Smoothing supply chain dynamics

A three-echelon Forrester production distribution system is used as a supply chain reference model for comparing various methods of improving total dynamic performance. Many authors have exploited the original simulation results for the nominal system, especially when describing problems associated with supply chain behaviour. However, few of these authors have attempted to produce a dynamically superior supply chain as distinct from offering detailed organisational and attitudinal changes needed to achieve any improvement. As the starting point of this paper, the production-distribution system has been transformed into a block diagram representation capable of considerable simplification. A combination of analysis and simulation can then be used to gain a far deeper understanding of the system dynamics than has so far been published. Thus, although the Forrester model is far from optimal, it does provide a well established benchmark against which proposals may be evaluated. For the purpose of illustration, five different approaches are then used to improve the supply chain dynamics. These are (1) ‘fine tuning’ the existing ordering policy parameters, (2) reducing system delays, (3) removal of the distribution echelon, (4) changing the individual echelon decision rules, and (5) better use of information flow throughout the supply chain. It is shown that by better utilisation of the information flow, significant reductions in the demand amplification can be achieved without substantial expenditure. This is because it is only necessary to separate out the flow of ‘real’ orders from ‘system’ orders as they are passed up the chain. Such collaboration does, however, correspond to the establishment of an integrated supply chain in the concept of ‘total system stocks’ is accepted.