Modeling the Supply Chain

by Shapiro, Jeremy F.

• ISBN13: 9780534373634
• ISBN10: 0534373631
• Format: Hardcover
• Copyright: 2000-12-20
• Publisher: South-Western College Pub

Summary

Supply chains don't manage themselves, although managers sometimes wish they did. For everything you'll need to know about analyzing supply chains, you'll need MODELING THE SUPPLY CHAIN. By using models to analyze the supply chain, you can quickly and effectively find ways to optimize its performance. And because this supply chain textbook is loaded with clear illustrations and practical study tools, this is the textbook that will help you be effective during test times as well.

Author Biography

Jeremy Shapiro is professor of operations research and management in the Sloan School of Management at MIT.

Table of Contents

PART ONE Introduction to Supply Chain Management	1	(60)
Supply Chain Management, Integrated Planning, and Models	3	(26)
Fundamentals of Supply Chain Management	5	(5)
Supply Chain Networks	6	(1)
Integrated Supply Chain Planning	7	(1)
Objectives of Supply Chain Management	8	(2)
Overview of Supply Chain Models and Modeling Systems	10	(2)
Supply Chain Modeling Incorporates Concepts from Several Management Disciplines	12	(11)
Strategy Formation and the Theory of the Firm	13	(4)
Logistics, Production, and Inventory Management	17	(2)
Management Accounting	19	(1)
Demand Forecasting and Marketing Science	20	(2)
Operations Research	22	(1)
Innovations in Information Technology Require and Support Supply Chain Modeling	23	(2)
Organizational Adaptation to Integrated Supply Chain Management and Modeling	25	(4)
Notes	26	(1)
References	27	(2)
Information Technology	29	(32)
Developments in Enterprise Resource Planning Systems and E-Commerce	30	(6)
ERP Systems	31	(1)
E-Commerce	32	(4)
Comparison of Transactional IT and Analytical IT	36	(4)
Time Frame Addressed	37	(1)
Purpose	37	(1)
Business Scope	37	(1)
Nature of Databases	38	(1)
Response Time for Queries	39	(1)
Implications for Business Process Redesign	40	(1)
Hierarchy of Supply Chain Systems	40	(13)
Components of the Supply Chain System Hierarchy	40	(6)
Frequency of Analysis, Cycle Times, and Run Times of Supply Chain Systems	46	(1)
Communication Among Supply Chain Systems of Data and Decisions	46	(7)
Balancing Centralized and Decentralized Decision Making	53	(1)
Legacy Systems and Legacy Thinking	53	(2)
Final Thoughts	55	(6)
Exercises	56	(1)
Notes	57	(2)
References	59	(2)
PART TWO Modeling and Solution Methods	61	(216)
Fundamentals of Optimization Models: Linear Programming	63	(62)
Linear Programming Modeling Examples	64	(20)
Resource Allocation Model	65	(4)
Infeasible and Unbounded Models	69	(1)
Spreadsheet Optimization	70	(2)
Multiperiod Resource Allocation Model	72	(6)
Network Models	78	(6)
Properties of Linear Programming Models	84	(7)
Linearity	85	(4)
Separability and Additivity	89	(1)
Indivisibility and Continuity	89	(1)
Single Objective Function	90	(1)
Data Known with Certainty	90	(1)
Interpreting an Optimal Linear Programming Solution	91	(10)
Shadow Prices	92	(2)
Reduced Cost Coefficients	94	(2)
Dual Linear Programming Model	96	(2)
Parametric and Sensitivity Analysis	98	(3)
Multiple Objective Optimization	101	(3)
Stochastic Programming	104	(5)
Generalizations	109	(1)
Final Thoughts	109	(16)
Exercises	110	(3)
Notes	113	(1)
References	114	(1)
Appendix 3.A The Simplex Method of Linear Programming	115	(10)
Fundamentals of Optimization Models: Mixed Integer Programming	125	(52)
Mixed Integer Programming Modeling Vignettes	126	(7)
Fixed Costs	127	(3)
Economies of Scale	130	(1)
Production Changeovers	131	(1)
Multiple Choice and Other Nonnumeric Constraints	132	(1)
Distribution Center Location Models	133	(6)
DC Location Model	134	(4)
Generalizations	138	(1)
Supply Chain Network Optimization Models	139	(12)
Strategic Planning at Ajax	139	(12)
Generalizations	151	(1)
Designing and Implementing Optimization Modeling Systems for Strategic and Tactical Planning	151	(7)
System Design	152	(2)
System Implementation	154	(4)
Optimization Software	158	(5)
Optimizers	159	(2)
Algebraic Modeling Language Development Kits	161	(2)
Spreadsheet Optimizers	163	(1)
Final Thoughts	163	(14)
Exercises	164	(2)
Notes	166	(1)
References	167	(2)
Appendix 4.A The Branch-and-Bound Method for Mixed Integer Programming	169	(8)
Unified Optimization Methodology for Operational Planning Problems	177	(48)
Heuristic Methods for Combinatorial Optimization Problems	179	(9)
Local Delivery Heuristics	180	(8)
