraft PillsburySara LeeGeneral Mills

Grocery Food

KruegerSmiths

Bid on LTs

Manage INs based on LTs

INm LTm

Bid on LTm

Manage INm Logistics based on LTm

Share Marketing Programs

INs LTs

INo LToINp

LTp

INi LTi

Bid on LTo

Plan Production INo based on LTo

Bid on LTp

Plan Harvesting INp based on LTp


Steel Product Supply ChainBench Markers -- Batches, Process & Setup Times, Bottleneck Operations and Information Sharing

S-C Members Iron Ore Mines Mini Mills Distributor

Inbound Logistics Operations Outbound Logistics

RawMaterials

FinishedGoods

Iron Ore Ingot / Fabricated /Finished Steel

SteelProduct

Packaged SteelProduct

INoLTo

INp LTp

INi LTi

Share Plan Progress

Negotiate & commit on Batches and LTo

Provide INo updates

Negotiate & commit LTp

Provide INp updates

Share Plan Progress

Bid on LTp

Plan Ore Mining INp based on LTp

Share Mining Plans

Bid on Batches and LTo

Plan Production Lots, Process and Setup Times for INo based on LTo

Share Production Plans

A Textile Industry Supply Chain Profile


Objective of the Supply Chain• Apply the philosophy of Synchronous

manufacturing, which promotes harmony in the entire production processes to achieve goals of the supply chain.

• The attempt is to coordinate all resources in the supply chain, so that they work in harmony or are “synchronized”.


GoalsImprove Performance

Financial

• Net Profit

• Return on Investment

• Cash Flow

Operational

• Throughput

• Inventory Levels

• Expenses


PrincipleBalance product flow throughout the system

Process Time (A) Process Time (B)

• Rather than balancing capacities, the flow of product through the system should be balanced


Understanding the Problem - Key #1Learn about the Product

Fabric & Garment

Labels(Artistic Identification Systems)

Insulation (3M Company)

Knit Cuffs(Green Mountain Knitting)

Zippers (YKK)

Grommets & Washers(Fastener Supply)

Vendors SuppliedPellon

Pocket LiningSleeve Lining

Waist Draw Cord

Other MaterialsNylon Filament Yarn

(DuPont)

Nylon Supplex® Shell (Glenn Raven Mills, Inc)

Lortex, Inc.

Polartec® Body Lining(Malden Mills)

Parka(Cascade West Sportswear, Inc)

Catalog Item(L.L. Bean)


Learn about the ProcessProcess Steps for Men’s Nylon Supplex® Parka


Decompose ProcessesLevel 0

12 6 8

3 4 5 7

Yarn Processing

Storage atYarn Facility

Cotton Fiber Yarn Packaged Yarn

Yarn Warehouse

Greige Fabric Mill

Storage at Greige Fabric

Mill

10 11 129 13 14 15 16

Supplex FabricRolls

Process Yarn Greige Supples Fabric

Greige Fabric Processing

Transportationof Greige

Fabric

Storage atFinish/Dye Mill

Dyeing/Finishing

1817

Storage atCut/Sew Facility

19

ApparelManufacture

20

Packagingand Shipping

21

RetailDistribution

22 Customer

Storage atRetail Stores

Key: denotes transportation activity denotes storage denotes a process

denotes an end-product


Understand Business & Information FlowMarketing Activity

CreateSales Forecast

Customer P.O.AccountForecasts

from Customers

Production PlanningActivity

Historical ProductionPrepare

Production Plan

Inventory Status

Sales Forecast &Customer P.O.

