A SYSTEM DYNAMICS MODEL FOR SUPPLY CHAIN MANAGEMENT IN A RESOURCE CONSTRAINED SETTING

By

Tulinayo Fiona Penlope 2005/HD18/3620U BIFA (Hons) Mak, PGDcs (Mak) fturinayo@cit.mak.ac.ug/+256-772-304702

A Dissertation Submitted to the School of Graduate Studies in Partial Fulllment for the Award of Master of Science in Computer Science of Makerere University

OPTION : Computer Information Systems April, 2007

Declaration
I Tulinayo Fiona Penlope do hereby declare that this Dissertation Report is original and has not been published and/or submitted for any other degree award to any other University before.

Signed..............................

Date......................................

Tulinayo Fiona Penlope BIFA, PGD (Computer Science) Department of Information Systems Faculty of Computing and Information Technology Makerere University

APPROVAL:

This Dissertation Report has been submitted for Examination with the approval of the following supervisor.

Signed..............................

Date......................................

Dr. Ddembe Williams, Phd Department of Information Systems Faculty of Computing and Information Technology Makerere University

Dedication
I dedicate this book to my Dear Parents, Sisters and Brothers.

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Acknowledgement
First of all I thank the Lord almighty for his endless love, care and blessings. Secondly my parents, sisters and friends thats; Maureen, Sandra, Teddy, Mariam, Deogratious, Noah, Rebecca and Jackie for there continuous love and support. Special Thanks go to my supervisor Dr. Ddembe Williams who has been a key player in the completion of this research I thank him for the support, time and eorts that he has put into this Dissertation. Lastly I thank the stas of the faculty of computing and information Technology especially the research oce and Mrs. Agnes Rwashana Semwanga who have helped in one way or another to accomplish this research.

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Contents
Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dedication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List Of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction 1.1 1.2 1.3 1.4 1.5 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denition of key theoretical terms . . . . . . . . . . . . . . . . . . . . . . . . Sources of problems in Supply Chain Modeling: . . . . . . . . . . . . . . . . Statement of the Problem: . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aim and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5.1 1.5.2 1.6 1.7 Aim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specic Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . i ii iii ix x 1 1 3 6 7 9 9 9 9 9 12 12 15 16

Study scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signicance of the study . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 Literature Review 2.1 2.2 State of the art in Supply Chain Management . . . . . . . . . . . . . . . . . Modeling in Supply Chain Management . . . . . . . . . . . . . . . . . . . . . 2.2.1 Process Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

2.2.2 2.2.3 2.2.4 2.2.5 2.2.6 2.3

Statistical Modeling

. . . . . . . . . . . . . . . . . . . . . . . . . . .

17 18 19 20 20

Neural Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discrete-Event Modeling . . . . . . . . . . . . . . . . . . . . . . . . . Mathematical Modeling . . . . . . . . . . . . . . . . . . . . . . . . . System Dynamics Modeling . . . . . . . . . . . . . . . . . . . . . . .

State of Practice in Supply Chain Management (Case Studies of SCM application) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 2.3.2 The Beer game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Newspaper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 25 26 26 27 28 29 30 30 30 30 31 32 33 34 36 36 36 37

2.4 2.5

Problems in SCM for constrained settings . . . . . . . . . . . . . . . . . . . Characteristics of SCM decision support tool . . . . . . . . . . . . . . . . . . 2.5.1 Decision variables In supply Chain Modeling . . . . . . . . . . . . . .

2.6

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 Methodology 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Field Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . System dynamics modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . System Dynamics Model Building . . . . . . . . . . . . . . . . . . . . . . . . Simulation Experiments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluation and validation: . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Field Study 4.1 An illustrative real-world case study . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 4.2 A Newspaper supply chain . . . . . . . . . . . . . . . . . . . . . . . .

The Simulation Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

4.2.1 4.2.2 4.3 4.4 4.5 4.6 4.7

Causal loop Diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . Stocks and Flows Analysis . . . . . . . . . . . . . . . . . . . . . . . .

38 42 43 50 50 51 52 54 54 54 55 55 56 57 57 58 70 70 72 72

Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Modeling Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The interface Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simulation Output One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simulation Output Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS 5.1 5.2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.1 5.3 5.4 5.5 5.6 The supply chain market . . . . . . . . . . . . . . . . . . . . . . . . .

The Simulation Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Validation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Further Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

REFERENCES APPENDICES Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDICES Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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List of Figures
1.1 2.1 2.2 3.1 3.2 4.1 Dynamic Hypothesis for the Proposed SCM Model . . . . . . . . . . . . . . The Forrester Supply Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . The Beer Distribution Game. . . . . . . . . . . . . . . . . . . . . . . . . . . System Dynamics Modeling Process . . . . . . . . . . . . . . . . . . . . . . 8 23 25 32 34

Dynamic Synthesis Methodology Research Design. . . . . . . . . . . . . . . . Causal loop diagram for the System Dynamics Supply Chain Model in resource costrained settings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39 42 44 44 45 45 46 46 47 47 48 49 50

4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9

Stock and Flow Diagram

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tests of Between-Subjects Eects . . . . . . . . . . . . . . . . . . . . . . . . Parameter Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time of the year Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . Newspaper Pairwise Comparisons . . . . . . . . . . . . . . . . . . . . . . . . Time of the year Univeriate Tests . . . . . . . . . . . . . . . . . . . . . . . . Newspaper Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Newspaper Univeriate Tests . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.10 Time of the year * Newspapers . . . . . . . . . . . . . . . . . . . . . . . . . 4.11 Pairwise Comparisons between Newspapers and Time of the year . . . . . . 4.12 Estimated marginal means of measure . . . . . . . . . . . . . . . . . . . . . 4.13 User Interface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

4.14 Simulation Output: Sales, Orders, Disposal rate and Production rate . . . . 4.15 Simulation Output: Orders, Processed orders, Factory Orders and Inventory 5.1 5.2 Distribution code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Factory and market code . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51 52 70 71

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List Of Acronyms
ANN B2B CW DC GPMS NN OR SC SCM SD UNA Articial neural networks Business to Business Warehouse Distribution Centre Global Production Management System Neural Networks Operations research Supply Chain Supply Chain Management System Dynamics United Nations Assembly

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Abstract
A case study approach at a media company (New Vision) in Uganda was used, where data was collected and analyzed to give a better understanding of the problem under discussion. The key research issue is to develop a system dynamic model for supply chain management in a resource constrained setting. this will be used as a decision support tool for evaluation and understanding of the problem that arise in a resource-constrained setting, to critically identify the current practices in supply chain management and factors that aect supply chains.

This research develops a new conceptual framework for supply chain management strategies in resource-constrained settings and tested based on empirical evidence. The new schemes proposed here provide a model to dene and represent supply chain strategies, a contingency model to support managers in designing supply chain strategies, and some hints for further research. The articulation of supply networks, as an extension of supply chains, seeks to accommodate and explain the commercial complexity associated with the creation and delivery of goods and services from the factory to their destination thats the customer.

Chapter 1 Introduction
Supply chain management is a critically signicant strategy that enterprises depend on in meeting the challenges of todays highly competitive and dynamic business environments. An important aspect of supply chain management is how enterprises can detect the supply chain behavioral changes due to endogenous and/or exogenous inuences and to predict such changes and their impacts in the short and long-term horizons (Luis et al.) [72]. The use of system dynamics (SD) simulation in supply chain management (SCM) started with Jay Forresters Industrial Dynamics (Forrester, 1961) [41]. Forrester described a productiondistribution system that consisted of the ows of information, materials, orders, money, manpower, and capital equipment across a supply chain (SC)(Luis et al.) [72].

