IACT 422 - 03 - Term Project - SUPPLY CHAIN SIMULATION FOR 4th PARTY LOGISTICS

8/14/2019 IACT 422 - 03 - Term Project - SUPPLY CHAIN SIMULATION FOR 4th PARTY LOGISTICS

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University of Wollongong

IACT 422 CASE STUDIES IN IT

(Spring Session)

SUPPLY CHAIN SIMULATIONFOR 4 th PARTY LOGISTICS

Version 1.0

Last Updated:Tuesday, 30 May 2006

Prepared By:Nurhazman Abdul Aziz 2666182

Bachelor in Information & Communication Technology


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Table of Contents

1. Executive Summary

............................................................................................................................................. 32. Introduction..................................................................................................................... 33. Philosophy of Supply Chain Management

............................................................................................................................................. 44. The Existing of 4 th Party Logistic

............................................................................................................................................. 75. The Target Company: Toyota & Linfox

........................................................................................................................................... 106. Supply Chain Simulation Framework

........................................................................................................................................... 116.1 Identification of Classes in a Supply Chain Network......................................... 126.2 Establishment of Nodes & Its Inherit Specialised Nodes ................................... 136.3 The Establishment of Relationships between the Nodes .................................... 146.4 The Robustness of a Facility (Node) .................................................................. 156.6 The Facility and Inventory System..................................................................... 186.7 Relationship of a Product.................................................................................... 216.8 Relationships of Order and Demand................................................................... 22

7. Supply Chain Simulation Architecture

........................................................................................................................................... 23

7.1 Simulation Interface............................................................................................ 257.2 Simulation as a Decision Support System .......................................................... 277.3 Multi-Agent Programming in the Simulation ..................................................... 29

8. Tools & Technology

........................................................................................................................................... 309. The Challenges and Feasibility

........................................................................................................................................... 319.1 Financial Challenges........................................................................................... 319.2 Organisation Challenges ..................................................................................... 32

10. Recommendation

........................................................................................................................................... 3311. Conclusion .................................................................................................................. 3412. References................................................................................................................... 35


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1. Executive Summary

The purpose of this paper is to investigate a generic framework to build up a supply chain

simulation application, based on an object-orientated environment. In this paper, thediscussion will be based on the design an object-oriented framework, and developing it

into a simulation based decision support for a supply chain logistic as an overall view.

This solution is to be implemented by a fourth party logistic into one of its clients to aid

the operation of supply chain logistic planning. This is due to the complexity of planning

of supply chain logistic. Poor planning may result in a system instability that may

seriously influence the ability to satisfy its customers. Thus, accurate, precise decision

has to be made to optimize the performance of the system. Moreover, it is a vital issue

that right information is transferred to the right entities that needs the right information.

Apart from that, a brief explanation of supply chain management and fourth party logistic

are explained in this paper, together with the challenges faced in implementing this

supply chain simulation system.

2. Introduction

The basic supply chain management (SCM) aims to produce and distribute products tocustomers in the right quantities, locations, and schedule, with minimized system-wide

costs while fulfilling service level requirements. Nevertheless the complexities of supply

chain make it hard to accomplish the objective. This includes the logistic planning. The

modelling, analysis and optimisation of a logistic supply chain has become increasingly

important as the advent of internet commerce forces changes within the industry.

The main objective of this research paper is to analyse a framework that is designed for aprototype objective oriented supply chain simulation to be implemented into a

manufacturing plant with the support service from a fourth party logistic. Furthermore, as

the framework will be identified and analysed with all the related entities and relationship,

the framework will be placed into simulation architecture of the system to build up the


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decision support system. With this implementation, the challenges issues on financial and

organisation will be discussed briefly.

In short, with the advent of the information and communication technology, all logisticactivities, such as customers demands, warehousing, inventory and transportation

information can be available electronically through the supply chain network. This

allows the possibility for logistic activities to be streamlined and optimised across the

organisation boundaries. To achieve this vision, manufacturing company with the

existing third party logistic provider will need to form an alliance, which is managed by a

fourth party logistic provider. The fourth part logistic providers role is to provide

optimised plans and schedules for the companies.

Furthermore, providing optimised plans and schedule is not an easy task. It involves a

sum of costing either in terms of financial or time. Therefore, deigning a simulation to act

as a decision support system will give a number of benefits to the planning of the logistic

stage in the supply chain management.

3. Philosophy of Supply Chain Management

Traditionally, the supply chain operations operate independently in any typical

organisation or industry. These operations components include marketing, distributions,

planning, manufacturing and purchasing, considering that the realistic supply chain have

multiple end products with shared components, facilities and capacities. 1 On top of that,

the supply chain management (SCM) serves as an oversight of materials, information and

finances as the process covers the generic supply chain networks.

1 Ganeshan, R., Harrison T. An Introduction to Supply Chain Management, [online], available:http://lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html , last accessed: October 21, 2005


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Figure 3.1: The Generic Supply Chain

On the other hand, supply chain management is also the combination of art and science

that goes into improving the way the organisation find the raw components required to

produce a product or service, manufactures that product or service and delivers it to

customers, as paraphrased by Christopher Koch in his article on the ABCs of Supply

Chain Management. 2 In addition, he also identified five basic components for the supply

chain management; Plan, Source, Make and Deliver and Return.