Weekly Updated RM Rolling Forecast& RM PO sent to Texas

Capacity Plan

Production ProcessDesign

Evaluate ProductionProcess

Marketing ActivityDetermine

Reallocation Needsacross Accounts

if Necessary

Production PlanningActivity

Production SchedulingVia Product Wheel

Capacity AllocationRequirements

ProductionSchedule

RM Availability Forecast &RM Shipping Notice from Texas

Prod nPlan

uctio

Plant Operations

Execute Production

Determine the Need for"Break-In" Scheduling

Organization &Management

uctio

A-B-C Priority Configuration

Prod nProcess

Configuration

Financial Data

RM Shipping Invoice

Final CapacityAllocation &Scheduling

GlenTouch

Scheduled"Break-Ins"

Scheduled"Break-Ins"

Fill & Warp Shippedto GT and FFD Respectively


DP.7Input

Output

Activity Sequence

DP.2

DP.23 DP.26

Flat Yarn

Produce Polymer via CP Technology(6h)

DP.18

Inspect

Key:End Product

MaterialProcessingStorage

TransportationInspection Set-Up

Pack intoQuads

DP.12 DP.16

Extrude Strip

DP.31

Ship FlatYarn

DP.20

WrapYarn6-8 h

Ship Fill &Warp Yarn

1 day

Store

DP.6

DenierChange

3-8 h

DP.5

ProductionSet-up5-6 h

OverhaulCP Machines

10 days

Delay

DP.28

TOMove

Handling

TO

Unload& Shelve

HMD & AA

DP.3

TOTOTOTODP.13 DP.14

Draw Wind

72 h

DP.29

Store YarnShelve1 day

DP.15 DP.17 DP.19 DP.21

TODP.11

Note: Documentationindicates DP.12 - DP..22requires 6-8 h.

TO

DP.24

DP.10DP.9DP.8

Evaporator ReactorVessel Flasher Finisher

DP.1

DP.22DP.27

Cure Yarn5 days

DP.30

Unshelve& Load

DP.4

Process/Inspection

DP.25

Load

Understand the Activity Flow


Understand the Process Flow

InputReceivingDP.1 - DP.2

Polymer ProductionDP.3 - DP.10

Pre-Yarn ProductionDP.11 - DP.16

Inspect & PackageDP.17 - DP.23

Ship & Cure/StoreDP.24 - DP.29

ShippingDP.30 - DP.31 Output


Understanding the Problem - Key #2Understand the Manufacturing Diversity

FIBERFIBER

FIBER

TEXTILE

APPAREL

FlexibilityVery Jumbled Flow(Job-Shop)

Less Jumbled Flow(Batching)

Machine-pacedLine Flow

Continuous OutputRigid Flow(Assembly Line) Custom

ProductsLow Volume of Many Products

High Volume of Several Major Products

Low Product-Mix

Pro

cess

Flo

w

Retailer - Non ManufacturingHigh

VolumeLowVery High VolumeCommodity

High


Understanding the Problem - Key #3Find out about the Logistics

Cascade West

DuPont

Glen RavenMills

Malden Mills

L.L. Bean ®

Major Population CentersSupply Chain Members

Supply Chain

Retail Distribution

Note: Supply Chain Length is ~ 9,500 highway miles

Polartec ®Supplex ®

Jacket

Yarn


Analyzing the Problem - Step #1Breakdown of Productive System

Total Time of Operation for Parka manufacturing under existing system

Total Work Content in Parka manufacturing

Work Content in Parka manufacturingdue todefective -product design,and product orraw materialspecifications

Minimum Work Contentin Parka manufacturing

Total Ineffective Time inParka manufacturing

Work Content in Parka manufacturingdue to inefficient methods, processes, material flow, setup, plant layout, etc.

Contribution of time due to inefficient logistics in Parka manufacturing

Contribution of time due to lack of productivity, unskilled work force, etc. in Parkamanufacturing

Opportunities for problem solving by Methods EngineeringGoal of Methods Engineering

(295 days)

(56 days) (239 days)

DetailedAnalysisRequiredto bring outthese details

Manufacturing Time Line for the Parka Supply-Chain

1st Order WasteI

2nd Order WasteII

3rd Order WasteIII

4th Order WasteIV

Identifying Bottleneck LocationsAnalyzing the Problem - Step #2

WaitTime,Days

0102030405060708090

100

Res

erve

Inve

ntor

y

6.2

Sto

re in

War

ehou

se

5.1

War

ehou

se

Sto

rage

5.7

Rec

eivi

ngS

tora

ge

3.1

War

ehou

se

Sto

rage

3.8

War

ehou

se

Sto

rage

2.5

Rea

dyIn

vent

ory

6.3

Shi

p to

Cut

& S

ew

4.6

Spr

ead

&C

ut F

abric

5.2

Shi

p to

Ret

ail

5.8

Legend1.x Yarn Facility2.x Texturizing3.x Griege Fabric Mill4.x Finish/Dye Mill5.x Cut/Sew Facility6.x Retail