1.1

Background

Supply Chain Management (SCM) represents crossroads where many academic disciplines have converged. Interest in the eld has steadily increased since the 1980s when the benets of collaborative, rather than adversarial, working relationships within and beyond the organization were rst identied (Ford 1980) [37]. Since then, a multitude of denitions have been proposed concerning the concept of the supply chain. These denitions can be categorized as focused on either the internal supply chain, concerned with managing the conversion process between departments of a single organization or the externalization of relationships with customers and suppliers by the enterprise (Ellram and Cooper, 1993) [32]; (Porter, 1985) [92].

Ellram and Cooper (1993) [32] suggest that SCM is an integrating philosophy to manage the total ow of a distribution channel from supplier to ultimate customer. From the various denitions proposed, it is possible to summarize that the concept of supply-chain management is centered on organizational restructuring and extends to the development of a company-wide collaborative culture but also embraces a strong sense of the integration of all activities which control the timing and synchronization of material ows (Nick and Peter, 1997) [85]. SCM aims at integrating activities of an entire set of organizations from procurement of material and product components to delivery of completed products to the nal customer which leads to improvements in channel performance among all channel members and not solely with in one company (Kotzab 1999) [62] and is characterized by highly competitive interactions among a large number of entities trying to achieve a multiplicity of objectives. Consequently, a key factor in the success and viability of a trading agent is to be able to reason about adversary agent strategies and adapt its own behavior. Thus, isolated evaluation of agent designs and market protocols are limiting. The central concept of system Dynamics is to understand how the system structure inuence emergent properties. The objects and people in a system interact through feedback loops, where a change in one variable aects a change in other variables over time, which in turn aects the original variable. System Dynamics as a method is important in identifying the main feedback loops relevant to the problem interest. The key iterative procedures of this method are: identify a problem, develop a dynamic hypothesis explaining the cause of the system at the root of the problem, test the model to be certain that it reproduces the behavior seen in the real situation and devise test in the model alternative policies that alleviate the problem. SD over time has developed as a method for modeling the behavior of complex socialeconomic systems (Forrester 1961) [41], and it can enhance understanding the nature of an organizations soft, strategic issues (Brans et al 1998) [11]. The stock and ow notation used in SD can be applied to build detailed conceptual models and facilitate identication of information needs at dierent levels of managerial activity. System dynamics models are used to redesign system structure and decision policies, which can then be implemented

(Flood and Jackson, 1993) [36]. Throughout history, new ideas and technologies have revolutionized supply chains and changed the way we work. Since early 1970s, Japanese manufacturers like Toyota changed the rules of production from mass to lean. Lean manufacturing focuses on exibility and quality more than on eciency and quantity. Signicant lean manufacturing ideas include six-sigma quality control, just-in-time inventory and total quality management (Siems, 2005) [99]. Today, businesses are improving their supply chains through better information engineering. Since about 1995 around the time of the commercial application of the Internet there has been a mass customization era. Now, manufacturers can mass-produce customized products. Firms are eectively using new information technologies like the Internet and wireless telecommunications to improve service and delivery processes. Through secure intranet systems and business-to-business (B2B) e-commerce platforms, the focus is on improving information management: integrating internal systems with external partners like Amazons practice of giving customers the ability to track the delivery location of their purchases through Amazons website (Siems, 2005) [99].

1.2

Denition of key theoretical terms

To position this dissertation, this section denes key theoretical terms that have been used including: Supply chain management, system dynamics modeling and constrained settings. A Model: A model is an abstraction of a representation of a real or conceptual complex system. A model is designed to display signicant features and characteristics of the system which one wishes to study, predict, modify or control (Law and Kelton, 2000) [66].Thus a model includes some, but not all, aspects of the system being modeled. A model is valuable to the extent that it provides useful insights, predictions and answers to the questions like What if ? analysis it is used to address (Williams, 2003) [119].

System Dynamics Modeling: is the technique of constructing and running a model of an abstract system in order to study its behavior without disrupting the environment of

the real system (Williams, 2004) [120]. The development of system dynamics models is an iterative process. (Luna et al ) [73] Understandings of the model and understandings of the problem and the system are the key products that a system dynamics modeling eort should accomplish (Richardson and Pugh, 1981) [93]. System dynamics model development is a system stage process that begins and ends with understanding. (Richardson and Pugh, 1981) [93] identies six key system dynamics model building processes key and these include; (1) problem identication and denition, (2) system conceptualization, (3) model formulation, (4) model testing and evaluation, (5) model use, implementation and dissemination, and (6) design of learning strategy/infrastructure. Simulations are generally employed when the complexity of the system being modelled is beyond what static models or other techniques can usefully represent (Kellner et al, 1995) [60].

Supply Chain Management: is an integrative approach to dealing with the planning and control of materials and information from suppliers to end customers (Monczaka et al., 1998); [82] (Jones and Riley, 1985) [59]. Research on supply chain management has ranged from analytical denitions describing supply chains as networks of material processing cells (Davis, 1993) [26]to investigations of supply chain partnerships (Spekman et al., (1998) [102] and customer service (Maltz and Maltz, 1998) [74] Supply chain management often refers either to a process-oriented management approach to sourcing, producing and delivering goods and services to end consumers or, in a broader meaning, to the co-ordination of the various actors belonging to the same supply chain (Harland, 1996) [50].

Resource Constrained Settings: represent the poorest and weakest segment of the international community. These countries are characterized by their exposure to series of vulnerabilities and constraints such as limited human institutional and productive capacity acute susceptibility to external economic shocks, natural and man-made disasters and communicable diseases UNA (2001) [112]. Currently many of the central capital accumulation and budgetary processes in the resource-constrained settings are highly dependent on international nancial assistance. Sustained poverty reduction requires the ecient development and utilization of productive capacities in a way in which the working-age population be-

comes more and more fully and productively employed LDR, (2004) [113]. There is a danger that the fragile economic and social position which characterizes many of the resource constrained settings will deteriorate further unless major eorts are made by these countries, supported by the international community, to adjust to the challenges of globalization LDR, (1996) [113].

A System Dynamics Model for Supply Chain Management in a Resource Constrained Setting: is a computer simulation model which is an abstract representation of the Supply Chain Management in a Resource Constrained setting. Its characterized, by ow, feedback loops, Stock and delays. It comprises of three main key words thats System Dynamics which has developed over time as a method for modeling the behavior of complex socio-economic systems (Forrester, 1961) [41], Supply chain management according to (Hung et al,2004) [54] is a strategy where business partners jointly commit to work closely together, to bring greater value to the consumer and/or their customers for the least possible overall supply cost. This coordination includes that of order generation, order taking and order fulllment/distribution of products, services, or information and resource constrained which represents the poorest and weakest segment of the international community UNA (2001) [112]. A SD model in a resource constrained setting begins with the importation of raw materials and ends with the nal consumer. There is importation of raw materials due to a number of reasons; nancial constraints, lack of expertise in terms of knowledge, insucient raw materials etc hence resource constrained. There are studies in SCM like Forrester Model (Forrester 1961) [41] which encompasses vendors, manufacturers/producers, distributors and retailers is characterized by a stock and ow structure for the acquisition, storage, and conversion of inputs into outputs and the decision rules governing these ows. The MIT Beer Game (Sterman, 1989) [106]which represents a four-echelon supply chain including a retailer, a wholesaler, a distributor and a factory. These models are not in a resource constrained setting but they give a clear understanding of SCM in developed countries.

