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Optimizing coordination strategies in a real supply chain : simulation approach

Housein, Tarak Ali

In recent years the interest in the supply chain coordination field has been growing, both among companies and researchers, particularly in the area of transportations systems and logistics management. Many companies realize that coordinating supply chain activities can maximize the performance of the supply chain, through the minimization of the system-wide costs while still satisfying service level requirements. The coordination of inventory and distribution (transportation) activities are the effective key for efficient coordination of the supply chain. Therefore, this dissertation deals mainly with developing new coordination distribution strategies that coordinate the inventory and transportation activities and optimize the performance of the supply chain. These strategies are evaluated and their applications are reported using the real-life supply chain network which motivated this research. In this dissertation, a real life food Supply Chain company located in a European country was considered for more detailed studies. Since the real supply chain being modeled and the problem of coordinating two activities are so complex that optimal solutions are very hard to obtain, most of the study models consider simple networks and make many assumptions to simplify the problem, for example, considering only one item in a static inventory system. Thus, it can be solved by exact algorithms (mixed integer programming) and heuristic solution approaches. Generally to solve such coordinated problems optimally is not easy due to its combinatorial nature, especially when many strategies are involved. Simulation models that permit user interaction and take into account the dynamics of the system are capable of characterizing system performance for coordinated and integrated models. A discrete simulation model integrated with C++ program was constructed specifically for modeling this real supply chain. The simulation model was validated by comparing the simulation results with the real data provided by the company. Then the simulation is extended to model and implement the new coordination distribution strategies. The new strategies are designed based on new trends and a new prescriptive of the Supply Chain. To show the importance and the value of the coordination strategies, uncoordinated strategies which were designed based on the item classification approaches (ABC & XYZ classifications) are presented and implemented by the developed simulation model. These uncoordinated strategies are evaluated to compare them with the developed new coordination strategies. The new trends which are considered in designing the coordination strategies are, for example, the shipment consolidation concepts, advance demand information technology, and vendor managed inventory (VMI) programs. All the mentioned trends are implemented and realized in this work. This dissertation presents two new shipment consolidation concepts for constructing new coordination distribution strategies. These two are the "Item classification consolidation concept" and "N-days forecasted demand consolidation concept". The first consolidation concept is developed based on the item classification concept and the second consolidation concept is developed based on the advance demand information technology. The problems such as the residual stock resulting from applying or using the coordination strategies are interpreted and discussed. Moreover, these two consolidation concepts are integrated with the VMI programs to construct more appropriate and efficient coordination strategies between the inventory policies and transportation strategies. To evaluate the effectiveness of the coordination strategies, a number of measures of performance have been selected. These measures are the logistics costs and the customer satisfaction (responsiveness/backorders). Many simulation results are collected and analyses have been made. These results and analyses show that under the right conditions the value of coordination can be extremely high. Also, the simulation results show that, the coordination strategies are better than the uncoordinated strategies for optimizing the system performance. Furthermore, the newly developed coordination strategies which incorporate the appropriate shipment consolidation concepts, advanced information technology, and apply new initiatives like VMI programs, are capable of reducing the system-wide costs and improving the Supply Chain performances significantly. Finally, conclusions and suggestions for future research have been presented.

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Housein, Tarak Ali: Optimizing coordination strategies in a real supply chain. simulation approach. 2007.


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