Identifying Bottleneck ActivitiesAnalyzing the Problem - Step #3

Activity Breakdown for Supply Chain

0

10

20

30

40

50

60

70D

uPon

t

Gle

nR

aven

Mal

den

Cas

cade

Wes

t

LL B

ean

Supply Chain Member

Num

ber o

f Act

iviti

es

DelaySetupInspectPackageStorageMove/TransportMaterial Process


Problem Solving TechniqueConvert Bottleneck Activity to Nonbottleneck Activity

Drum, Buffer, Rope Approach to Synchronization

A B C D E F

Bottleneck (Drum)

Inventorybuffer

(time buffer)Communication

(rope)

Market


Organizing Processes Facilitates SynchronizationPipeline CompanyProvideri Provideri+1

ManufacturingReceiving Shipping

Process Flow Model

Activity 1 Activity 2

Activity Flow Model

Task 1 Task 2

Task Flow Model

RawMaterials

FinishedGoods

RawMaterials

WIP WIP

WIP WIP

Customeri

Material Flows Inventories Transformations


Information Sharing is Key to Synchronizing

Customer

Marketing

Sales Production Planning

Procurement Production ShippingReceivingVendors

Customer Order,Customer Payment

Order Status,Sales Invoice

Advertising, Catalog StockLevel

Report

ForecastReport

CapacityReport

Surveys

Sales HistoryAggregated Orders

ShippingSchedule

Sales HistoryProcurement

ScheduleProductionSchedule

ShippingInvoice

ShippingInvoice

Purchase Order,Payment Shipping

NoticeShippingNotice

ShippingNotice


System Performance Simulation

A D down

SUT

A D down

SUT#

demand

use #

changeu A D down

SUT

A D down

SUTuse #

changeu

Resource 1 Resource 2 Machine 4BottleneckResource

use #

changeu

a

b

V 1 2#

Count

Drum

Rope(Constrained Feedback)

Buffer


BenefitsMajor Savings in Production Cycle Time

• Setup time

• Process time

• Queue time

• Wait time

• Idle time


BenefitsAll Functions in the Manufacturing Enterprise

• Marketing– discourages holding large amounts of finished goods

inventory• Purchasing

– discourages placing large purchase orders that on the surface appear to take advantage of quantity discounts

• Manufacturing– discourages large work in process and producing earlier

than needed


Classification of Supply-Chain Synchronized Models

A B C D E F

Bottleneck (Control)

RawMatl.

Fini-shedGoods

Customer

Push System

Material Flow Information Flow

1

A B C D E F

Bottleneck (Control)

Inventory buffer (time buffer)Rope (Information)

RawMatl.

Fini-shedGoods

Customer

RawMatl. 2 n

Fini-shedGoods

Customer

PullPull

Pull System

Synchronous Flow System

...


Comparison of Objectives in Synchronized Models

Time

Met

rics

Utilization

Production Lead Time

(Supply) PushTime

Met

rics

Utilization


(Demand) PullTime

Met

rics

Utilization


(Push-Pull) Synchronous

Objectives:• Control throughput• Measure WIP Inventory

Objectives:• Control throughput• Control WIP Inventory

Objectives:• Control WIP Inventory• Measure throughput

Source: Dan L. Shunk. Integrated Process Design and Development, 1992. Business One Irwin, Homewood, Illinois.