1.3

Sources of problems in Supply Chain Modeling:

Supply chain management strives for an optimal functioning of a supply chain. Generally, optimal is seen as satisfying demand of ultimate consumers while minimizing inventories at dierent positions in the chain, keeping order backlogs low (or even not having them at all) and minimizing costs. In a real-life organizational context managing a supply chain is dicult due to uncertainties in demand of consumers and the dependency of performance of one chain member upon the decisions and actions of other supply chain members (Gwenny et al.2005) [47].

The feedback on the eect of decisions such as ordering and transportation are usually delayed or indirect which might lead to the bullwhip eect which can be described as the phenomenon where the variance in demand for wholesaler, distributor and manufacturer is larger than for the retailer and amplies upstream (e.g. Lee et al. (1997) [67] show this eect in real-life settings (which is replicated by others) and address four operational causes of the problem: errors in demand signal processing, inventory rationing, order batching, and price variations. There is a still growing amount of research that further explores, mostly using an analytical approach, the bullwhip eect and comes up with further analysis of the problem and ways to solve it.

The optimal functioning of a supply chain seems to be often distorted by specic behavior of individual decision makers in the chain. One of the distortions is the overestimation of demand, resulting in the bullwhip eect. The bullwhip eect can be illustrated using the beer game (Beer Distribution Game) originally developed and used at MIT (Sterman, 1989) [106]. Jacobs (2000) [58] developed an Internet version based on the original manual version of the game that used boards and cards. The Internet version (and the original version) is ideal for conducting experiments in a supply chain context.

Another aspect that complicates the modeling of supply chains is that they are heavily distributed. For the management of supply chains, there is not one central organization that

has the authority to make decisions on behalf of the entire supply chain. All actors take their own decisions, based on limited information, as the other organizations do not share all their data with others. This has a severe eect on the models that are created for supply chain decision making; many decisions have to be taken based on assumptions of other organizations information or behavior (Alexander et al. 2005) [2].

On the contrary, Boyson et al. (2004) [10] state that modeling is more important and more needed than ever before. Because of the nature of supply chain dynamics, managers often do not have insight into the ripple eects of their decisions. Eects also can easily get lost in the overwhelming ood of data that crosses the supply chain managers desk daily, weekly, or monthly. A rapidly changing supply chain with a continuous change of partners leads to dierent sets of decisions than a stable chain with long-term contracts (Alexander et al. 2005) [2].

1.4

Statement of the Problem:

The current growth in competition due to globalization of markets means more competition for companies especially those in developing economies that have limited analytical tools for business decisions. Market demand uncertainty aects the performance and behaviour of the planning processes used by production to satisfy sales. This uncertainty and the resulting instability in the production schedules aects the relationships with the suppliers from whom the company purchases raw materials and component parts. A number of Supply Chains have been developed over the years that is; Just-In-Time, value chains, global sourcing, inventory and total quality management. Of which they have strength and weakness causing preferences to users who apply them depending on the goods being produced.In order to solve the problem, this research developed a SCM system dynamics model that helps business managers and researchers in SCM make better and informed decisions.

Figure 1.1: Dynamic Hypothesis for the Proposed SCM Model

Fig. 1.1 represents a dynamic hypothesis of SCM in a resource constrained setting. The verbal descriptions coincide with the variables of the model. The arrows represent the relationship between variables. The structure of the SC consists of variables internal and external factors, perception by stakeholders of product eectiveness which add to the support for product quality by stakeholders which also adds to improvement of the product and it then adds to perceived quality of product creating a reinforcing loop as indicated above. The second loop is a balancing loop, which consists of attractiveness to the rm where price reduces on the rms attractiveness and perceived quality of the product adds to it, it then adds to orders which add to factory production which also adds to factory inventory. From factory inventory to attractiveness to the rm there is a delay and there is an opposite ow.

1.5
1.5.1

Aim and Objectives

Aim

The main aim of this research was to develop a system dynamics model for supply chain management that will be used as a decision support tool for evaluation and understanding of the problem that arise in a constrained SCM.

1.5.2

Specic Objectives

The specic objectives of this research project were as follows: 1. To critically identify current practices in supply chain management and factors that aect supply chains. 2. To simulate and design a model for supply chain management and extensions for strategic and risk analysis in a resource constrained setting. 3. To implement a system dynamics model. 4. To validate the developed model using a Case study.

1.6

Study scope

The research concentrated on distribution, transportation-capacity and the ecient ways to dynamically determine the levels examined using a desk-top simulation tool due to limitations of time, and cost. The project provides procedures that are implemented across all subsystems over a six-month period.

1.7

Signicance of the study

The motivation behind this research is to facilitate the decision-making process in resource constrained settings for capacity planning of supply chains in such uncertain environments by studying the long-term behavior of supply chains and to further oer a generic method-

ological framework that could address a wider spectrum of strategic SCM related problems.

Most of the standard methodologies for the analysis of supply chains study the steady state of the system, i.e. they assume that all transient phenomena have been diminished. This assumption may be valid in several supply chains, where product demand exhibits a smooth pattern, i.e. demand has a low coecient of variation (functional items, in (Fisher, 1997) [35]). However, there is an increa singly important family of products with shorter life cycles and larger demand variability, for which the utilization of the traditional methodologies may lead to considerable errors (innovative items, in (Fisher, 1997) [35]). While focusing on the latter, system dynamics (SD) methodology is employed, well known and proven in strategic decision-making, as the major modeling and analysis tool in this research. Seppala and Jan 1995 [97] state that a decision maker, who wants to understand the problem of a supply chain in its entirety and has limited time and resources, will nd no models suitable for his needs. Only spreadsheet, pen and paper are oered. In this research a model was developed to give decision makers a better understanding of the ow of information,costs incurred in the whole process on which they will base to examine and visualise the likely eects to the trend of product prices and where they arise from. Hence, reducing on the likely future uctuations and bottlenecks that cause such uctuations and by so doing they give the most satisfactory results for better performances.

Each decision maker in this supply chain has a narrow view of the total chain. They see only their own part of the chain and optimize it as best as they can. This causes problems of sub-optimization in the whole chain: buer stocks grow, information ow is delayed and distorted, and throughput time grows. The supply chain system must be treated as a chain, not examining every level (production, delivery, etc.) individually Seppala and Jan (1995) [97]. The potential of system dynamics in evaluating the increasingly challenging market place with growing eld of competitors in resources constrained organizations was demonstrated in this study and the developed System Dynamics model is the decision making tool that is employed by supply chain management decision makers to generate an insight into the

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available SCM alternatives and enhance their understanding before implementation. This research made a contribution to the literature in terms of bringing together problems of SCM in resource constrained settings. The resulting model Constitutes new knowledge about SCM and will help managers and researchers in there decission making hence, cutting costs, reducing information overload and help researchers evaluate related problems.

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Chapter 2 Literature Review

2.1 State of the art in Supply Chain Management

The 1990s saw the development of supply management as an emerging academic discipline Ellram and Carr (1994) [33]; Chen and Paulraj (2004) [15], rms began to see that eective and ecient supply chain management could yield large direct (cost reduction) and indirect (improvements in delivery performance, technology acquisition, etc.) improvements for the rm. The economic environment in the late 1980s and early 1990s also forced rms to become more competitive as markets become more globally competitive. Firms realized that, in order to be able to compete, they must adopt best practice manufacturing techniques. These techniques needed to focus on not only the internal production mechanism, but on aligning what suppliers can deliver with what customers want. This leads to the lean revolution in the 1990s Womack et al., (1990) [124] and to mass customization and modularization in the 2000s Pine et al., 1993 [90]; Duray et al., (2000) [30]. The current focus for rms is on how they can better manage their supply chain and supply networks to reduce cost and cycle times, and increase innovations and time to market for new products and services Handeld et al.,(1999) [49].

