B U S IN E S S DE C I S I O N -M A K I NG
Source: A.T. Kearney analysis
lead times and other unforeseen events.
Simulation is the best way to model dynamic operations to improve business
policies that balance customer service
levels, multi-echelon inventories, and
the use of transport and production assets while keeping costs under control.
Because company operations is an area
where the devil is in the details and multiple trade-offs exist, much effort goes
into modeling to capture this complexity
on the required level of detail. Benefits include overall service-level improvements
and 20 percent to 30 percent inventory
reductions.
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A N A LY T I C S - M A G A Z I N E . O R G
Holistic supply chain. When overhauling the supply chain, strategic and
lower-detail operations designs are both
beneficial because they leave no stone
unturned. Operational design also helps
to show the customer how a redesigned
network will work in real life. Although
there are many ways to make the optimization and simulation methods work together, a model with two feedback loops
is ideal (see Figure 2). Optimized flow
path design is fed into a dynamic simulation model, which is then tightened with a
simulation-optimization loop. If an adjustment is needed to the high-level network
W W W. I N F O R M S . O R G