Simulation Modeling and Analysis of the Impacts of Component Commonality and Process Flexibility on Integrated Supply Chain Network Performance

Abstract

A supply chain can be defined as an integrated business process wherein a number of various business entities (i.e., suppliers, manufacturers, distributors, and retailers) work together. Supply chain configuration is concerned with determining supply, production and stock levels in raw materials, subassemblies at different levels of the given bills of material (BOM). End products and information exchange through (possibly) a set of factories, distribution centers of a given production and service network to meet fluctuating demand requirements. Through the evaluation of the supply chain network configurations, performance indicators of the supply chain such as fill rate, customer service level, associated cost and response capability can be obtained under different network configurations. Different network configurations include: (1) different stocking levels in raw materials, subassemblies and end products; (2) safety stock location; (3) production policy (make-to-stock or make-to-order ); (4) production capacity (amount and flexibility); (5) allocation rules for limited supplies; and (6) transportation modes. Reconfiguration of the supply chain network from time to time is essential for businesses to retain their competitive edge. Supply chain performance optimization consists of deciding on the safety stock level, reorder point, stocking location, production policy (make-to-stock or make-to-order), production capacity (quantity and flexibility), assignment of distribution resources and transportation modes while imposing standards on the operational units for performance excellence. Therefore, the aim of supply chain performance optimization is to find the best or the near best alternative configuration with which the supply chain can achieve a high-level performance.