Competition among companies is becoming keen and no longer between companies and companies, but supply chains to supply chains Christopher, (1992) [18]. In order to enhance their competitive edge, companies must continuously strive to seek defensive and oensive approaches so as to increase their organizational eectiveness and better realization of or-

12

ganizational goals such as enhanced competitiveness, better customer care and increased protability. From the 1960s to the 1990s, companies placed their emphasis on customer loyalty. Later, the focus was shifted to producing high quality products at reasonable cost. Afterwards, developing a variety of products to meet dierent needs of customers became a priority. In the 1990s, companies started discovering the impact of suppliers as of enormous signicance to customers delivering products to customers at the right time, at the right place, and at the right price has become a new challenge rather than producing only high quality products (Kwai-Sang Chin et al. (2004) [65]. Based on this evolution, both upstream rms and downstream rms have to be managed directly or indirectly by companies in order to satisfy their customers.

There are many denitions of the term supply chain, of which the following is typical Marien (2000) [77]: supply chain is that network of organizations that are involved, through upstream and down stream linkages, in the dierent processes and activities that produce value in the form of products and services in the hands of the ultimate customer or consumers. emphasis is put on the following key characteristics of supply chains: - They are networks, supply chain linkages are upstream and down stream Upstream, Linkages, Processes, value and the ultimate customer. This means that supply chain encompasses all organizations and activities associated with the ow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information ows. Material and information ows both up and down the supply chain Kenneth et al (2006) [61].

Supply chain management contains dierent relationships between suppliers and controls supplies in the supply chain but does not form company organizations. Saunders (1997) [95], Anderson et al (1997) [3] suggests that there are seven basic principles in managing a supply chain. These include: 1. Segmenting the customers according to their demands and providing them with a tailored set of products and services that will have maximum impact on them. 2. Customizing the logistics network through more robust logistics planning, enabled by real time decision support tools that can handle ow-through distribution. More time 13

sensitive approaches to managing transportation will result in signicant increase in revenues and return on investment. 3. Listening to signals of market demand and planning the production according to them helps the organizations to avoid situations like over stocking and out of stock during peak seasons. 4. Dierentiating products closer to the customer avoids product obsolescence and increases the impact on the customers. 5. Sourcing strategically from suppliers who share the common goals improves the supply chains eciency as it reduces inventory and gives way to concepts like vendor-managed inventory. 6. Developing supply chain wide common technology strategy improves interaction between the supply chain partners. 7. Adopting a common supply chain wide performance measure directs all the supply chain partners to work towards a common goal and facilitates comparisons across organizational boundaries. The chain has to contain elements that guarantee a fast information ow between each of the member elements. The whole supply chain must also be agile and exible in order to compete eectively and to respond quickly to changing customer demands Monczaka et al. (1998) [82]. Supply Chain Management varies from one enterprise to another Kuglin (1998) [64].

Lee (2000) [69] Points out that SCM involves the ows of material, information, and nance in a network consisting of customers, suppliers, manufacturers, and distributors. Coordination and integration of these ows and their correlated activities within and across companies through improved supply chain relationships to achieve a sustainable competitive edge are critical for eective SCM. In fact, the SCM approach has been engaged by many organizations to improve their organizational performance and enhance competitiveness in the marketplace. 14

Christopher et al (2002) [16] Suggests that Supply chain managers strive to achieve the ideals of fully integrated ecient and eective supply chains, capable of creating and sustaining competitive advantage. This is because there are a number of factors for managers to consider in order to have a successful SCM of which the most important is to maximize sales and minimize costs in terms of inputs. To this end they must balance downward cost pressures and the need for eciency, with eective means to manage the demands of market-driven service requirements and the known risks of routine supply chain failures. Better management and control of internal processes together with more open information ows within and between organizations can do much to help. However, in a resource constrained setting there are loopholes with the organizations supply chain that are due to nancial constrains or lack of Technical knowledge. In SCM no organization is an island and even the most carefully controlled processes are still only as good as the links and nodes that support them. All are dependent on ecient and reliable transportation and communication systems, an obvious point, but one that is often overlooked Peck et al (2004) [88]. These issues are the subjects of the Centre for Logistics and Supply Chain Managements on-going Program of research into supply chain risk and vulnerability. Modern commercial supply chains are in fact dynamic networks of interconnected rms and industries Hakansson et al (1989) [48]. A supply chain is only as strong as its weakest link Kenneth et al (2006) [61] in this statement its made to realize that non of the subsystems can exist with out the other below or above it this implies that each has a role to play though in the case of Just In time some processes are eliminated hence reduction of costs. A network connected and interdependent organizations mutually and cooperatively work together to control, manage and improve the ow of materials and Information from suppliers to end user Atken (1998) [6]

2.2

Modeling in Supply Chain Management

Models are generally dened as explicit representations of some portions of reality as perceived by some actor Wegner & Goldin (1999) [115]. Modeling in various forms is essential in supporting complex human design activities. In the development of information systems, as well as the re-engineering of work practices, the modeling of business processes or workows 15

often plays a central part Hjalmarsson & Lind (2004) [52]. Models, particularly those that oer good insight through visualization and graphs, can help companies to structure and simplify their complex and dynamic supply chains Alexander et al (2005) [2].

2.2.1

Process Modeling

Process modeling refers to logically capturing and abstracting the systems components, relationships and behavior, with respect to modeling objectives . Process models can be descriptive, prescriptive, iconic or symbolic (Williams, 2003) [119].

Increasingly, researchers and practitioners are describing business organizations in terms of processes rather than functional hierarchies. An organization may be viewed as a web of interrelated processes that are designed to achieve certain organizational goals Wenhong and Tung (1999) [116]. A business process, according to Davenport and Short (1990) [24], can be dened as a set of related tasks performed to achieve a dened business outcome and they classied business processes in terms of three basic elements: Entities, objects and activities. In studying process models for software engineering, Curtis et al. (1992) [23] suggested that software process models have often presented software processes from one or more dierent perspectives. They identied the four most common perspectives: 1. Functional; 2. Behavioral; 3. organizational; and 4. Informational. The functional perspective depicts a process in terms of what activities are being performed and which data (or information) ows are needed to link these activities. The behavioral perspective represents a process in terms of when activities are being performed and how they are performed using mechanisms such as feedback loops, iterations and triggers. The organizational perspective depicts a process in terms of where and by whom activities are being performed. Finally, the informational perspective represents a process in terms of 16

the entities (documents, data, or products) being produced or manipulated by the process. These perspectives provide distinct and complementary representations of a software process. However, each perspective by itself only gives a partial and incomplete view of the process Wenhong and Tung (1999) [116].

The various approaches for business process modeling and the tool sets implementing them have numerous features in common. They all try to capture which business tasks are going to be automated, where the automating system is going to be deployed, who will use it, and how it will integrate with other systems. In a nutshell, we nd the following typical elements in a business process modeling language Eriksson et al, (2000) [34]: 1. The organizational model describes the roles and areas of responsibilities within an organization with respect to the activities of a business process. It presents a more static view of a process. 2. The control ow describes the order of execution and the dependencies among the various activities. 3. The data ow describes how the business entities (or artifacts) are manipulated by the various activities. 4. Use cases describe the context of a business process and its externally visible behavior. 5. Collaboration diagrams can further document how business agents and artifacts work together to perform a function. All this information together provides an accurate semiformal specication of the business process. In particular, the process requirements when an activity executes, how often it will execute, and under what conditions it will end can usually only be described informally in the form of use cases or textual descriptions in some natural language.