1. Plan refers to the strategic potion of the supply chain management,

which manages all the resource allocations, meeting the customers

demands. Thus, this is done through developing a set of metrics to monitor

the efficiency of the process. Therefore, resulting in cost savings, high

quality deliveries and value to the customers.

2. Source involves the selection of suppliers that will deliver the goods and

services at a set of pricing, delivery, payment process and also creating

metrics for monitoring and improving the relationships. These include the

management of inventory of goods and services which consists of the

2 Koch, C. The ABCs of Supply Chain Management, [online], available:http://www.cio.com/research/scm/edit/012202_scm.html , last accessed: October 21, 2005

Upstream Internal Downstream

2nd Tier1st Tiers

Assembly/ Manufacturing/

Packaging

Distributor

Retailers

Customer

2nd Tier

2nd Tier

2nd Tier


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receiving shipments, verifying and transferring into the manufacturing

facilities.

3. Make refers to the manufacturing process, which consists of thescheduling activities for production, testing, packing and preparation for

delivery. This is the most metric intensive components of the supply chain

management, measuring the quality levels, production output and

productivity.

4. Deliver also known as the logistics coordinates the receipt of orders

from the customers, which consists of the network of warehousing, pick

up vehicles to transfer the product to the customers, including an invoicing

system that handles the revenue of the operation.

5. Return is an avenue channel that handles defective and excess products

back from the customers with the delivered products.

From these five basic components, Koch is able to structure the hierarchical formats of

supply chain management, focusing the top level of management which has beenmentioned before earlier, such as the operation components. 3 Basically, in the main

activities of supply chain management, two types of flows have been identified before

through the supply chain cycle. 4 The initial follow is the material flow, which consists of

acquiring raw materials, manufacturing, transportation and delivery to the customer. The

following flow is the information flow which provides and determines the data of the

material when certain activities of the material flow are executed. This flow consists of

the activities triggered by receiving order from customers.

3 Ibid.4 Supplychain consultants, Sales and Operations Planning Basics, [Online], Available:http://www.supplychain.com/Downloads/sandop.pdf , Last Accessed: October 21, 2005


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In general, the core elements of the supply chain managements philosophy are based on

a number of issues. The customer demands will drive the whole inter-company supply

network, such as the synchronisation, built-to-order, built-to-stock, etc. A built-to-order

product occurs when an order intersect the material flow before manufacturing becausethe product can be manufactured with the order in hand. 5 In contrast, if the order

intersects the material flow at the completed good level, it is known as built-to-stock.

This is because the material has to be completed and ready for delivery. In addition, with

these scenarios, the supply chain gradually demands in an increase in the reaction speed

and flexibility of the network, where multi-tier concepts are enabled and applicable.

Most of the companies have the desire own a visibility and transparency in their supply

chain management. Thus, integrated inter-company processes are required to share their

relevant data across the network. This leads to the need in quick responses of relevant

information or decision making in an appropriate period. Ideally, in the supply chain

management, a simulated scenario can be a beneficial solution to find the root causes in

the complexity rather than cure of the symptoms. This will also enable a win-win

partnership between the tiers due to the global availability of information.

4. The Existing of 4 th Party Logistic

The fourth party logistics service provider (4PL) exists and participates in a supply chain

co-ordination due to providing more than just the operational logistics and fulfillment

services, like a traditional third party logistic provider (3PL). 6 Primarily, the

implementation of 4PL model is constructed towards more into an integral involvement

in the customers supply chain, with greater impact on the customer supply chain

performance and strategy. Furthermore, in the 4PL model, it will essentially elevate the

3PL to a coordinator of the flow of goods, and not just an operator in the physical

5 Turban, T., King, D., Lee, J., Viehland, D., 2004, Electronic Commerce: A Managerial Perspective, Ed 3,Pearson Education, Inc., Upper Saddle River, New Jersey.6 Prof Hoek R., UPS Logistiic to mocve towards 4PL or Not, [online], Avaiilable:http://www.cscmp.org/Downloads/Education/04LECREMKO.pdf , Last accessed: October 21, 2005


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movement of goods, which is seen in the 3PL model. 7 More importantly, this method will

contribute to higher value-added activities in the supply chain than the traditional

warehousing and transport services have to offer.

Figure 4.1 A Complete Logistic Service.

In the 4PL model, the 4PL is actually the integration of all companies involved in the

supply chain. It is the planning, steering, controlling of all the logistic procedures by one

service provider with a long term strategic objectives. These logistic procedures are theflow of information, material and capital. On top of that, there are a number of potential

benefits existing for some organisations to adopt 4PL. PA Consulting Group has

summarised there would be a huge saving on the cost of a supply chain or distribution

management department, giving the coverage and management of the supply chain over a

wider geographic area, or providing total independence. 8

7 Hoyer, 3PL/4PL, [Online], Available: http://www.hoyer-group.com/logistikE/html/3pl4pl.html , Lastaccessed: October 21, 20058 PA Consulting, Forth Party Logistic (4PL), [Online] Available:http://www.paconsulting.com/insights/supply_chain/4pl/ , Last Accessed: October 21, 2005


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In the evaluation of a 3PL framework, the information technology (IT) is able to act as a

leading logistic provider, which is known as 4PL. 9 The adoption of IT concepts and

solutions allow the 3PL provider to expedite the movement of goods and information in

the organisations supply chain. Furthermore, the significant of IT improvements can leadto lower transaction cost and allow all the supply chain to manage complexity, as

discussed earlier.

