Identify supply chain problems before they happen

Built on software used to simulate materials handling operations, new tools from LLamasoft allow companies to anticipate supply chain bottlenecks and gaps.

By Bob Trebilcock Editor at Large -- Modern Materials Handling, 5/18/2007

Simulation software has long been used to prove an automated materials handling concept during the design phase. Now, those same tools have been adapted to rapidly model the supply chain and simulate “what if” scenarios and determine the impact of changes in sourcing, transportation, and the location of distribution centers.

“For the longest time, when people did any kind of strategic analysis of their supply chain network design, they were using an optimization technology that would look at various scenarios to determine the lowest- and highest-cost solutions,” says Toby Brzoznowski, co-founder and vice president of sales for LLamasoft a software company based in Ann Arbor. “The missing link was whether those scenarios would work. Optimization alone would not tell you, for instance, if your service levels were going to take a hit.”

But simulation software can do better than that. The difference is that a simulation solution uses constraints to simulate real-world operations that identify bottlenecks and gaps. It’s much the same as simulating an automated materials handling system with real-world information to highlight bottlenecks. 

“If you break it down into its simplest form, the solution is an interface for modeling supply chains and their alternatives,” Brzoznowski explains. “It automatically builds an optimization or simulation of those specific models you want to analyze.”

The drive for these types of solutions is coming for the increased emphasis on the supply chain as a strategic advantage. “The shift we’ve witnessed in the last two or three years is that companies are hiring VPs of supply chain and creating their own supply chain centers of excellence,” Brzoznowski says. “They’ll have a core group of four or five people who are answering strategic questions.“

What are the kinds of real world problems end users are trying to solve with supply chain simulation solutions? Here are three.

1) General Mills has multiple plants that manufacture the same products. The company uses the tool to analyze its distribution network. In addition, General Mills is running simulations on a weekly basis to determine which product lines should be relocated based on forecasted demand.

2) Dell uses simulation and optimization to analyze its overall supply and distribution network.

3) ModusLink handles the packaging and distribution of electronic memory storage devices for a number of their clients. Simulation helped ModusLink to determine whether it was best to consolidate packaging into one central location, or to continue to operate a global network of smaller locations to meet its customers’ service demands. “On paper, it looked like the right thing to do was to consolidate locations,” says Brzoznowski. “When we simulated the supply chain, it turned out that was a more costly way to go when you factored in the transportation costs to meet service levels.”