2.2.2

Statistical Modeling

Statistical analysis is a form of modeling that explicitly recognizes the existence of uncertainty in a set of data. It is conventionally seen as having two possible roles-descriptive and 17

inferential. Descriptive statistics is simply concerned with summarizing the main characteristics of a data set, particularly highlighting any patterns (and anomalies) that may not be immediately obvious Mingers (2006) [81]. The implicit philosophy of statistical modeling is inherently empiricist. That is, it largely restricts itself to analyzing empirically available quantitative data rather than going beneath the surface to explain the mechanisms that give rise to empirically observable events Mingers (2000) [80].

2.2.3

Neural Networks

Margarita (2002) [76] states that articial neural networks are computational paradigms based on mathematical models that unlike traditional computing have a structure and operation that resembles that of the mammal brain. He futher says that Articial neural networks (ANN) or neural networks(NN) for short are also called connectionist systems, parallel distributed systems or adaptive systems, because they are composed by a series of interconnected processing elements that operate in parallel. Neural networks are typically arranged in layers. Each layer in a layered network is an array of processing elements or neurons. Information ows through each element in an input-output manner. In other words, each element receives an input signal, manipulates it and forwards an output signal to the other connected elements in the adjacent layer. Lertpattarapong (2002) [71] points out that Neural network (NN) analysis is used to detect changes in the SC behavior and map them into the future. NN, with their pattern recognition capability, are eective mechanisms for that use. This can be very practical, as neural networks can be encapsulated in a software agent that can in turn use the companys ERP records and business intelligence data to perform this task routinely in real-time in an actual system. Using NN to detect changes in the SC will empower companies to detect any changes occurring in the business environment that can aect their SC and hence give the company enough time to adjust its business strategies in order to counteract the impact of these changes. Margarita (2002) [76] states that one of the original aims of articial neural networks (ANN) was to understand and shape the functional characteristics and computational properties of the brain when it performs cognitive processes such as sensorial perception, concept catego-

18

rization, concept association and learning. However, today a great deal of eort is focused on the development of neural networks for applications such as pattern recognition and classication, data compression and optimization.

2.2.4

Discrete-Event Modeling

Discrete-Event simulation rst emerged in the late 1950s and it has grown in popularity steadily to be now recognized as the most frequently used of the classical Operational Research techniques across a range of industries-manufacturing, travel, nance, health and beyond Hollocks (2005) [53]. Kreutzer (2005) [63] gives a concise introduction and summary of discrete event simulations foundations. A discrete event simulation model Banks et al., (1996) [7] is built based on the actual system.It usually focuses on productivity improvement; for instance, machine and human resource utilization analysis, bottleneck analysis and throughput improvement. In the area of discrete event simulation, there is a scarcity of research Leonardo Chwif et al. (2006) [70] and according to Sevinc (1991) [98] No complete theories of model abstraction exist, nor does any suciently general procedure. While discrete event simulation has long been a popular technique for studying industrial processes, it is also used widely for planning e.g. for evaluating design alternatives in a production process; see Law and Kelton (2000) [66] and Oakshott (1997) [86]. In many dynamic processes, particularly in industrial contexts like manufacturing, transportation and inventory management, system states change at discrete points in time (i.e. at events), rather than through continuous state uctuations. In such discrete event simulations it is often desirable or even necessary to treat many model components as individuals, each with their own properties and processing history Wohlgemuth et al. (2006) [114].

Discrete-Event simulation permits the evaluation of operating performance prior to the implementation of a system: It enables companies to perform powerful what-if analyses leading them to better planning decisions; it permits the comparison of various operational alternatives without interrupting the real system; it permits time compression so that timely policy decisions can be made Chang et al. [12]. 19

2.2.5

Mathematical Modeling

Neumaier (2003) [5] denes mathematical modeling as the art of translating problems from an application area into tractable mathematical formulations whose theoretical and numerical analysis provides insight, answers, and guidance useful for the originating application. McLaughlin (1999) [79] states that a mathematical model is a statistical lter that not only attempts the separation but also quanties its success in that eort. To construct a model, it is necessary to proceed from the known to the unknown or, at the very least, from the better known to the less well known. McLaughlin (1999) [79] gives two ways to construct a model and the choice depends upon whether it is the information or the error that is better known, bearing in mind that known and assumed are not synonyms. ......In the rst case, the model is designed that is to utilize the known properties of the embedded information to extract the latter and leave the error behind. This approach is commonly employed with stochastic data. Alternatively, if the error is the better known, the model is designed to operate on the error, ltering it out and leaving the information behind. This approach is nearly universal with deterministic data. In either case, the separation will be imperfect and the information still a bit erroneous. The notion of deterministic information is commonplace and requires no further elaboration

2.2.6

System Dynamics Modeling

System dynamics modeling is the technique of constructing and running a model of an abstract system in order to study its behaviour without disrupting the environment of the real system Williams, (2004) [120]. Due to the dynamic nature of supply chains, simulation is a natural and important instrument for the analysis and design of supply chains and supply chain management Alexander et al. (2005) [2]. The simulation models can help to structure, transform, condense and visually display data in such a way that managers can quickly grasp a situation and act upon the presented information Boyson et al. (2004) [10]. The application of system dynamics modeling to supply chain management has its roots in industrial dynamics Forrester (1958, 1961) [39], [41]. System Dynamics is a methodology for understanding the behavior of complex, dynamic social-technological-economic-political 20

(STEP) systems to show how system structures and the policies used in decision making govern the behavior of the system. SD focuses on the structure and behavior of systems composed of interacting feedback loops. The objective of the SD approach is to capture the dynamic interaction of dierent system variables and to analyze their impact on policy decisions over a long-term horizon and to attain some desired goals through modications of the system. For this, a system boundary is dened and a model of the system is built. The systematic procedural steps in SD modeling are as follows Roberts, (1978) [94]: 1. Dene the problems to be solved and goals to be achieved; 2. Describe the system with a causal loop/inuence diagram; 3. Formulate the structure of the model (i.e. develop the ow diagram for systematizing symbols, arrow designator and the format of system dynamic modeling in the form of Psuedo-code equations); 4. Collect the initial data/base data needed for model operation either from historical data and/or from discussion with executives/planners who have knowledge and experience of the system under study - these are the initial value of all the level variables, constants and policy data; 5. Validate the model on some suitable criteria to establish sucient condence in the model; and use the model to test various policy actions to nd the best way to achieve prescribed goals. A supply chain being the extended enterprise that encompasses vendors, manufacturers/producers, distributors and retailers is characterized by a stock and ow structure for the acquisition, storage, and conversion of inputs into outputs and the decision rules governing these ows Forrester, (1961) [41]; Sterman, (2000) [104]. The ows often create important feedbacks among the partners of the extended chain, thus making SD a wellsuited modeling and analysis tool for strategic supply chain managementGeorgiadis et al (2004) [44].

21

Morecroft (1988) [83] emphasized that model conceptualization begins with causal loops and moves to rate/level ow diagrams and nally to explicit equations capturing the diagram structure. Thus, the objective of the SD model is to capture the dynamic interaction of dierent variables that the system has and to analyze the policy decision over a long-term time horizon. Causal loop diagramming is an important tool, which helps the modeler to conceptualize the real world system in terms of feedback loops.

Forrester (1961) [41] expands on his basic model through further and more detailed analysis, and establishes a link between the use of the model and management education. Figure 2 shows the classic supply chain model that was used by Forrester in his simulation experiments. There is a downstream ow of material from the factory via the factory warehouse, the distributor and the retailer to the customer. Orders (information ow) ow upstream, and there is a delay associated with each echelon in the chain, representing, for instance, the production lead-time or delays for administrative tasks such as order processing. Researchers since have coined the expression of the Forrester Model, which essentially is a simple four-level supply chain (consisting of factory, a warehouse, a distributor and a retailer).

