PROJECT REPORT

ON
FEXIBILITY ANALYSIS OF PROCESS
SUPPLY
CHAIN
NETWORKS

Submitted to :- Dr. P. Mohapatra

Submitted by- Devesh (1202339)

Abhinav Sinha (1202353)
Ashish Sahu (1202352)
Amritendu Dey
Pramendra Chaurasia
Amit Hembrom (1202340)

INTRODUCTION

A supply chain involves the flow of products, finances and information. A key
feature for businesses nowadays is that it is the entire supply chain that
competes, not solely individual organizations, and the success of supply
chains is ultimately determined by the end consumers trends of increased
market competition, rising costs, and increased globalization of
manufacturing, supply and distribution, all contribute to the ever increasing
importance of effective supply chain management to reduce costs, maintain
acceptable service levels and mitigate uncertainty

Todays companies are forced into functioning in a challenging business

world with extensive uncertainties. Frontrunners turn out to be those
companies that are able to foresee the market swings and react swiftly with
minimal adjustment costs and effective response strategies. Hence,
developing flexibility in adapting to sudden changes in global markets,
resource availabilities, and outbreaks of financial and political crises
becomes an integral part of effective management strategy. Supply chain
management presents an especially important domain where such flexibility
is critical to achieving a consistently successful performance.

Manufacturing firms invest in plant capacity in anticipation of future product

demand. At the time of capacity commitment, a firm has only a forecast of
the unknown product demand. One approach to addressing forecast
uncertainty is to build dedicated plants with sufficient capacity to cover the
maximum possible demand. This strategy is expensive, and the expected
capacity utilization is low. Flexibility provides an alternative means of coping
with demand uncertainty. By enabling plants to process multiple products, a
firm can allocate products to plants so as to meet realized demand most
effectively.

SUPPLY CHAIN FLEXIBILITY

An overview of several approaches toward supply chain flexibility analysis.

We begin with a brief discussion on manufacturing flexibility, which predates
supply chain flexibility and from which many concepts on supply chain
flexibility are drawn.
External flexibility is viewed as a source of competitive advantage, and the
internal flexibility is the internal capability by which external flexibility can be
achieved.

PROCESS FLEXIBILITY ANALYSIS

Consider a process model and constraints represented by

equation(1)
h( d,x ,z , ) = 0
equation(2)
g( d,x ,z , ) 0

where h represents steady-state model equations such as material and

energy balances, g is a set of operating and/or design constraints, d is a
vector of design variables, x is a vector of model states of the same
dimension as h, and z is a vector of control variables that can be adjusted in
response to a realization of a set of uncertain parameters, . Using Eq. (1) to
express the state variables as a function of d, z and , and substituting into
Eq. (2), the feasible region can be described in the reduced variable space by
f( d,z , ) 0.

FORECASTING AND SUPPLY CHAIN

FLEXIBILITY

Forecasts represent main inputs into planning and decision making processes
in supply chains. Predictions of future demands, resource requirements and
consumer needs present some areas where collaborative forecasting may
play a significant role in contributing to flexible supply chain performance. In
fact, the quality of decisions and the resulting outcomes may be argued to
depend on the extent of information sharing and forecast communication in
flexible supply chains. Planning and decision making processes in supply
chains heavily rely on forecasts. Accordingly, forecasting accuracy is a core
factor that influences the performance of a supply chain

RISK MANAGEMENT AND SUPPLY CHAIN

FLEXIBILITY

Uncertainties in the operating environment of firms reduce the reliability in terms of

delivering at the right time, at the right amount and quality. Uncertainty requires
firms to quickly respond to changing environments. Operating in a flexible supply
chain helps the firms to accomplish this rapid adaptation. On the other hand,
increasing flexibility brings along additional risks for the firms to undertake.
Alignment, adaptability and agility (flexibility) are fundamental elements for supply
chain risk management. It is accepted that flexibility increases supply chain
resilience; however, firms are reluctant to invest in flexibility when it is not clear
how much flexibility is required. The higher the flexibility, the riskier is the chain.
However, there are some methods and models which help to mitigate the level of
risk associated with the level of flexibility. This section analyses the relationship
between supply chain flexibility and supply network risk management.