The difference between 3PL and 4PL found in the understating the role and competencies

of each entity, where the truly appreciated kind of hyper value is created in both

providers. 10 Many 3PL offers integrated or total logistic solution, but only succeeded with

inability to understand the complexity and competency required. In many 4PL providers,

they are able to offer more strategic management objectives, raising the concerns overlive operation, implementation and execution expertise.

In short, 4PL providers are able to deal with complex task as the existing supply chain

process are to be reviewed and changed, if necessary. This is done through an emphasis

on the optimization of total logistic costs and a continual improvement of the entire

process to remain competitive. In order to enhance the existing technology that a 4PL

provider has in their system, a simulation has to be created in order to align theirorganisational activities and their IT activities. Following that, this will lead up to the

planning stage, where both alignment of organisation and IT strategic plan concern in

achieving this major goal.

First and foremost, the idea to implement a simulation system will focus on a

collaboration of two target companies, such as manufacturing plant (organisation) and

fourth party logistic solution. Following that a generic framework will be drawn out to set

the direction of the architecture of the desired supply chain simulation system.

9 Vaidyanathan, G., (2005) A Frameworks for Evaluating Third Party Logistics, Published 2005,Communication of the ACM10 YCH, (2002), The Definitive Supplychain Revolution, [Online], Available:http://www.tliap.nus.edu.sg/tliap/Media_Events/E19Feb2002/4%20Presentation%20-%20Robert%20Yap.pdf , Last Accessed: October 21, 2005


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5. The Target Company: Toyota & Linfox

The two target companies, which would be the ideal cases to implement this system are

Toyota and Linfox. Toyota is a leading automotive manufacturer in Australia. It has a

number of manufacturing plants operating all around Australia, unlike in Japan, where all

the suppliers of Toyota are located within a certain radius. These would allow a milk run

system to take place effectively and efficiently. 11

Linfox is a logistic solution provider which handles the provision of warehousing,

transportation and supply chain management in Australia. As an efficient supply chain

provider, most of the solutions are tailored made by Linfox herself. 12 The solution

focuses on three tiers of service depending on the customer requirements:

Tier 1 Logistics Service Provider Tier 2 Lead Logistics Provider Tier 3 Supply Chain Solutions Provider

One of the solutions that are focused between the Toyota and Linfox is the fourth partylogistic management. This is where the proposed simulation will add onto the current

supply chain management system of Toyota Manufacturing plant. Here, a two

collaboration organisation is established in order to keep the supplies moving on through

the supply chain network.

In short, the staffs of Toyota will plan using the simulation on certain issues of their

products or machines initially, setting up all the requirements information. The system

will simulate the plans for the supply chain logistic using the system and at the same time

11 Toyota Motor Corporation Australia, (2005), History, [Online], Available:http://www.toyota.com.au/corporate/articles/0,2862,subId%253D922%2526sectionId%253D880 [Accessed15 August 2005].12 Linfox, (2005), Solutions, [Online], Available: http://www.linfox.com/Linfox/Solutions/ , Last Accessed :October 21, 2005


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acknowledging the suppliers on the quantities of the supplies of raw materials or part of

the machines. As these suppliers received the orders, another note (quote) will be sent to

the transport company. This case it will be Linfox since Linfox provides the

transportation, as well as the solution. Furthermore, Linfox is also able to provide thewarehouse storage. But, this only happens in a simulated environment for the staffs of

Toyota to make a critical decision. At the same time, the simulation will act as a decision

support based system.

In order to make this simulation carry out in a real physical environment, multi-agents are

connected to the web interface of the simulation. Once the decision is made based on the

information given, an agent will be activated by a click of button if this decision is to be

carried out in the physical environment. Thus, by activating this, the whole operation will

be initialised.

6. Supply Chain Simulation Framework

Before designing the simulation software for the solution, an object-oriented framework

will be developed to guide the whole system process. This will be a generic framework

that will be present in any part of the system that is represented by a set of abstract

classes and the way their instances interact. These classes represent some operations,

which are the implementations of a service in the supply chain network. An alternative

approach that illustrates a particular system domain deep into the object level is by using

object-oriented modeling. This is because object-oriented system can be organised to

build hierarchy of objects and reusable as they are usually composed of many objects. 13

In addition, it allows these objects to have many relationships within a system. Thus, the

resulting application will be efficient, easy to maintain and reliable, in order to construct

a robust supply chain framework. This core framework will be taken from the research of

13 Pundoor G, Herrmann J, A Hierarchical approach to supply chain simulation moddlelling using SupplyChain Operation Reference Model, [Online] Avalaible:http://www.isr.umd.edu/Labs/CIM/SC_Simulation/IJSPM.pdf Last Accessible October 21, 2005


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Rossetti and Chains articles. 14 From their framework, the development of the simulation

will be built into a decision support system.

6.1 Identification of Classes in a Supply Chain Network

In a current generic simulation framework, a total of 29 classes have been identified by

Rossetti and Chan in their prototype object-oriented supply chain simulation

framework. 15 These classes represent various elements within a supply chain, as

illustrated in the Table 1. In addition, these elements are commonly used terms in the

supply chains activities, creating part of the information flow in the network. Based on

these elements, a prototype for the supply chain simulation framework, which is used in

the logistic operation, can be built as close as a real physical operation.

