University of Wollongong

IACT 422 CASE STUDIES IN IT
(Spring Session)

SUPPLY CHAIN SIMULATION FOR 4th PARTY LOGISTICS

Version 1.0 Last Updated: Tuesday, 30 May 2006

Prepared By: Nurhazman Abdul Aziz 2666182 Bachelor in Information & Communication Technology 1

Table of Contents
1. Executive Summary ............................................................................................................................................. 3 2. Introduction..................................................................................................................... 3 3. Philosophy of Supply Chain Management ............................................................................................................................................. 4 4. The Existing of 4th Party Logistic ............................................................................................................................................. 7 5. The Target Company: Toyota & Linfox ........................................................................................................................................... 10 6. Supply Chain Simulation Framework ........................................................................................................................................... 11 6.1 Identification of Classes in a Supply Chain Network......................................... 12 6.2 Establishment of Nodes & Its Inherit Specialised Nodes ................................... 13 6.3 The Establishment of Relationships between the Nodes .................................... 14 6.4 The Robustness of a Facility (Node) .................................................................. 15 6.6 The Facility and Inventory System ..................................................................... 18 6.7 Relationship of a Product.................................................................................... 21 6.8 Relationships of Order and Demand................................................................... 22 7. Supply Chain Simulation Architecture ........................................................................................................................................... 23 7.1 Simulation Interface............................................................................................ 25 7.2 Simulation as a Decision Support System .......................................................... 27 7.3 Multi-Agent Programming in the Simulation ..................................................... 29 8. Tools & Technology ........................................................................................................................................... 30 9. The Challenges and Feasibility ........................................................................................................................................... 31 9.1 Financial Challenges........................................................................................... 31 9.2 Organisation Challenges ..................................................................................... 32 10. Recommendation ........................................................................................................................................... 33 11. Conclusion .................................................................................................................. 34 12. 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, the discussion 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 to customers 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 a prototype 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 3

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 logistic activities, 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 provider’s 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.

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 Upstream Internal Downstream

2nd Tier 1 Tiers 2 Tier 2nd Tier
nd st

Assembly/ Manufacturing/ Packaging

Distributor

Retailers

Customer 2 Tier
nd

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
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
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receiving shipments, verifying and transferring into the manufacturing facilities.

3. Make – refers to the manufacturing process, which consists of the scheduling 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 been mentioned 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.

Ibid. 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 management’s 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 because the 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 4th 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).
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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
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 the flow 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

Hoyer, 3PL/4PL, [Online], Available: http://www.hoyer-group.com/logistikE/html/3pl4pl.html, Last accessed: October 21, 2005 8 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 organisation’s supply chain. Furthermore, the significant of IT improvements can lead to 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 over live 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 their organisational 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.

Vaidyanathan, G., (2005) A Frameworks for Evaluating Third Party Logistics, Published 2005, Communication of the ACM 10 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 party logistic 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
Toyota Motor Corporation Australia, (2005), ‘History’, [Online], Available: http://www.toyota.com.au/corporate/articles/0,2862,subId%253D922%2526sectionId%253D880 [Accessed 15 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 the warehouse 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

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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

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Rossetti and Chain’s 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 chain’s 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 ContinuousReorderQuantity PeriodicReorderPoint Container Parameter ContinuousReorderUpToLevel Continuous Review Periodic Review Demand Inventory InventoryPolicy Location ManufacturingCenter Node

ProductFamily Product StorageLocation Relationship RelationshipNetwork Shipment Shipper Region Facility Order Generator Variable Warehouse TransportationCenter

Order OrderGenerator StorageLocation Facility Parameter PeriodicRecoderPoint ProductReview DemandGenerator DistributionCenter

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

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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 15 Ibid

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6.2 Establishment of Nodes & Its Inherit Specialised Nodes
Similar 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 to illustrate 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 Node’s 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. Each specialisation plays a vital role to build up the simulation framework to represent to the real scenario’s activities in the supply chain network closely.

16

ibid

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Table 2: Details of the Classification of Nodes Type of Nodes Facility Roles A Provider of products or services Act as a single or a set of comprehensive customers A composite Pattern Responsible To manufacture and distribute product, consolidate and deliver the shipment To make order of the product and update the inventory Indicates a group/single of types of Nodes, which can present of an entire area (such as postal code)

OrderGenerator Region

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 Nodes
The 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 know who 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 unfinished Products from raw materials. Product will be make to meet the market demand within the network DistributionCenter Provide inventory replenishment and Product delivery to other facilities Primarily act as holding points and do not manufacture Products from raw materials TransportationCenter A place where shipments of customers orders can be consolidated 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 and shipments to the customers Contractor Has an infinite supply material, such that a contractor supplies the materials after a lead time delay 15

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 the supplies 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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Order Enter

Contractor

Manufacturing Center

Distribution Center

Transportation Center

Shipper

Customers

Figure 6.4: Flow Chart of Pre-Define Supply Chain Network in the Simulation Framework when an order is made The unique feature about this framework is the models are able to work reversely for an organisation’s 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 the ManufacturingCenter.

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Order Enter

Manufacturing Center

Distribution Center

Transportation Center

Shipper

Contractor

Order More Supplies

Figure 6.4: Reverse - Flow Chart of Pre-Define Supply Chain Network in 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 company’s 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 System
The 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 a Product. This is case a Warehouse’s 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. 18

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.

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Ibid.

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Order Received Inventory sent to TransportCenter for Shipment checkInventory() checks every demand Inventory check to check for status of the demand Product updateInventory() will update the update and previous order

New shipment arrived from Manufacturing

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 Product’s information by the PolicyType, recorderPoint and recorderQTY. Therefore, this will aid the determination on the schedule and quantities to order from the ManufacturingCenter.

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Figure 6.8: Inventory and Inventory Policies

6.7 Relationship of a Product
As 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 Demand
The 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 in Figure 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 23

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

Basic Simulation Components

Inform System Changes

Interface Components

Update machine with repairs information

Report Failure

Update user request

Update inventory status in the interface

Shop Floor Components (Machine Parts are present in the machines)

Inventory Control Component

Place Order

Suppliers
Get Quotes

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
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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

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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 Interface
One 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 25

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 the warehouse 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 steps19:

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, a simulation idea is produced.

19 20

Ibid ibid

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Machine 0 Time of Failure Parameters Value Temperature Voltage Pressure Capacitance

Component Diagnosis for Machine 0 Electric Part 1 Electric Part 2 Electric Part 3 Mechanical Part 1 Mechanical Part 2
Check Diagnosis Submit DSS

Inventory Control Qty Part Name Needed Electric Part 1 Electric Part 2 Mechanical Part 1 Mechanical Part 2 Select Part Name:
Electrical Part 1 Get Quote

Technician Schedule Chart At time of failure

Suppliers List

Select Technician

Tech 1

Schedule Repair

Figure 7.2 Simulation Interface

7.2 Simulation as a Decision Support System
As 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.

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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 multiagent 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 29

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

Furthermore, using the Node and the RelationshipNetwork to build the simulation architecture, 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 the Java 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 as maintenance 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 will be drawn out to estimate the return cost from the solution implemented.

9.2 Organisation Challenges
While 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, the organisation 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 online documentation and troubleshooting, resident experts, help desk and technical support. 32

Furthermore, the supplier will also be known about this new simulation system through the company’s news or in a form a internal and stakeholder’s advertisement related. This is done to inform the suppliers on the effectiveness of the organisation supply chain management 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 modular based 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 33

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 advantage level23.

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.

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.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, last accessed: 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.hoyergroup.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.informssim.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

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