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A Supply Chain Modelling System

Geo Raju
11/18/2012

CONTENTS

1. Introduction..1 2. Literature Review..3 3. Methodology.4 3.1. Integrated Trans system.4 3.2. Operating the Integrated Trans system..5 4. Conclusions.7 5. Reference.8

A Supply Chain Modelling System

1. Introduction
The term supply chain was first introduced by Houlihan (1984), and has since been defined in different ways: A supply chain is a system through which organisations deliver their products and services to their customers. (Poirier and Reiter 1996) A supply chain is an integrated process wherein raw materials are manufactured into final products, then delivered to customers (via distribution, retail, or both). (Benita 1999) A supply chain is a network of interlinked suppliers, manufacturers and distributors, as shown in the simple example in figure 1. In practice, it is likely to be much more complex than that shown in figure 1.There may be a considerable mesh of suppliers to the suppliers, sometimes called second tier suppliers, and so on to third, fourth and perhaps fifth tier suppliers. In addition, there may be a mesh of distribution between manufacturing and the customer. This distribution mesh might include finished goods inventory, national distributors, regional distributors, local distributors and retail outlets.

Not surprisingly, the inherent complexity of typical supply chains, combined with its economic importance, has prompted the development of the relatively new research area of supply chain management, building on the work done in the area of logistics. An important issue is the need for an approach that can model the complexity of supply chains to give some insights into their behaviour. What is giving added urgency to the problem are the recent developments in communications, primarily based on Internet technologies, that offer the promise of connecting suppliers, assemblers and customers in a seamless network of information that can form integrated supply chain management. In such an integrated supply chain management structure, each entity can have a much greater visibility of

A Supply Chain Modelling System

other portions of the supply chain, thereby allowing for improved decision making and, hence, the ability to reduce costs and reduce the response time. This paper aims to develop an integrated Trans system with supply chain reengineering models and with an inventory model to model the network characteristics of the supply chain. A Trans-Net is used to abstract and model the information, removing many of the complexities, while retaining the ability to analyse the more important characteristics of the supply chain. This would allow, for example, different designs of the supply chain to be modelled and analysed. The Trans-Nets model is developed into a decision support system by integrating modelling methods for supply chain reengineering (Trieneken and Hvolby 2001). The modelling methods for supply chain analysis and redesign were derived from existing methods for business modelling (Trienekens and Hvolby 1999). Activity chain modelling (ACM, Hvolby and Barfod 1998) aiming at optimization of tasks and the use of resources (cost reduction). Event process chain modelling (EPC, Kim 1995 , Trienekens 1999 ) aiming at lead time reduction and process improvement. GRAI modelling (Doumeingts et al. 1992) aiming at improvement of decision structures and information flows.

An arborescent (tree-like) inventory model (Yang and Wee 2001) is integrated to this network-based approach (called Trans-Nets) to model the supply chain. In a competitive market environment, a buyer has the privilege to decide on the number of deliveries when an order is made. The optimal number of deliveries favoured by the buyer may not be the most economical for the vendor. If the number of deliveries is decided in corporation with the vendor, overall integrated cost can be achieved. A mathematical model taking into account the integration of the producer, distributor and retailer is developed and this model can be integrated into the Trans-Nets to enhance the decision-making involved.

A Supply Chain Modelling System

2. Literature Review
Wu and OGrady 2005 developed the Trans-Nets approach of supply chain modelling. The Trans-Nets is a network-based approach to model the network characteristics of the supply chain. A Trans-Net is used to abstract and model the information, removing many of the complexities, while retaining the ability to analyse the more important characteristics of the supply chain. Trieneken and Hvolby 2001 presented three modelling methods for supply chain reengineering; the event process chain (EPC, Kim 1995, Trienekens 1999) method; the activity chain model (ACM, Hvolby and Barfod 1998) method; and the GRAI grid method (Doumeingts et al. 1992). The modelling methods for supply chain analysis and redesign were derived from existing methods for business modelling (Trienekens and Hvolby 1999). Yang and Wee 2001 developed an arborescent inventory model for a supply chain system. Ha and Kim 1997 made the analysis on the integration between the buyer and the supplier by developing a mathematical model with the geometric method. Wee and Jong 1998 studied the integration between multi-parts and finished product with multi-lot-size for deteriorating items. Yang and Wee 1999 derived the integration model between vendor and buyer for deteriorating items. Graves and Schwarz 1977 derived an arborescent production /inventory system. Wee 1993 developed the production lot size model for deteriorating items with constant production and demand rate with partial backordering.