Container ProductFamily Order

ContinuousReorderQuantity Product OrderGenerator

PeriodicReorderPoint StorageLocation StorageLocation

Container Parameter Relationship Facility

ContinuousReorderUpToLevel RelationshipNetwork Parameter

Continuous Review Shipment PeriodicRecoderPointPeriodic Review Shipper ProductReview

Demand Region DemandGenerator

Inventory Facility DistributionCenter

InventoryPolicy Order Generator

Location Variable

ManufacturingCenter Warehouse

Node TransportationCenter

Table 6.1: Classes are representing various elements within a supply chain

14 Rossetti M, Chan HT, A prototype object-oriented supply chain simulation framework, [Online],Available: www.informs-sim.org/wsc03papers/205.pdf Last Accessible October 21, 200515 Ibid


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6.2 Establishment of Nodes & Its Inherit Specialised NodesSimilar to physical supply chain network, the complexity of the network has to be

addressed and focused too. Every single complexity in the network will tend to have a

relationship among them, which is the bond between the two entities Here, in order toillustrate the complexity, the bond (also known as the relationship) between each entities

have to be identified. Therefore, in the framework illustrated by Rossetti and Chan, a

customer or supplier in a supply chain network is represented by a Node, which is not a

physical location in the network. 16 The Node can be derived further down into three types

of specialised entities, where they can inherit the Nodes attributes and operation. Thus,

each type of Node will inherit the send and received shipments method of Node. These

three specialised Nodes are known as Facility, Order Generator and Region.(See figure

6.1)

Figure 6.1: The Classification of Nodes

These classifications can be explained below in the tabulated format in detail. Eachspecialisation plays a vital role to build up the simulation framework to represent to the

real scenarios activities in the supply chain network closely.

16 ibid


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Table 2: Details of the Classification of Nodes

Type of Nodes Roles ResponsibleFacility A Provider of products or

servicesTo manufacture and distributeproduct, consolidate and deliverthe shipment

OrderGenerator Act as a single or a set of comprehensive customers

To make order of the product andupdate the inventory

Region A composite Pattern Indicates a group/single of types of Nodes, which can present of anentire area (such as postal code)

In addition, the facility has been characterised to learn the situation, either to receive

orders or send ships to the customer intelligently. As a result, the facilities in the

simulated network are able to perform a number of roles, such as ManufacturingCenter,

DistributionCenter, TransportationCenter, Shipper and Contractor. Overall, these will

form a just like a real physical supply chain network, with all the related entities being

assigned into each Node.

6.3 The Establishment of Relationships between the NodesThe idea of designing the characteristics of the Node first is to match the simulation as

closely as possible, just like a real supply chain network. In a network, bond (also known

as Relationship) is established between two entities. Similarly, in this framework, the

Relationships between two Nodes have been considered as a need to construct the whole

conceptual network with a full set of Nodes and Relationships. In short, the two entities

will be known as RelationshipNetwork, where it acts as a complex system of

interconnected network nodes. Here, the exchanges of materials and information flow

will be established in order to provide materials, products or related information (such as

services) to the end users. In other words, a customer or supplier is able to obtain

detailed information on who are their suppliers and customers, allowing them to knowwho to send orders to their suppliers and to send shipments to their suppliers. This will

allow the whole simulation to be a robust system.


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Figure 6.2: The Conceptual Relation Network

6.4 The Robustness of a Facility (Node)The facility is able to play a number of roles and have been identified before into five

different concepts in the framework design. The table below illustrates the

responsibilities which the facility holds and plays in the framework.

Table 3: The roles that Facility (Node) able to play

Facilities (Default) Characteristic (Default)

ManufacturingCenter Manufacturing finished Products or unfinishedProducts from raw materials.

Product will be make to meet the market demandwithin the network

DistributionCenter Provide inventory replenishment and Product deliveryto other facilities

Primarily act as holding points and do notmanufacture Products from raw materials

TransportationCenter A place where shipments of customers orders can beconsolidated to obtain efficiencies in transportation

Able to hold an inventory for a short period of time,but do not directly supply other facilities.

Shipper Responsible for the delivery of shipments to customer Able to know how, when and where to pick up the

shipment from the TransportationCenter andshipments to the customers

Contractor Has an infinite supply material, such that a contractorsupplies the materials after a lead time delay


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In a graphical illustration, the facility is set as a robust system. The related company or

user of the system is able to further declare this Node accordingly to their specifications

and desire in their simulated supply chain network. Most importantly, they should be able

to know the main characteristics of each facility in order to avoid conflict in the system.Basically, the types of facilities in the above table and below figure are the commonly

used facilities in any average physical supply chain network. Therefore, the simulation

will launch its initial model according to the default generic supply chain network.

Figure 6.3: Types of Facility

Basically, the above discussions have settled in an upstream of supply chain activities,

where a Product order is being made, the system will trigger the contractor to send thesupplies to the ManufacturingCenter. Here, in the ManufacturingCenter the Product will

be manufactured according to the demand of the market, before sending to the

distribution centre for proper distribution to be done. The proper distribution is done and

managed by the TransportationCenter through a shipper. The Shipper will send all the

shipment to the customer, listed down accordingly by the Transportation Center.