Overview of the Unified Optimization Methodology	188	(9)
Production Scheduling Example of Decomposition	189	(4)
Unified Optimization Methodology	193	(4)
Unified Optimization Methodology Applied to Vehicle Routing	197	(10)
Statements of the Optimization Models	198	(4)
Numerical Solution	202	(3)
Generalizations	205	(2)
Unified Optimization Methodology Applied to Production Scheduling	207	(11)
Company Background and Numerical Data	207	(2)
Unified Optimization Methodology Specialized to Goodstone's Production Scheduling Problem	209	(4)
Production Scheduling Solution	213	(5)
Generalizations	218	(1)
Final Thoughts	218	(7)
Exercises	219	(3)
Notes	222	(1)
References	223	(2)
Supply Chain Decision Databases	225	(52)
Data Aggregations	228	(4)
Aggregating Products	229	(2)
Aggregating Customers and Markets	231	(1)
Aggregating Suppliers	232	(1)
Facility Data	232	(5)
Recipes, Processes, Resources, and Costs	232	(5)
Transportation Network Data	237	(5)
Transportation Network Submodels	237	(3)
Transportation Costs and Capacities	240	(1)
Modal Choice and Shipment Sizes	241	(1)
Utilities for Generating Networks	242	(1)
Supplier Data	242	(3)
Vendor Costs and Constraints	243	(2)
Role of Management Accounting	245	(12)
Develop Causal Cost Relationships of Direct and Indirect Costs	247	(1)
Activity-Based Costing	248	(2)
Connection of ABC to Optimization Models and the Taxonomy of Costs	250	(1)
Computation of Transfer Prices, Product and Customer Costs from an Optimal Solution to a Supply Chain Model	250	(7)
Demand Forecasting	257	(4)
Background	257	(1)
Types of Forecasting Models	258	(2)
Demand Data Specifications for Optimization Models	260	(1)
Forecasting Software	261	(1)
Global and Policy Data	261	(1)
Model Output Data	262	(4)
Management Reports of Output Data	263	(1)
Shadow Prices and Reduced Costs	264	(1)
Derived Output	265	(1)
Connections Among Supply Chain Decision Databases	266	(4)
Scenarios	267	(1)
Multiperiod Decision Databases	268	(1)
Hierarchies	269	(1)
Graphical Displays of Data Inputs and Outputs	270	(1)
Final Thoughts	271	(6)
Exercises	273	(1)
Notes	274	(1)
References	275	(2)
PART THREE APPLICATIONS	277	(240)
Strategic and Tactical Supply Chain Planning: State-of-the-Art Modeling Applications	279	(44)
Resources and the Resource-Based View of the Firm	281	(5)
Taxonomy of Resources	281	(1)
Summary of the Resource-Based View of the Firm	282	(1)
Connections with Optimization Models	283	(3)
Strategic Analysis of Logistics Supply Chains	286	(6)
A Framework for Logistics Strategy Formation	286	(3)
Constructing an Optimization Model for Strategic Logistics Planning	289	(3)
Redesigning the Distribution Network of an Electronics Products Company	292	(2)
Strategic Analysis of Manufacturing Supply Chains	294	(8)
A Framework for Manufacturing Strategy Formation	294	(4)
Constructing an Optimization Model for Strategic Manufacturing Planning	298	(4)
Two Manufacturing Strategy Applications	302	(8)
Worldwide Sourcing at Delta Industrial Chemicals	303	(3)
Postmerger Consolidation of Consumer Paper Companies	306	(4)
Tactical Planning	310	(2)
Two Tactical Planning Applications	312	(4)
Monthly Planning at an Industrial Gases Company	312	(3)
Monthly Planning at a Beer Company	315	(1)
Final Thoughts	316	(7)
Exercises	317	(2)
Notes	319	(1)
References	320	(3)
Strategic and Tactical Supply Chain Planning: Advanced Modeling Applications	323	(68)
Integrating Supply Chain and Demand Management	324	(2)
Price and Location Sensitive Revenue Curves	326	(4)
Integrating Supply Chain and Marketing Models for Consumer Products	330	(16)
Consumer Products Supply Chains	331	(2)
Modeling the Effects of Marketing Decisions on Demand for Consumer Products	333	(4)
Integrating Supply Chain and Marketing Models for Manufacturers of Consumer Products	337	(3)
Illustrative Numerical Model	340	(6)
Planning for New Product Introduction and Growth	346	(3)
Optimization Models for Competitive Analysis	349	(13)
Structural Analysis of Industries	349	(2)
Theory of Industrial Organization	351	(2)
A Model of Price Competition	353	(2)
Illustrative Numerical Model	355	(7)
Application of Competitive Analysis in the Forest Products Industry	362	(2)
Practical Issues of Price Competition	363	(1)
Decision Trees and Stochastic Programming	364	(11)
Decision Trees	366	(4)
An Inventory Example of Stochastic Programming	370	(5)
Supply Chain Strategies for Managing Product Variety	375	(7)
Exploit Component Commonality and Postponement of Product Differentiation	376	(1)