Comparing SynchronousManufacturing to MRP (or the Push philosophy)

• MRP uses backward scheduling

• Synchronous manufacturing uses forward scheduling


Comparing Synchronous Manufacturing to JIT

(or the Pull philosophy)

• JIT is limited to repetitive manufacturing

• JIT requires a stable production level

• JIT does not allow very much flexibility in the products produced


Comparing Synchronous Manufacturing to JIT

(or the Pull philosophy)

• JIT requires work in process when used with Kanban so that there is "something to pull"

• Vendors need to be located nearby because the system depends on smaller, more frequent deliveries


Defense Supply ChainA Logistics Lifecycle Management for TACOM’s Extended Enterprise



January 9-12, 2006



Supply Chain Logistics Configuration and Supportive Information Technology

Examples


Supply Chain Configuration

Unit P1 Resource R1 Resource R2

Process Pr1

Process Pr2

Process Pr3

Process Pr4

Unit P2 Resource R3 Resource R4

Process Pr1

Process Pr3

Process Pr4

Process Pr5

Product

Process Pr3

Process Pr2

Process Pr5

Process Pr3

Process Pr2

Process Pr5

Process Pr3

Process Pr2

Process Pr5

Time t = t1 Time t = t2


Supply Chain Network Configuration Examples

Parallel Sequential Distributed


Product structure

Car Manufacturing Components– Body– Interior– Under Carriage– Power Train

Under Carriage– Wheels– Front and Rear Axles– Front and Rear Shock Absorbers

Body• 14 Preformed Tubes• 5 Exterior Sheets

Interior– Dashboard– Front Seats– Rear Seat

Power Train– Engine– Transmission– Cardan Shaft


Car Manufacturing Components

Car

Power Train

UnderCarriage

Interior

Body

14 Preformed Tubes5 Exterior Sheets

Dashboard2 Front seats

Rear Seat

2 Front Axles

2 Rear Axles

4 Wheels

2 Front Shock Absorbers

2 Rear Shock Absorbers

Engine

Transmission

Cardan Shaft


Parallel Distributed Production Model of a Car

Dashboard

Seat Manufacturer

Engine

Shaft / AxlesManufacturer

Transmission

Wheel Manufacturer

Shock AbsorberManufacturer

Interior Assembly

Power Train Assembly

Under Carriage

Forming TubesManufacturer

Exterior SheetManufacturer

Exterior Assembly

Body Assembly

Tier 3 Tier 2 Tier 1 Tier 0


ExampleAutomotive Supply Chain

Raw Material Suppliers

Tier 2 Suppliers

Tier 1 Suppliers

Manufacturer Dealers Consumers

Product (Materials) Flow

Demand (Information) Flow

Final CarAssembler

Power TrainAssembler

InteriorAssembler

DashboardManufacturer

TransmissionManufacturer

EngineManufacturer


Supply chain configurations


SeatManufacturer

EngineManufacturer

ExteriorAssembly

BodyAssembly


TransmissionManufacturerShaft / Axles

ManufacturerWheel

ManufacturerShock Abs.

ManufacturerForm. Tubes

Manufacturer

EngineManufacturer

ExteriorAssembly

Power TrainAssembly



Under CarriageAssembly

Body / InteriorAssembly


SeatManufacturer

WheelManufacturer

Shock Abs.Manufacturer


Form. TubesManufacturer


SeatManufacturer

EngineManufacturer

ExteriorAssembly

BodyAssembly




WheelManufacturer

Shock Abs.Manufacturer

InteriorAssembly

Power TrainAssembly

Under CarriageAssembly

Form. TubesManufacturer

Parallel Distributed Production Model - manufacturing is mainly done in-house and is parallel

Sequential Distributed Production Model - manufacturing mainly is done in-house and sequentially

One-Stage Distributed Production Model -manufacturing is highly outsourced


Process Data Model for Supply Chain Network Configuration

A process model representation for an automotive SC utilizing a car with four main components Body, Interior, Under Carriage, Power Train, and several constructive elements within these components. In order to manufacture this car, various automotive SC production models may be created; different configurations are being evaluated using experimentation

One-Stage Distributed Production Model

Parallel Distributed Production Model

Sequential Distributed Production Model


Supply Chain Taxonomy

Customers

Distribution

Information

Finished Product

System L(2)

Taxa

Supply

IT Attributes

Production DistributionSupply

Production Attributes

Production


Subsystem L(0)

Raw Material Supplier

Dealer’s Attributes

Distribution Attributes

Dealer

DistributionSupply Production

Tier 1 Supplier

Supply Attributes

Distribution AttributesSupply Attributes

Production Attributes Distribution AttributesSupply Attributes

Tier 2 Supplier

System L(0)