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Figure 6.4: Flow Chart of Pre-Define Supply Chain Networkin the Simulation Framework when an order is made

The unique feature about this framework is the models are able to work reversely for an

organisations requirement in the supply chain network. Instead of the

ManufacturingCentre sending out the Product, the ManufacturingCenter will hunt for the

desired raw materials in the Distribution Center as it requires manufacturing the Product.

If the Product is available, it will inform the TransportationCenter to send the shipment

through a shipper. If not, it will inform and request the contractor for more supplies.

Concurrently, the TransportationCenter will also be activating its Shipper to pick up the

supplies and send back either to the DistributionCenter or direct to theManufacturingCenter.

Order Enter

ManufacturingCenter

DistributionCenter

TransportationCenter

Contractor Shipper

Customers


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Figure 6.4: Reverse - Flow Chart of Pre-Define Supply Chain Networkin the Simulation Framework when supplies is limited

Overall, the advantage of this conceptual simulation framework is the flexibility of the

system. It can be set as bi-directional way to determine the flexibility and robustness of

the supply change network. This simulation can be used to add on to any existing supply

chain management system or enterprise resource planning system, in order to plan the

physical network of the desired companys supply chain network. With the aid of this

generic framework, companies are now able to simulate and focus if the planning is

accurate, flexible and most importantly, the reliability.

6.6 The Facility and Inventory SystemThe above discussions are only to regard on the top level planning of the supply chain

network. In short, it only able to establish the topologies of the supply chain network.

Next, the discussion will be briefly focused on activities framework in each facility.

Likewise, in each facility, a number of activities are in operation in order to produce aProduct. This is case a Warehouses activity will be selected as one of the types of

facilities. A warehouse is a facility, where a number of finished Products are being stored

and ready for to be distributed according to the schedule and location set. Basically, in

physical, this warehouse is actually managed by a person called the Warehouse Manager.

Order Enter

DistributionCenter

TransportationCenter

ShipperManufacturingCenter

Contractor

Order MoreSupplies


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Similarly, in this simulation framework, a warehouse manager can design it with the

desired attributes, controlling the Inventory. Hence, each Inventory keeps a track of

Product status in every transaction, as defined by Rossetti and Chan. 17

Figure 6.5: Facility and Inventory System

In a typical warehouse, there are number of several important operations that administrate

the daily functionability of the warehouse structure. These operations are known as

checkInventory(), makeReplenishment() and updateInventory(), which are set to maintain

the Product information.

17 Ibid.


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Figure 6.6: A Flow Diagram of a Typical Inventory Operation

With the inventory system keeping track of each product at a facility full of many

difference types of products, there is a need to build an InventoryPolicy. This Inventory

Policy will allow the encapsulation of rules to control associated inventory, as each

Inventory as an unique information (variables), such as onHand, onOrder, type of cost

and others. In order to build a strategy that governs the reordering behavior for the

inventory of a certain type at a particular facility, the InventoryPolicy can distinguish

each Products information by the PolicyType, recorderPoint and recorderQTY.

Therefore, this will aid the determination on the schedule and quantities to order from the

ManufacturingCenter.

updateInventory()will update the

update and previousorder

OrderReceived

checkInventory()checks every

demand

Inventory check tocheck for status of

the demand Product

Inventory sent toTransportCenter for

Shipment

New shipment arrived fromManufacturing


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Figure 6.8: Inventory and Inventory Policies

6.7 Relationship of a ProductAs the Facility and Inventory system have been discussed, one of the most important

issues to make the whole framework work is the Product itself. Without the product, the

whole simulation framework will be static since the Product carries a number of

information with it as it is traveling through the flow in the supply chain network. Here,

the discussion will lead more towards the investigation between the Product and Nodes.

On top of that, the illustration below will give a brief illustration that the Product does not

only establish between the Nodes and itself. Yet, a number of relationships have been

established, such as with the Inventory, Storage Location, Demand and Facility. In other

words, the Products will only establish its relationship when the element is associated

with it.


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Figure 6.9: Relationship with Product

6.8 Relationships of Order and DemandThe existence of Product will fail if there is no order and demand from customers. The

roles of demands will be the initial to be commissioned for the supply chain from a

facility, which will state the quantity of the Product. In the illustration below, one the

Demands is placed. It will establish a number of relationships in the network.

Figure 6.10 Relationships of Order and Demand


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Here, a node can make many orders and each order may have several demands in it. Once

a supplier is capable of filling an order, its warehouse will make a shipment that contains

the demanded products, creating three supply chain elements and they are the entities that

flow around the chain. Lastly, the purpose of an OrderGenerator, which can be seen inFigure 6.1 is to generate multiple demands within an order during the simulation. It will

also acts as an end customer in the relationship network, creating each orderGenerator

with a set of DemandGenerator. This is to establish a synchronisation that follows a

specific statistical distribution. In addition, in the attributes of OrderGenerator, it has

these functionalities:

time until next Order time until last Order time until first Order maximum number of Order.

Figure 6.11 explains the OrderGenerator distribution with its relationship with the

DemandGenerator, which has an attached variable that provides information about the

statistical distribution.

As a whole, now simulation can be built based on the framework designed by Rossetti

and Chan for an object-oriented supply chain simulation. This is also one of the

frameworks used in the supply chain system that can be classified as an analytical and

simulation model. With this simulation framework, it will represent a multi-echelon

supply chain system that involves interactions and relationships associated.