Assemble Differentiated Products from Vanilla Boxes	377	(1)
Implement Quick Response to Early Sales	378	(4)
Scenario Planning	382	(2)
Methodology	382	(2)
Connections to Optimization Modeling	384	(1)
Final Thoughts	384	(7)
Exercises	386	(1)
Notes	387	(2)
References	389	(2)
Integration of Financial and Physical Supply Chains	391	(38)
Optimization Models for Corporate Financial Planning	392	(10)
Modeling the Balance Sheet	393	(2)
Numerical Example of an Optimization Model for Corporate Financial Planning	395	(6)
Model and Methodological Extensions	401	(1)
Financial Planning Issues Facing the Multinational Corporation	402	(1)
A Network Illustration	403	(3)
Financial Flows Model	406	(9)
Statement of the Financial Flows Model	408	(4)
Financial Flows Model Results	412	(3)
Modeling Exchange Rate Risks	415	(4)
Real Options for Hedging Risks in the Global Economy	419	(2)
Final Thoughts	421	(8)
Exercises	422	(4)
Notes	426	(1)
References	427	(2)
Operational Supply Chain Planning	429	(48)
Taxonomies of Operational Planning Problems	430	(11)
Production Planning and Scheduling	431	(7)
Vehicle Routing and Scheduling	438	(2)
Human Resources Scheduling	440	(1)
Modeling Systems for Operational Planning	441	(7)
System Integration	441	(2)
Steps to Follow in Using a System	443	(3)
Real-Time Operational Planning	446	(1)
Other Uses of a Modeling System	447	(1)
Training, Learning, and System Evolution	447	(1)
Vehicle Routing System for an E-Commerce Company	448	(7)
Company Background	449	(1)
Routing System Description and Use	450	(5)
Driver Assignment	455	(1)
Production Planning System for a Semiconductor Company	455	(8)
Manufacturing and Marketing Background	456	(2)
Planning and Modeling Approaches	458	(3)
Implementation	461	(1)
Results	462	(1)
Simulation Models and Systems	463	(7)
Deterministic Simulation	463	(1)
Monte Carlo Simulation	463	(5)
Simulation Software	468	(1)
Simulation versus Optimization	469	(1)
Final Thoughts	470	(7)
Exercises	471	(3)
Notes	474	(1)
References	475	(2)
Inventory Management	477	(40)
Inventory Theory Models	479	(7)
Deterministic Models	479	(2)
Probabilistic Models	481	(4)
ABC Classification	485	(1)
Incorporating Inventory Management Decisions in Strategic and Tactical Supply Chain Models	486	(9)
Incorporating Inventory Management Decisions in Strategic Supply Chain Models	487	(5)
Incorporating Inventory Management Decisions in Tactical Supply Chain Models	492	(3)
Inventory Management in Distribution Supply Chains	495	(9)
Distribution Scheduling in a Reverse Logistics Company	495	(5)
Multiechelon Spare Parts Distribution System at IBM	500	(4)
Inventory Management in Manufacturing Supply Chains	504	(8)
Optimizing Inventory across Hewlett-Packard's Printer Supply Chains	504	(4)
Optimal Safety Stock Placement in Kodak's Manufacturing Supply Chains	508	(4)
Final Thoughts	512	(5)
Exercises	514	(1)
Notes	515	(1)
References	516	(1)
PART FOUR The Future	517	(60)
Organizational Adaptation to Optimization Modeling Systems	519	(58)
How Organizations Make Decisions	521	(6)
The Theory of Rational Choice versus the Reality of Organizational Behavior	522	(2)
Uncertainty and Risk	524	(1)
Rule-Based Decision Making	524	(1)
Deriving Meaning from the Decision Environment	525	(1)
Decision-Making Ecologies	526	(1)
Contested Issues about Organizational Decision Making	527	(12)
Choice-Based versus Rule-Based Decision Making	528	(2)
Clear versus Ambiguous Decision Making	530	(5)
Instrumental versus Interpretive Decision Making	535	(3)
Supply Chain Management as an Interacting Ecology	538	(1)
Information Technology as Competitive Advantage	539	(8)
Recent History of IT as Competitive Advantage	539	(1)
Resource-Based Analysis	540	(1)
Attributes of IT as Possible Sources of Competitive Advantage	541	(3)
Complementary Organizational Resources	544	(3)
Exploitative versus Exploratory IT Developments	547	(3)
Acquisition or Development of a Modeling System	548	(1)
Use of a Modeling System	549	(1)
Enhancement of a Modeling System	550	(1)
Business Process Redesign and IT	550	(7)
Modeling Systems Invoke Business Process Redesign	553	(4)
Supply Chain Coordination Processes and Incentive Contracts	557	(5)
Selecting Coordination Processes	558	(1)
Principal-Agent Theories of Incentives	559	(3)
No Gain without Pain	562	(5)
Stages of a Strategic Supply Chain Study	563	(3)
Summary	566	(1)
Outlook for the Future of Modeling Systems and Their Applications	567	(10)
Exercises	572	(1)
Notes	573	(2)
References	575	(2)
Index	577	(6)
Credits	583