Industrial Dynamics Simulation Models in the Design of Supply Chains

Abstract

Reviews the dynamic operation of supply chains and reaches some simple conclusions for reducing demand amplification, which consequently attenuates swings in both production rates and stock levels. The results are based on one particular supply chain, for which the use of systems simplification techniques has generated valuable insight into supply chain design. Although different strategies are compared for reducing demand amplification as witnessed by one particular supply chain model, the conclusions are nevertheless thought to have wide application and, indeed, implication. Comments in depth on the significance of the simulation results for the demand chain as a whole, and for the role of an individual business within the chain. In the first instance, supply chain integration, and in particular free exchange of information, is a prerequisite for progress. In the second case, shows that reduction in lead times throughout the supply chain via JIT is similarly beneficial. Clearly pinpoints the limitation to supply chain improvement which can be obtained as a result of using JIT alone. This can be an expensive and ongoing process of improvement with many spin‐off benefits. Nevertheless, shows that the improvement possible by JIT operation of an individual business can be negated by the failure to design and manage the supply chain dynamics as a total system. The message for an individual business is thus quite specific. Not only must lead times be reduced via JIT, but also the business must seek to be part of the right supply chain, if it is to remain competitive and stable.