7. Supply Chain Simulation Architecture

The next issue, after deciding on the framework to be used is the discussion on the

desired simulation architecture. The design proposal of this supply chain simulation

system is to support a real time supervisory control. This will account for the dynamic


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and uncertainty of a supply chain system. As discussed before, using the framework, the

system will be built based on these components exists in the current system:

Basic Simulation Module Inventory Control Module Shop Floor Module Supplier Module Interface Module

The above modules are specifically selected to aid a supply chain logistic operation.

Therefore, the architecture will be designed according to the blueprint illustrated below,

as an overall picture before zooming into the framework of the supply chain networks. 18

Figure 7.1: Overview Plan of the Simulation Architecture

Basically, this simulation architecture allows its module to accept stimulus from outside

entities, including the supplier components and users, as the framework defined before.

Moreover, these modules are able to simulate the systems under difference conditions,

such as machines failures, part acquisitions, technician assignment, machine repair and

18 Ganapathy S, Srivinivasan K,(2003), Simulation Based Decision Support For Supply Chain Logistic,[Online], Available: www.informs-sim.org/wsc03papers/124.pdf , Last Accessed: October 21, 2005

Basic Simulation Components

Shop FloorComponents

(Machine Partsare present inthe machines)

InventoryControl

ComponentSuppliers

InterfaceComponents

Place Order

Get Quotes

Inform SystemChanges

Update inventorystatus in the

interface

Update user request

Report Failure

Update machinewith repairsinformation


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part outsourcing. All these will be performed by the simulation server, which runs an

inventory control unit that monitors the inventory and updates the parts storage databases

frequently.

Focusing in detail, the basic simulation component is overall responsible for the

scheduling of events and coordinating of the multi-threaded architecture. It is comprised

of an event calendar, clock, simulator and distributors, with the adoption of the

frameworks which have been discussed earlier. For instance, with regards to this, the

suppliers have the parts needed for machine repair to provide the inventory control with

information about the part details, such as price and shipping schedule.

The inventory control component will track the parts inventory and acquire parts from the

suppliers to keep inventory in control. This module is also able to request quotes and

orders parts from the suppliers, based on trades off analysis of priority, time, cost and

quality of parts. The shop floor component consists of the machines and the technicians

that will update its status to the simulation which is reflected on the interface. The

interface with the simulation module will facilitate updating the information on the server

side.

7.1 Simulation InterfaceOne of the important elements in system design for simulation software is the interface of

the programme. The interface should not have a complicated look and feel as the main

goal is to present all information in the best possible way to the user. Of course, using

user-animation will create an interesting environment for the simulation to deliver its

ideas. This will be delivered once the main interface has been set properly.

The main interface which represents the four primary section of the architecture, consists

of the top left of information of the machines. This will reflect the status of information

about the parameters for the machine, a list of parts of the machine and time taken to

repair the machine after a machine has failed. On the top right of the screen contains

information about the inventory. It gives information about the different suppliers, their


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price quotes, quantities, and their part shipping times, if any order need to take place.

Before that, the technician schedule chart is presented to the user so that he or she can

decide on assigning a particular technician for the repair based on the schedule. In

addition, using the framework discussed before, the system is able to check at thewarehouse for any parts available. The illustration in figure 7.2 will give a better picture.

Hence, this is just one of the typical solutions to solve a simulation based decision

support for supply chain logistic, which a 4PL is able to adopt. Supply chain logistic

planning is a complex process and with this example, poor planning may be avoided.

Moreover, in a cognitive process of a logistics planning, there are five different steps 19:

1. problem identification,

2. alternatives to solve the problem,

3. evaluation of the alternatives,

4. selection of the best alternative,

5. implementation of the selected alternative

These steps are actually identified by Ganapathy and Srinivasan in a Winter Simulation

Conference in US. 20 Together with these steps and the related initial framework, asimulation idea is produced.

19 Ibid20 ibid


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Figure 7.2 Simulation Interface

7.2 Simulation as a Decision Support SystemAs the simulation works on the basis of the initial framework suggested, it is also able to

work as a decision support system for any logistic solutions. This system has two

decision scenarios. As the main objective of the supplier identification modules, it selects

the supplier based on conditions, such as cost, shipping schedule and quantity. The

illustration below explains the whole idea.

Machine 0

Time of Failure

Component Diagnosisfor Machine 0

Inventory Control

Parameters Value Electric Part 1

Electric Part 2Electric Part 3

Mechanical Part 1

Mechanical Part 2

DSSCheck Diagnosis

Submit

Electric Part 1

Electric Part 2

Part Name

GetQuote

ElectricalPart 1

Select Part Name:

Mechanical Part 1

Mechanical Part 2

TemperatureVoltage

Pressure

Capacitance

Technician Schedule Chart Suppliers List

At time of failure

ScheduleRepair

Tech 1Select

Technician

QtyNeeded


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Figure 7.3: Decision Scenarios

Figure 7.4 describes the decision making process as a block diagram. In addition, a

number of assumptions have been made in this module, such as the part can be ordered

from any suppliers and multiple parts can be ordered concurrently or selected

simultaneously.


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Figure 7.4: Decision Process for Selection of Supplier

As a result, it can be observed in the performance measure, such as the machine down

time, number of times supplies orders, the mean number of times part identified

incorrectly and the number of times parts ordered. With these results, an accurate

decision is made to optimize the performance of the supply chain system. It is also

important for the right information to be transferred to the concerned unit. Therefore,

with the combination of the frameworks and the example of the simulation, a suitable

model featuring a decision support system is created to aid human in making decisions in

enhancing the performance of a supply chain logistic system.