22

Figure 2.1: The Forrester Supply Chain. Adapted from Forrester (1961) [41]

Using the Forrester Model as an example, Forrester (1961) [41] describes the modeling process used in modeling continuous processes, whilst clearly emphasizing the importance of information feedback to the System Dynamics method. Forrester (1958) [39] disapproves of the approach taken by operations research (OR) in the 1950.s, where OR methods are applied to isolated company problems. He suggests that the success of industrial companies depends on the interaction between the ows of information, materials, orders, money, manpower, and capital equipment Forrester (1961) [41], and states that the understanding and control of these ows is the main task of management.The Forrester Model has received much 23

criticism over the years, which has served as a basis for applying and extending Forresters research further. Despite its simplicity, the Forrester Model yielded important insights into supply chain dynamics. Demand amplication, a fundamental problem in supply chains, has only recently been recognize to the full extend of the problem Towill (1996b) [109]. Forrester accidentally established the ground rules for eective supply chain design, when he showed that medium period demand amplication was a system dynamics phenomenon that could be tackled by reducing, eliminating delays and the proper design of feedback loops. Towill (1996b) [109]. In order to manage the supply chain eciently, a clear understanding of managing dynamics in the supply chain is of high priority Sterman (1989a, b, 2000) [106], [107], [104]; Towill (1989) [110], (1997) [111]; Disney et al., (1997) [28]; Lee et al., (1997a, b) [68] [69]. As dynamics of the supply chain become a matter of great concern, a number of causes of dynamics of the supply chain have been identied in terms of rational and irrational factors (Lee et al., (1997a, b) [68], [69]; Sterman, (2000) [105]; Simchi-Levi et al., (2000) [101].

2.3

State of Practice in Supply Chain Management (Case Studies of SCM application)

There are dierent practices in supply chain management as discussed: Sterman (1989) [106] uses the beer distribution game to explore the behaviors of decision makers and demand distortion. Although there are companies initiatives to mitigate this distortion aect, it was not until second part of 1990s to give theoretical back round and underlying principles of demand distortion. Lee (1997a) [68] analyzed the demand amplication along the supply chain and named this amplication eect as bullwhip eect. Gavirneni et al. (1999) [43] study the relationships between capacity, inventory, and information, as well as how they are aected by the retailers policy and end-item demand distribution in a typical serial supply chain with dierent information sharing scenarios. Lee et al. (2000) [69] dierently study the value of information sharing when demands are correlated over time in serial supply chain. Their analysis suggest that the higher the demand correlation over time, the higher the value of information sharing. Besides the information sharing, there are many studies attempt to facilitate coordination in supply chain. Researchers use dierent aspects such 24

as contracts, game theory, hierarchical planning and recently multi-agent approach Ibrahim and Ratna (2006) [56].

2.3.1

The Beer game

The MIT Beer Game Sterman, (1989) [106] represents a four-echelon supply chain including a retailer, a wholesaler, a distributor and a factory. A ow of information (orders) goes from the retailer to the factory and a ow of product returns. The game involves dierent delays: two weeks delay for the order to reach the next echelon and two weeks transport delay from the inventory of an echelon to the next.

Figure 2.2: The Beer Distribution Game. Adapted from Sterman (2000) [103]

The Beer Distribution Game has proven to be an important tool in the spread of System Dynamics methodology, inuencing many researchers and executives Sterman (2000) [105]. Especially for researchers, it provided an important experimental setup for understanding, analyzing and simulating dynamic systems (Sterman (1989), Senge (1993)) [106], [96]. There have been alternative application areas of the Beer Distribution Game where it has been used as a complex problem in articial intelligence Geyer-Schulz (1998) [45] and as a basis for dierent experiments Croson and Donohue (2002) [22]. More recent enhancements include a computerized version of the basic game Simci-Levi, (2000) [101] and an internet version Jacobs, (2000) [58]. These have made the game more 25

accessible and user friendly, but have done little to extend the learning potential of the game Sparling, (2002) [25].

2.3.2

The Newspaper

Newspaper production operations are based on real world news, which may occur at odd times, even well passed the closing edition time, determining how to operate the printing and distribution of the newspaper is not a trivial task. Standard and static analysis tools cannot capture the dynamics of such a changing environment Marelys et al. [75]. Research in this area indicates that simulation modeling is a great tool for the modeling of the processes of the newspaper industry. Some examples include the works by Annikka et al. (1994) [4] and Fredick et al. (1997) [42]. Annikka et al.(1994) [4] used simulation as a tool for strategic management. They used simulation to analyze the complex causalities of revenues from the advertising and circulation market with the economic result of the newspaper. The results of the model indicated how the newspaper market conditions were and described the macro level economical measurements as well. Fredick et al. (1997) [42] used simulation to test and validate a decision support system for the entire production process. The decision support system was called GPMS (Global Production Management System). To test GPMS without disturbing daily production, simulation was used to simulate the events from various production subsystems and achieve the actual production state. These simulation results were then fed to the GPMS for analysis. Thus, simulation has been used successfully to support newspaper production.

2.4

Problems in SCM for constrained settings

In supply chain there are a number of issues that are receiving increasing attention, as evidenced by their prevalent consideration in the work reviewed. These issues are: product postponement which is the practice of delaying one or more operations to a later point in the supply chain, using delaying the point of product dierentiation, global vs. single-nation supply chain these are supply chains that operate in multiple nations and demand distortion and variance amplication which is the phenomenon in which orders to the supplier have a large variance than sales to the buyer and variance amplication occurs when the distortion of the 26

demand propagates upstream in amplied form Lee et al. (1997) [67]. There are additional considerations aecting SC performances that are not present in supply chains operating in a single nation that is; Import regulations, duty rates and exchange rates Beamon, (1998) [8].

Resource-constrained allocation problem is another issue aecting supply chain management. Davis (1973) [27] describes resource allocation as the method of scheduling activities within xed amounts of resources available during each time period of project duration so as to minimize the increase in project duration. This type of problem is characterized by a factorial growth in the amount of computation required to consider all possible solutions as problem size increases (Davis 1973) [27]. Scheduling problems these have a vital role in most manufacturing and production systems. They concern allocation of scarce resources to tasks over a period of time Pinedo, (2002) [91]. These problems are generally dened as decision-making problems with the aim of optimizing one or more scheduling criteria. The diversity of scheduling problems, largescale dimensions and their dynamic nature make scheduling problems computationally very complex and dicult to solve Petrovic et al. (2006) [29].

2.5

Characteristics of SCM decision support tool

A decision support tool is a computer-based system that brings together information from a variety of sources, assists in the organization and analysis of information and facilitates the evaluation of assumptions underlying the use of specic models Williams, (2002) [118].

Supply chain decisions have been classied based on their temporal and functional consideration. Supply chain decisions can be broadly classied into three categories: Strategic (long-term), tactical (medium-term), and operational (short-term and real-time) according to the time horizon of the decisions. Functionally, there are four major decision areas in supply chain management: Procurement, manufacturing, distribution, and logistics. In addition, there are also certain global decisions whose scope extends over multiple functions Biswas and Narahari (2004) [9]. There are strategic, tactical, and operational questions in

27

each of these areas. These are described in detail by Shapiro (1999) [100].

Biswas and Narahari (2004) [9] state that supply chain decision making is a complex process and Some of the important reasons for the complexity of the decision making process are: 1. Large scale nature of the supply chain networks, 2. Hierarchical structure of decisions, 3. Randomness of various inputs and operations, 4. Dynamic nature of interactions among supply chain elements.