Subsystem L(2)

Taxa/Classification

System L(1)

Taxa/Classification

Subsystem

Customer's Attributes


Taxonomic Representation of Supply Chain Member


• Work Process Inventory• Product Coordination•SC Membership specific costs

Inventorydination

Supply Attributes

• Component• Product coor

Distribution Attributes

• Finished Product Inventory• Distribution configuration

•Lead Time•Product costs•Holding costs•Transportation costs•Assembly costs per Unit•Assembly costs per Batch•Set up time

Work In Process Inventory

•Lead Time•Customer Demand•Number of Product•Transport. Costs•Product costs•Holding costs•Service level•Delivery Policy•Selling Price

Finished Prod Inventory

•Assembly•Fixed Capacity costs•Operating Time unit•Supplier Integration•Lead time•Batch/lots size•Capacity Utilization•Capacity•Assembly Policy

Product coordination

•Lead Time•Customer Demand•Number/quantity of component•Trans Costs per Unit•Trans Costs per Batch•Product costs•Holding costs•Set up time•Ordering Policy•Buying price

Component Inventory

•Backorder Penalty•Cost of Resources•Costs of resources utilization•Inventory Handling

•Demand Planning

System Components

• Demand Planning

SC Member specific costsInformation

Distribution configuration•Number of warehousing•location•size•space of Product•Transport resources


Prototypic Implementation of the Supply Chain Object Model

• Utilizes flexible data modeling approach based on the Design of Structured Objects (DESO) architecture.

• Allows modeling any object structure with limited number of relations (tables).

CLASSClass_IDClass_NameClass_Coment

OBJECTObject_IDClass_IDObject_NameObject_Coment

ATTRIBUTEAttribute_IDClass_IDAttribute_NameAttribute_Coment

VALUEValue_IDAttribute_IDObject_IDValue_Value

HISTORICAL_VALUEValue_IDHValue_TimeHValue_Value

1:∞ 1:∞

1:∞1:∞

1:∞


A Supply Chain Dynamic Constraints NetworkGeneric Object Data Model

Supply Chain

Product

Component Process PU – Product

Production Unit

PU–Product–PU

Resource

Generic Activity

OBJECT

Power Train Manufacturer (PTM)TransmissionPTM - Transmission

OBJECTS

ATTRIBUTE

ProducerProductPriceProduct NameProducer Name

ATTRIBUTES

VALUE

Power Train Manufacturer

Transmission T-234

PTM

Transmission

VALUES

HISTORICAL_VALUE

01.01.01 $1,50002.01.01 $1,52003.01.01 $1,550

HISTORICAL VALUES

CLASS

Production UnitProductPU - Product Relation

CLASSES


Supply Chain Network Components

OrganizationProduct

Structure Definition

Network structure definition

Flow coordination

Inventory Management

Capacity Management

Manufacturing

Forecasting Control

Common Data Model


An Enterprise Information Management System

Customer

Marketing

Sales Production Planning

Procurement Production ShippingReceivingVendors

Customer Order,Customer Payment

Order Status,Sales Invoice

Advertising, Catalog

Surveys

Sales HistoryAggregated Orders

StockLevel

Report

ProductionSchedule

ProcurementSchedule

ShippingSchedule

Purchase Order,Payment

ForecastReport

CapacityReport

ShippingInvoice

ShippingInvoice

Sales History

ShippingNotice

ShippingNotice

ShippingNotice


SAP R/3 Integration Model

R / 3Client / Server

ABAP / 4

SDSales &

DistributionMM

MaterialsManagement

PPProductionPlanning

QMQuality

ManagementPM

PlantMaintenance

HRHuman

Resources

FAFinancial

Accounting

COControlling

AMFixed Asset

Management

PSProjectSystem

WFWorkflow

ISIndustrySolutions


Logistics Sub-Modules

• Sales and Distribution• Production Planning• Materials Management• Quality Management• Plant Maintenance• Logistics Information System• Project System• Product Data Management

Documents

Defense Supply Chain