DECISION MAKING AND SUPPLY CHAIN

FLEXIBILITY

Existing literature defines supply chain flexibility as a reactive means to cope

with uncertainty. Networked companies in a dynamic and complex
environment require coordination of their multiple plants, suppliers,
distribution centres, and retailers. There are numerous decision making
models (linear, non-linear, and multi-objective) which aim for coordination of
the supply network players and hence increase the overall flexibility of the
chain.
The level of extra capacity required to obtain volume flexibility, number of
products to achieve mix flexibility, or the level of procurement flexibility
stand as important decisions in the supply chain to improve market
responsiveness and resolve uncertainty-related problems.

INTERCONNECTEDNESS OF FORECASTING,
RISK MANAGEMENT AND DECISION MAKING

The three areas of analysis are not mutually exclusive. There is a definite need for
studies to focus on and explore the intersections of forecasting, risk management
and decision making in the context of supply chain flexibility.

RISK MANAGEMENT FOR SUPPLY CHAIN

FLEXIBILITY

Risk management and decision making are inherently intertwined. Their

interactions gain a special significance for the plethora of managerial issues
faced in efforts to introduce flexibility to different aspects of supply chains.
the most profitable sourcing strategies in the presence of supply chain
disruption risks. It should be noted that the demand model used in this study
is fairly simple and the suppliers capacity is assumed to be infinite. One
critical limitation of this study is that it considers only the buyers profit
instead of examining the sourcing decisions from both parties point of view.
Effective disruptions management is assumed under collaborative behavior
of supply chain partners by learning from previous corrective actions for
future decisions, suggesting risk mitigation at operational and tactical levels.
The most important result of this analysis may be that risk management
cannot be perceived as an individual process of each partner.

RISK MANAGEMENT FOR SUPPLY CHAIN FLEXIBILITY

Forecasts may be utilized as critical tools for risk management, and this
gains a special significance for managing flexible supply chains. Introducing
successful mechanisms for operational flexibilities throughout the supply
chain requires effective integration of forecasts into risk management
strategies. This is a vital and yet challenging process for supply chain
management. Future work directed at exploring the role of forecasting risk
management interactions for the performance of supply chains and their

flexibility concerns will prove especially useful in various contexts ranging

from waste management to quality control.

DECISION MAKING FOR SUPPLY CHAIN FLEXIBILITY

As far as the uncertainty in demand and supply processes is concerned,

flexibility improves the performance of supply chains in terms of cost
efficiencies and market response. The close interplay between forecasting
and decision making plays a vital role in managing such uncertainties to
expand the supply chain capabilities, resulting in enhanced system
performance throughout. Management of flexible supply chains necessitates
planning for alternative forecast scenarios and building efficient response
strategies to tackle possibilities of disruptions/crises/alterations for a variety
of factors. Strong coordination mechanisms among supply chain partners will
be needed for information sharing, forecast adjustment/synchronization, and
group decision making.

CONCLUSIONS

The development of process flexibility analysis is reviewed and the

application of the flexibility analysis framework has been extended to supply

chains under uncertainty. The mathematical framework to quantitatively

evaluate flexibility of supply chains using a flexibility index is established.
Two types of flexibility measures, individual and overall flexibility indices, are
quantified using this framework under various supply chain uncertainties.
Two illustrative case studies are presented to demonstrate the application of
this framework on such aspects, including evaluation of individual and
overall flexibility indices for an existing supply chain, the impact of a
sustained process shutdown to flexibility, a retrofit design problem to expand
existing production capacity to achieve a specific requirement of flexibility,
and the examination of the trade-off between economic criteria and flexibility
in a design problem involving production capacity sizing and binary
operating variables. Overall, this study provides a detailed understanding of
the flexibility framework and quantitative application to supply chain
networks, and offers a decision-making framework for optimal supply chain
design using a quantitative measure of flexibility.

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