2.5.1

Decision variables In supply Chain Modeling

In supply chains modeling the performance measures are expressed as functions of one or more decision variables. These decision variables are then chosen in such a way as to optimize one or more performance measures. The decision variables used in the reviewed models are described below Beamon, (1998) [8]: 1. Production/distribution scheduling: scheduling the manufacturing and/or distribution. 2. Inventory levels: Determining the amount and location of every raw material, subassembly and nal assemble storage. 3. Number of stages (echelons): Determining the number of stages or echelons that will comprise the supply chain. This involves either increasing or decreasing the chains level of vertical integration by combining stages or separating stages, respectively. 4. Distribution Center (DC) customer assignment: Determining which DC(s) will serve which customer(s) 5. Plant product assignment: Determining which plant(s) will manufacture which products

28

6. Buyer-Supplier relationships: Determining and developing critical aspects of the buyer-supplier relationship 7. Product dierentiation step specication: Determining the step with in the process of product manufacturing at which the product should be dierentiated. 8. Number of product types held in inventory: Determining the number of dierent product types that will be held in nished goods inventory.

2.6

Conclusion

Modeling and analysis to gain a better understanding of the system complexity and to predict system performance are critical in the system design stage, and often valuable for system management Biswas and Narahari (2004) [9]. Simulation modeling can provide valuable insights into the operational characteristics of supply chains. Variability and uncertainty are endemic in all systems, and certainly so in supply chains Chateld et al. (2006) [14]. Chateld (2001) [13] found that uncertainty in demands, production yields and rates, transportation times, and cost of goods over time are common place in the actual operation of a supply chain, yet these operational factors are often modeled deterministically. By accounting for uncertainty when modeling supply chains, an insight into the impact of these factors can be gained. Thus, simulation modeling provides an important tool for understanding supply chain behavior under changing conditions and can give the information necessary to make informed decisions regarding supply chain design and management.

29

Chapter 3 Methodology
3.1 Introduction

This section focuses on the methods used to collect and analyse data in this research. It brings together two complementary methods using system dynamics modeling approach. Simulation modeling and case study Law and Kelton, (2000) [66] which are powerful research methods, for modeling and analysis whose added advantages can complement each other in terms of theory building, testing and theory extension Williams, (2000) [117].

3.2

Field Study

Field studies and supporting data collection methods provide invaluable insights and discoveries during the System dynamics research. Field study is a term that applies to variety of research methods, raging from low to high constraints. These methods share a focus on observing naturally occurring behavior under largely natural conditions Williams, (2000) [117]. Field studies were conducted from the Head oce in industrial area where the distribution, ordering and most of the processes of the newspapers take place. The resulting data was used to simulate the generic Supply Chain Management system model.

3.3

Case Study

A Case Study is an exploratory (single in-depth study) or explanatory (cross-case analysis) research strategy, which involves an empirical investigation of a particular contemporary phe30

nomenon within its real life context using multiple sources of evidence Williams, (2000) [117]. The case study methodology focuses on understanding the dynamics present within a single setting Eisenhardt, (1989) [31], and to understand them within a particular context Yin, (1994) [125].

3.4

System dynamics modeling

The eld of system dynamics depends heavily upon the use of quantitative data to generate feedback models (Luna et al.) [73] System dynamics is a method for analyzing the behavior of any kind of system: biological, physical, sociological, economic, and others. It provides a high level view of the system emphasizing the interactions between its constituent parts, as well as the impact of time on its dynamic behavior Hustache et al.,(2001) [55]. SD is acknowledged Senge, (1993) [96]; Coyle, (1996) [21]; Richardson (1981) [93]; Wolstenhome (1990) [123]; Williams and Kennedy, (1997) [121] as an excellent medium for exploring and identifying knowledge gaps, but it has not been utilized in the requirements process engineering domain before Abdel-Hamid and Madnick, (1990) [1]; Williams and Kennedy, (1997) [121]. The greatest strength of this approach is its ability to represent the evolving state of a system through time. System dynamics methodology has been widely applied to the study of the behavior of social and economic systems Forrester (1961, 1967) [41], [40]; Graham, et al., (1990) [46], Sterman et al., (1997) [105]. Stocks, ows, delays, and feedback loops, comprise the building blocks of the system dynamics methodology. Stocks represent accumulations of an item within the system as of a given point in time. Steps involved in system dynamics modeling are: (1) representing the hierarchy of system structure with the help of causal loop diagrams, (2) dening the stocks, ows, and delays within the system, (3) simulating the system behavior under various conditions by introducing external shocks to the system, and (4) using the simulation results to understand the interrelationships of system components through the course of time. Modeling a dynamic system involves capturing the interactions of its components through feedback loops, where a change in one variable aects other variables over time, which in turn aects the original 31

variable. System dynamics demonstrates how most of our own decision-making policies are the cause of the problems that we usually blame on others, and how to identify policies we can follow to improve our situation (Morecroft, 1999) [84]

3.5

System Dynamics Model Building

System dynamics modeling is the technique of constructing and running a model of an abstract system in order to study its behavior without disrupting the environment of the real system. Simulation is the process of forming an abstract model from a real situation in order to understand the impact of modication and the eect of introducing various strategies on the situation (Williams, 2000) [117]. System dynamics model building process involves six key activities as shown in Figure: 3 adapted from: (Richardson and Pugh, 1981) [93]. System dynamics model development is a system stage process that begins and ends with understanding (Williams, 2000) [117].

Figure 3.1: System Dynamics Modeling Process Adapted from (Richardson and Pugh, 1981) [93]

Understandings of the model and understandings of the problem and the system are the key products that a system dynamics modeling eort should accomplish (Richardson and Pugh, 1981) [93]. Any system-dynamics modeling eort should have a goal to understand 32

better the problem under study and the system in which it is happening. An orientation towards understanding and learning grants meaning to the denition-type activities and offers context and meaning for the formalization-type activities of the process incrementing the possibility of being successful at the insight-generation type of activities.

In this research a Dynamic Synthesis Methodology was used to allow the integration of theoretical concepts and structuring of parts and elements of a process over time in such a manner to form a formal functional entity, underpinned by synthesis as philosophy of science (Williams, 2004) [120]. Dynamic Synthesis Methodology is a powerful empirical research method that potentially makes useful contribution to body of System Dynamics (Williams, 2004) [120]. The Dynamic Synthesis Methodology is grounded on well-tested and developed theoretical anchors and builds on an existing epistemological philosophy of science in the acquisition of knowledge (Churchman and Acko, 1961) [19].

The study used the following data collection techniques:1. Structured and Semi-structured Interviews of dierent stakeholders thats circulation manager, inventory manager and data analyst of the organization under study were conducted to collect primary data to verify the proposed operational model and the conceptual model. 2. The questionnaire was developed based on the review of literature in Section (2) and were distributed to dierent distribution centers and consumers to get more reliable data, clear understanding of the system in question and to enable the researcher give clear conclusions. 3. Participant observations of the System under study was done from the head oce.

3.6

Simulation Experiments:

Simulation models are abstracts of the real world-view of a system or problem being solved. simulation can be an eective, powerful and universal approach to problem solving in dierent areas of application, to extend existing theories or identify new problems (Williams, et 33

Figure 3.2: Dynamic Synthesis Methodology Research Design. Adapted from Williams, (2000) [117]. al., 1999) [122]. The behaviour of the various system elements/components over time was identied by computer simulation using STELLA Modeling software. This was done in a trial and error method to demonstrate the likely eects of various decisions in the model.