A Supply Chain Modelling System

3. Methodology 3.1. Integrated Trans system


The same structure of the Trans system is taken to conceive the architecture of the inventory integrated Trans system. Trans is a prototype system developed to implement the Trans-Net approach. It consists of three main modules: the information engine, design engine and Trans engine.

Designers Attribute Retrieve Warehouse(s) Customer(s) Supplier(s) Manufacturer(s)


ACM arborescent inventory model

Trans Algorithm Attribute Update Evaluation Trans Engine

Retailer(s)
Automatic

Layout Identification Network Sketch New Manual Edit Delete

EPC GRAI grid

Design Engine

Distributor(s)

Information Sharing Mechanism (Internet Gateway, Database)

Figure 2: Architecture of the integrated Trans system

A Supply Chain Modelling System

The information engine mainly uses Internet technologies to pass information between supply chain designers. It contains two main components: the Internet Gateway and the database. The Internet Gateway provides the interactive interface. The information is stored in distributed databases. Data can be taken from these multiple distributed databases and copied to the Trans central database. The design engine allows designer to generate a supply chain structure automatically (automatic mode) and then to reengineer the supply chain using the mentioned models for supply chain reengineering automatically. Manual mode is also provided to further customize the design. Both automatic mode and manual mode are linked to the Trans central database. Therefore, each component generated in the supply chain layout has its associated properties attached to the central database. The integrated Trans engine implements the Trans-Net algorithm and updates the properties of each component and database record accordingly. The arborescent inventory model is integrated into the Trans engine and on invoking the Trans engine, the attribute set such as the lead time and inventory cost are determined.

3.2. Operating the Trans system


Step 1: Generating the initial design Both automatic mode and manual mode can generate the design of a supply chain from the data in the central database. In this case, assume the designer invokes the automatic mode to build the supply chain layout. Each node is attached to properties (ID, description, cost, lead time) retrieved from the Trans central database. Step 2: Running the integrated Trans engine The Trans engine is invoked to determine the attribute set: the total lead time, cost etc. Assume the designer wants to improve the supply chain performance by reducing the costs and the response times. One possible approach is to focus on those nodes that contribute most to the total cost and the total lead time. Here as an inventory model has been integrated to the system the inventory cost would be optimized and also we can get an optimal ordering policy for the whole supply chain. At this point, the designer now has a number of possibilities to improve the supply chain by making changes to the main elements contributing to the total cost and total lead time. Step 3: Revised design I The integrated Trans system provides the option of reengineering the supply chain automatically using the models given for supply chain reengineering. The designer can also opt for the manual mode so that the design can be customized according to the needs.

A Supply Chain Modelling System

Step 4: Rerunning the integrated Trans engine Once the Trans engine is invoked, the revised attribute sets are determined. Step 5: Revised supply chain design II An analysis of the contributions of different nodes to the total cost and total lead time for revised supply chain design I shows further areas of improvement. Either automatic mode or manual mode can be applied to change the properties of the concerned nodes. Step 6: Rerunning the integrated Trans engine The Trans engine is invoked again and the attribute sets are determined. If the designer finds the revised supply chain optimum, the revised supply chain design II is accepted. The supply chain designer can continue to carry out, in an iterative procedure, integrated Trans system to identify further areas for improvement.

A Supply Chain Modelling System

4. Conclusions
This paper has proposed an inventory model integrated network-based approach (called Trans-Nets) for modelling supply chains. The integrated Trans-Net approach has the main potential benefit of abstracting essential information so that multiple factors can be considered simultaneously and also provides with the models for reengineering the supply chain automatically. Moreover, it has the potential to be easily computerized given the mathematical algorithms inherent in the proposed TransNet approach. The arborescent inventory system is developed on the basis of assumptions such as instantaneous replenishment and definite demand etc. These assumptions could come in conflict with the design considerations used in the proposed system. To enhance designing of supply chain more models for reengineering have to be included. Future work will include integration and further elaboration and testing of modelling methods for supply chain reengineering into the proposed system. The future works also include the application of the proposed system for designing different supply chains. The aim is to eventually come up with an integrated system for chain analysis and redesign.

A Supply Chain Modelling System

5. Reference
Wu, T. and O'Grady, P. (2005) 'A network-based approach to integrated supply chain design', Production Planning & Control, 16:5, 444 453. Yang, Po-Chung and Wee, Hui-Ming (2001) 'An arborescent inventory model in a supply chain system', Production Planning & Control, 12:8, 728- 735. Trienekens, J. H. and Hvolby, H. -H. (2001) 'Models for supply chain reengineering', Production Planning & Control, 12:3, 254 264.