Abstract

                         The term supply chain is defined as an integrated process wherein a number of various business entities (i.e., suppliers, manufacturers, distributors, and retailers) work together in an effort to: (1) acquire raw materials, (2) convert these raw materials into specified final products, and (3) deliver these final products to retailers. This chain is traditionally characterized by a forward flow of materials and a backward flow of information. At its highest level, a supply chain is comprised of two basic, integrated processes: (1) the Production Planning and Inventory Control Process, and (2) the Distribution and Logistics Process.

A global economy and increase in customer expectations in terms of cost and services have put a premium on effective supply chain reengineering. It is essential to perform risk-benefit analysis of reengineering alternatives before making a final decision. Simulation [Towill and Del Vecchio (1994)] provides an effective pragmatic approach to detailed analysis and evaluation of supply chain design and management alternatives. However, the utility of this methodology is hampered by the time and effort required to develop models with sufficient fidelity to the actual supply chain of interest. In this paper, we describe a supply chain LINGO based modeling framework designed to overcome this difficulty.

In modeling of supply chain, the variables [decision) are chosen in such a manner to optimize one or more measures [Lee and Whang (1993) and Chen (1997)] can be represent as functions of one or more decision variables performance measures. The decision variables generally used in supply chain modeling are Inventory Levels, and Number of Stages (Echelons): in supply chain, the number of stages is called echelons. This involves either increasing or decreasing the chain’s level of vertical integration by combining (or eradicating) stages or separating (or adding) echelons respectively. On the analytical point of view. In this research model, we minimize shipping costs over a three tiered (Echelon) distribution system consisting of plants, distribution centers, and customers. Plants produce multiple products that are shipped to distribution centers. If a distribution center is used, it incurs a fixed cost. Customers are supplied by a single distribution center.

Key Words: Supply chain management system (SCMS), echelons, supply chain sourcing, sc design; dynamic optimization, Simulation.