What Does Simulation Software Have to Do with Supply Chain Efficiency?
Let’s frame this with a production process that’s fairly easy to picture, the auto assembly line. In the 1980s a familiar mantra started with manufacturers in the automotive industry: “Focus on core competencies, don’t try to be everything to everyone.”
Automobile companies were vertically integrated, producing most of what was needed to make a car. Like Henry Ford, who smelted his own steel, car companies produced up to 80% of a vehicle’s components from raw materials.
This resulted in long internal production lines, piles of work-in-progress and was thought to limit innovation, because automobile companies were producing components outside their skill-set.
With globalization, car companies diversified production to more specialized suppliers, allowing them to reach into cheaper labor markets. By leveraging quality standards like the International Standards Organization (ISO 9001), they were able to standardize quality improvement efforts and reporting; meaning high product quality, reasonable cost and reliable delivery between a supplier and a downstream customer.
But it wasn’t all good news. They couldn’t resist short term gains, imposing cost reduction without respect to the impact it would have on the supplier. These cost shifting strategies resulted in short term gains, but long-term difficulties.
She wrote: “Pushing costs and waste backwards to suppliers and lengthening payables will give short-term benefit; but, as seen in the automotive industry, cause longer-term issues.” You can push the waste out of your company, but it will soon come to haunt you in the form of quality problems and delays in your supply chain.
So How Do Companies Avoid Short-term Traps?
Computer-based simulations can provide the answer. With simulation software, supply chains flow like rivers. Like water, products flow downstream from suppliers to customers and ultimately to the end-user.
Capital, on the other hand, flows backwards up the supply-chain, like returning salmon up an Alaskan creek. What simulations can model effectively is the timing and cycles of each step in the chain. Lead-times, cash-to-cash cycles and Quality, Cost, Delivery (QCD) can all be factored into how the overall chain will perform.
Simulations Show You the Big Picture More Clearly.
A simulation will aid analysts by allowing them to adjust parameters in order to see how the effect will be absorbed by the entire system. This is critical, because it provides a necessary end-to-end visualization of the supply chain.
Simulations Could Save You Millions.
The company wanted to optimize shipments within its supply chain by optimizing loads and shipping routes. The resulting analysis saved the company over US$41 million per year.
Simulations help decision makers to see the big picture by capturing all of the entities within a system, mapping their relationship to each other, and projecting future states on the basis of desired initial conditions. So in the shipping example, the company could reconfigure the loading of their current inventory of ships to achieve the desired capacity, instead of buying new ships to increase capacity.
And Simulations Can Help You Improve Your Supply Chain Efficiency Before Spending a Dime.
In the Simudyne case study above, we see the amazing changes simulations can bring to your production and bottom line. By manipulating the balance between ship loading and routes, the analysts could “tune” the system for optimal performance before spending a single dime.
Computer-aided simulations provide a powerful, safe environment to see the big picture, test your systems, and course correct before spending any money. This end-to-end visualization, means your supply chain efficiency will never be the same again.
© Takouba Security, LLC.
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