Simulation Based approach to Supply Chain Management (SCM)

As seen in Automation World, Supply Chain Management (SCM) woes are still a real issue for many equipment manufacturers. Of course, they try to manage all the content associated with SCM, but sooner or later things can get out of hand and they end up in situations where they spend a lot on time & money by just planning, executing or controlling work that has already been done.

This article focuses on the dynamics involved in SCM managed by Enterprise Resource Planning (ERP) systems. SCM, the management of flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory and of finished goods from point of origin to point of consumption.

Supply-chain management has been defined  as the “design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

Typical challenges faced in managing real-time demand fluctuations…

  • Difficult to do dynamic calculations for Quantity to order.
  • Difficult to provide Delivery Instructions to suppliers due to the following dynamic variables.
    • Committed Purchase Orders
    • Suppliers Lot size
    • Current Inventory
    • Ideal Inventory levels of parts
    • Delivery frequency of suppliers
    • Number of working days and holidays
  • Difficult to calculate ETD (Estimated Time to Depart) & ETA (Estimated Time of Arrival) for overseas suppliers.
  • Identifying critical parts.
  • Generating graphs / reports.

How can these challenges are addressed…

There are many tools on various platforms available that companies use to overcome the challenges in SCM. In order to achieve optimized purchase of parts & material allocation, robust planning modules have been designed called Lean Material Planning (LMP) built using Plant Simulation tool.

The main objective of the LMP is to optimize purchase of parts & material allocation for production from supply chain based on End user demand forecast & Inventory levels which are available in traditional ERP systems.

System framework of LMP:

Plant Simulation

LMP has bi-directional interface through a database which can also be an MS-Excel file.

The data from the ERP is imported to LMP application in Pre-defined formats. The LMP then processes the current state of the inventory in-house; Outstanding PO Quantity, Outstanding PO date, Supplier details, open sales orders, delivery schedules and the reports shall be displayed based on the back end logics defined. The various reports displayed include:

  • Quantity to Order
  • Estimated Time to Depart & Estimated Time of Arrival for Overseas Suppliers.
  • Inventory Graphs
  • Delivery Instructions for Local suppliers.
  • Dollar Value of Inventory.

Some of the benefits of LMP…

LMP can help manufacturing companies in effective material planning as per the Production demands.

  • Effective Inventory management.
  • Simple and user friendly interface.
  • Pre-defined input templates.
  • Outstanding Purchase Orders tracking and modifications for ease of operations.
  • Calculating current value of inventory.
  • Bi-directional excel interface.
  • Independent application.

Business Benefits

Inventory Management – LMP provides a cutting edge benefit to inventory management, delivers accurate forecast so that the savings on maintaining an ideal inventory can be maximized.

Sales Order Management – With improved simulation of sales order, outstanding PO and inventory demands, the planner is empowered with a tool which requires minimum manual efforts and provides accurate reports.

Production flow – Unavailability of any critical parts can disrupt the Production. LMP enables the user with current status, maintain the required inventory and also notify him whenever a new PO needs to be raised.

What’s holding manufacturers back from reaping the benefits of LMP?

The challenges of wider LMP adoption are overall awareness of the concept and a lack of knowledge on the available tools in market. Moreover, the manufacturers are attached to the traditional methods (ERP), as they have already made a huge investment on these.

LMP isn’t a specific technology; instead, it is an application that simulates a scenario with multiple inputs defined and generates accurate reports for quick & easy decision making.

Industry Segments

  • Automotive
  • Consumer Packaged Goods
  • Power & Utility
  • Industrial Machinery

Customer Type

  • System Integrator
  • OEM