7.3 Multi-Agent Programming in the Simulation

Similarly, like the other supply chain management system, the simulation will use multi-

agent technology and optimization technology to enhance the simulation system.

Moreover, the entire system will be built on a web technology for hybrid accessibility. In

fact, from the initial framework discussed, the Nodes can be categorized as a multi-agent


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system. It has artificial intelligence to compute such decisions based on the scenarios

given.

Furthermore, using the Node and the RelationshipNetwork to build the simulationarchitecture, it improves the characteristics of the agent. Thus, allowing it to carry out its

task in depth, making the whole simulation acts just like a real physical operation.

8. Tools & Technology

From the understanding of the framework, the Nodes are designed closely related to a

multi-agent. Therefore, the overall implementation of the solutions will fully-utilise theJava Agent Development Environment (JADE) platform. 21 This is a software framework

to develop agent applications in compliance with the Foundation for Intelligent Physical

Agents specifications (FIPA, 1998) for multi-agent systems. 22 Moreover, JADE is able

to deal with all aspects external to agents that are independent of their applications, such

as message transport, encoding and parsing, agent lifecycle and others.

Basically, JADE supports a distributed environment of agent containers, which provides

a run-time environment to allow several agents to execute concurrently. This feature has

been utilized to create several concurrent market sessions, such as commodity and

auction sessions, which is used in a simulation area. In addition, JADE will provide

support for standard FIPA and user-defined ontologies with the open source and standard

software concept.

On top of it, JADE is completely implemented in Java language and the minimal system

requirement is the version 1.4 of JAVA (the run time environment or the JDK).Furthermore, Java features, such as portability, dynamic loading, multithreading, and

21 Java Agent Development Framework, JADE, (Online)[http://jade.tilab.com/, Last Accessed October 21,2005].22 FIPA (2003) (Online) [http: //www.fipa.org/., Last Accessed: October 21, 2005].


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synchronization support, making it appropriate to implement the inherent complexity and

concurrency in a simulated environment. These features are also instrumental for

executing the agents in parallel.

Apart from that, the simulation is an add-on function to an existing Enterprise Resource

Planning (ERP) System, which remains the leading systems for every organisation. The

simulation provides a functionality that cannot be achieved by decentralized ERP system.

One of key indicators for the system is to keep the complexity low (e.g number of

parameters, details of modeling) as the main benefits come from the accuracy and speed

of information flow and cross enterprise visibility and synchronization.

9. The Challenges and Feasibility

The challenges in implementing this system can be addressed in a number of areas. They

are the financial, organisation and technical areas. Any organisations that which would

like to implement this solution have to address these matters in order to improve their

logistic service in the supply chain management. Therefore, in order to implement this

system, the organisation will conduct a feasibility study whether this system benefits their

organisation. Ideally, it would be a good investment for the organisation, such as a 4PL

provider to implement this simulation to enhance their decision support in planning the

logistic environment for their client.

9.1 Financial Challenges

The financial challenges can be streamed down into a section that have to be considered

by the organisation, such as the development cost, net present value, return of investment,

project cost, implementation cost and training cost. Furthermore, the cost, such asmaintenance cost will remain a concern after the simulation has been implemented.


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In the development cost, the concern is bound between the development team. Here, the

salaries and equipment purchase will be discussed. In order to build such system, the

team requires:

1 Project Leader 2 System Analysts 5 Programmers 2 Multimedia Designers

The development will be carried out in phases over an estimated of 6 months to complete

and implement. The salaries and wages will also be paid at the normal market price. As

for the development cost, it will consist of the salaries, equipment/installation cost,

training cost, facilities cost, utilities cost, licenses, support staffs and miscellaneous cost.

All these costs can sum up to AUD$100, 000 or even more.

On the other hand, the organisation will also receive cost savings, such as the cost of

efficiency and flexibility in dealing with suppliers reduce shipping cost, increase in

production and other related cost. This is also known as total annual benefits, which can

save more that the annual operating cost. In order to view this, a return on investment willbe drawn out to estimate the return cost from the solution implemented.

9.2 Organisation ChallengesWhile the financial challenges handle with the cash/account flow of the organisation, the

organisation challenges also exist as the system is implemented. Therefore, it is crucial to

identify the potential risk that may arise. To some extent, the organisation challenges are

concerning the cultural environment. Firstly, once the simulation is implemented, theorganisation has to start training their staffs on using the simulation effectively. The user

supports have to be considered in this area to support the operation at maximum

effectiveness. These user supports will be provided through various methods, such as on-

line documentation and troubleshooting, resident experts, help desk and technical support.


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Furthermore, the supplier will also be known about this new simulation system through

the companys news or in a form a internal and stakeholders advertisement related. This

is done to inform the suppliers on the effectiveness of the organisation supply chainmanagement and also indirectly to prepare the suppliers on the demand wave of the

supplies.

10. Recommendation

Overall, it is strongly recommended to implement a supply chain simulation system into

the current Enterprise Resource Planning (ERP) System to remain the leading system for

every organisation. Moreover, it is only an add-on application, which works as a modularbased system. The simulation also provides a functionality that cannot be achieved by

decentralized ERP system.

Figure 10.1 Alignment of Strategic Plan and IT activities

One of key indicators for the system is to keep the complexity low (e.g number of

parameters, details of modeling) as the main benefits come from the accuracy and speed


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of information flow and cross enterprise visibility and synchronization. Strategically, the

simulation is able to align the organisational supply chain strategic plan with its IT

strategic plan, in order to achieve this mission. This is explained in the illustration above,

and this implementation will make the organisation stays at a competitive advantagelevel 23.

11. Conclusion

In this research proposal, a generic supply chain simulation framework, which facilitates

the dynamic analysis of supply chain system, has been covered. This is done to build

supply chain simulation architecture with the tools and technology discussed. The

discussion also covers the challenges if the organisation plans to implement such systems,

as the system is built to target a fourth party logistic to work efficiently with their clients.

Thus, the suppliers will keep replenishing into the facility.

The whole idea of implementing this system is to aid in supply chain logistics planning.

This is due to the complexity process in the supply chain operations. In the framework,

the system will take advantage of the information flow in the network to simulate a plan,

aiding the supply chain management system. Hence, these activities with be strategically

aligned together with the IT activities.

As the framework developed further into the architecture, an agent base architecture is

formed. This will allow rules and behaviours to be easily plugged into the simulation. In

addition, further work is planned, making the persistent network easier to use. Finally, the

utilization of transportation elements within a supply chain simulation with finer details is

provided as the framework explores the hierarchy.

23 Caralli R. (2004), The Critical Success Factor Method: Establishing a Foundation for Enterprise SecurityManagement, [Online], Available:http://www.sei.cmu.edu/publications/documents/04.reports/04tr010/04tr010title.html , Last Accessed:October 10, 2005


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12. References

1. Ganeshan, R., Harrison T. An Introduction to Supply Chain Management,

[online], available: http://lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html, lastaccessed: October 21, 2005

2. Koch, C. The ABCs of Supply Chain Management, [online], available:

http://www.cio.com/research/scm/edit/012202_scm.html, last accessed: October

21, 2005

3. Supplychain consultants, Sales and Operations Planning Basics, [Online],

Available: http://www.supplychain.com/Downloads/sandop.pdf, Last Accessed:

October 21, 2005

4. Turban, T., King, D., Lee, J., Viehland, D., 2004, Electronic Commerce: A

Managerial Perspective, Ed 3, Pearson Education, Inc., Upper Saddle River, New

Jersey.

5. Prof Hoek R., UPS Logistiic to mocve towards 4PL or Not, [online], Avaiilable:

http://www.cscmp.org/Downloads/Education/04LECREMKO.pdf, Last accessed:

October 21, 2005

6. Hoyer, 3PL/4PL, [Online], Available: http://www.hoyer-

group.com/logistikE/html/3pl4pl.html, Last accessed: October 21, 2005

7. PA Consulting, Forth Party Logistic (4PL), [Online] Available:http://www.paconsulting.com/insights/supply_chain/4pl/, Last Accessed: October

21, 2005


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8. Vaidyanathan, G., (2005) A Frameworks for Evaluating Third Party Logistics,

Published 2005, Communication of the ACM

9. YCH, (2002), The Definitive Supplychain Revolution, [Online], Available:http://www.tliap.nus.edu.sg/tliap/Media_Events/E19Feb2002/4%20Presentation%

20-%20Robert%20Yap.pdf, Last Accessed: October 21, 2005

10. Toyota Motor Corporation Australia, (2005), History, [Online], Available:

http://www.toyota.com.au/corporate/articles/0,2862,subId%253D922%2526sectio

nId%253D880 [Accessed 15 August 2005].

11. Linfox, (2005), Solutions, [Online], Available:

http://www.linfox.com/Linfox/Solutions/, Last Accessed : October 21, 2005

12. Pundoor G, Herrmann J, A Hierarchical approach to supply chain simulation

moddlelling using Supply Chain Operation Reference Model, [Online] Avalaible:

http://www.isr.umd.edu/Labs/CIM/SC_Simulation/IJSPM.pdf Last Accessible

October 21, 2005

13. Caralli R. (2004), The Critical Success Factor Method: Establishing a Foundation

for Enterprise Security Management, [Online], Available:

http://www.sei.cmu.edu/publications/documents/04.reports/04tr010/04tr010title.h

tml, Last Accessed: October 10, 2005

14. Java Agent Development Framework, JADE, (Online)[http://jade.tilab.com/, Last

Accessed October 21, 2005].

15. FIPA (2003) (Online) [http: //www.fipa.org/., Last Accessed: October 21, 2005].


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16. Ganapathy S, Srivinivasan K,(2003), Simulation Based Decision Support For

Supply Chain Logistic, [Online], Available: www.informs-

sim.org/wsc03papers/124.pdf , Last Accessed: October 21, 2005

17. Rossetti M, Chan HT, A prototype object-oriented supply chain simulation

framework, [Online], Available: www.informs-sim.org/wsc03papers/205.pdf Last

Accessible October 21, 2005

IACT 422 - 03 - Term Project - SUPPLY CHAIN SIMULATION FOR 4th PARTY LOGISTICS

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Transcript of IACT 422 - 03 - Term Project - SUPPLY CHAIN SIMULATION FOR 4th PARTY LOGISTICS