3.7

Evaluation and validation:

Building valid and credible process models is an important aspect of a researchers representation of the actual system being studied (Williams, 2000) [117]. Validation is a process of establishing condence in the soundness and usefulness of a model (Forrester and Senge 1980) [38]. Law and Kelton (2000) [66] suggest that if the model is valid, then the decisions made with the model should be similar to those that would be made by physically experimenting with the system. A model is said to be credible when a simulation model and its results are accepted by managers/customers as being valid, and used as an aid (tool) in 34

making decisions.

Given the reporting needs of the organisation that was used as a case study, data tools and techniques used for analysis of the supply chain management model were EPI data, which was used for data entry and SPSS for data analysis and Regression analysis. Vensim and STELLA as tools were used to simulate the Causal loops, and supply chain management model respectively and an algorithm was used for pattern evaluation.

35

Chapter 4 Field Study

4.1
4.1.1

An illustrative real-world case study

A Newspaper supply chain

A system dynamics model of the SC of an actual newspaper company was used in this research to demonstrate the proposed methodology. This company was facing a problem of persistent oscillations in its orders and processed orders. Even though the company has maintained its market share, it has experienced serious competition and demand uctuations, which in turn impacted its work strategies. The company has been implementing the following SC strategy: Utilization of supply relationship management to guarantee that suppliers provide excellent product quality, meet due dates, and oer excellent prices.

The research approach and modeling methodology in the newspaper supply chain of a major newspaper company in Uganda was applied. The supply chain of the company is comprised of a central producer and warehouse (CW) located in Kampala, which then supplies directly one hundred and six distribution centers around the country. The company divides these distribution centers into four thats Central, Kampala, Northern and Western, which supply to dierent parts of the country From the head oce, this company supplies its products to various distribution centers (regions) such as Central, Kampala, Northern, Eastern, and Western. The short life cycle of the product have amplied the coordination problems, which in turn have caused excess inventories and sometimes diculties in consumer demand oscillations. 36

Another main factor is the intense competition from other companies. The competition has forced the company to introduce more product varieties into the market to protect its existing and potential market share. Production capacity is another factor that adds to SC complexity because of its long delays, huge investments, and new products with more complex manufacturing processes than previous generations. In addition, these complementary products are at the upstream of the SC and their resulting uctuations are higher.

4.2

The Simulation Model

Building the SD model of the companys SC followed the steps of (Hines, 2000) [51]. The rst step was dening the problem, followed by understanding the formulations, developing the causal loop diagrams, developing the stocks and ows diagrams, validation and testing. First I developed the causal loop diagram of the entire chain, taking into consideration the inventory control policies used by the company and the Distribution centre (DC). The entire diagram, which includes all system variables and the regulating feedbacks, is exhibited in Fig. 4.1 To develop the causal loop diagram, I used the following assumptions, the validity of which was thoroughly checked with the CW and the DC: 1. No order is greater than the capacity of a single Vehicle. 2. Each Vehicle serves one Region at a time. This is generally true for centers that are in the vicinity of the CW facilities. For the other ones each truck serves more than one center at a route. Therefore, this assumption easily makes sense, assuming that the lead-time is half of the loading-transportation- unloading time. 3. There are no emergency deliveries. 4. There is no collaboration (no lateral movements) among Centers. The next step of the SD methodology involves the mapping of the causal loop diagram into a dynamic simulation model using specialized software. I used the Vensim and STELLA 8.1 software for this purpose. The embedded mathematical equations are divided into two 37

main categories: the stock equations and the ow equations. Stock equations dene the accumulations within the system through the time integrals of the net ow rates. Another typical form of stock equations is used to dene the smoothed stock variables that are expected values of specic variables usually obtained from their past values using exponential smoothing (e.g. the smoothed stock variable Expected Demand

4.2.1

Causal loop Diagram

Causal loop diagrams are the basis on which the SD model is built. They depict, graphically, the interactions and cause-and-eect relationships among the dierent system parameters (Lertpattarapong 2002) [71]. During model development, Causal loop diagrams serve as preliminary sketches of causal hypotheses and they can simplify the representation of a model. The structure of a dynamic system model contains stock (state) and ow (rate) variables. Stock variables are the accumulations (i.e. inventories), within the system, while ow variables represent the ows in the system (i.e. order rate), which are the byproduct of the decision-making process (Georgiadis et al 2004) [44]. The model structure and the interrelationships among the variables are represented by stock-ow diagrams. A supply chain being the total extended enterprise that captures all partners including vendors, manufacturers, producers, distributors and retailers, extends over multiple echelons. Each partner of the chain typically manages his/her own inventory (operating as an autonomous linkage of the chain), which is replenished from the upstream echelon, while using a control policy to determine the frequency and magnitude of the orders(Georgiadis et al 2004) [44].

38

Figure 4.1: Causal loop diagram for the System Dynamics Supply Chain Model in resource costrained settings

The arrows in Fig. 4.1 represent the relations among variables. The direction of the inuence lines displays the direction of the eect. Signs +or -at the upper end of the inuence lines exhibit the sign of the eect. When the sign is +, the variables change in the same direction; otherwise they change in the opposite one. The structure of the systems internal environment consists of the stock variables Factory production and Inventory. Order Monitoring monitors 39

the accumulation of unlled orders, i.e. orders that have been placed but not received yet, while Inventory monitors the accumulation of products on hand. Orders increase Order Monitoring. The rate of Order Fulllment is determined by the Orders after a time delay equal to Lead-time. Order Fulllment reduces the stock of products in Order Monitoring and increases Inventory. The variable Inventory is depleted by Sales. This process takes time equal to the Response Time to Customer Demand. The clear denition of the boundaries between the system under study and its external environment is an essential step of SD; thus, the model and its analysis are kept as simple as possible while capturing all necessary elements for the analysis of the system under study. The closed-loop structure of Fig. 4.1 restricts the endless accumulation of inventory (that occurs in the model) whatever the demand level may be. This occurs due to two negative feedback loops displayed in Loop #1 which is dened by the sequence of the variables OrdersOrder Fulllment-Inventory-Inventory Position-Inventory Position Adjustment, while Loop #2 is dened by the variables Orders-Order Monitoring-Inventory Position-Inventory Position Adjustment. To explain the negative feedback mechanism, I follow the route around Loop #1. An increase in Orders will increase the Order Fulllment and thus, Inventory and Inventory Position will also increase. This causes Inventory Position Adjustment to decrease, since the Desired Inventory Position changes slowly and it can be assumed to be constant for the next time step. Finally, the decrease in Inventory Position Adjustment restricts Orders. Therefore, Orders will stabilize at a nite level and eventually the system will reach an equilibrium (steady) state. Capacity may refer to all operations of Order Monitoring, e.g. stock space, manpower, production facilities, transportation means etc. Generally, capacity determination is quite simple in a steady-state situation; however, in an evolving environment, as in the case under study, it is important to consider a dynamic capacity planning policy. It appears that a decision-maker could determine capacities for all these operations once in the beginning of the planning horizon, and that this could be done using a standard management technique that incorporates steady-state conditions. However, this is not the case in the environment under study since product ows can change dramatically for several reasons; for example promotion activities or price variation strategies of the competitors.

40

Although, such demand shifts take time to materialize, they have to be considered for the development of ecient capacity planning policies. Thus, it is evident that an appropriate modeling methodology needs to be able to capture the transient eects of ows in a Newspaper supply chain. SD has this capacity and moreover, it easily describes the diusion eects related to market behavior. In addition, an operation may be performed using either owned capacity or additional leased capacity. The problem of determining the optimal ratio of owned to leased capacity units (buy or lease problem) is also typical in the New Vision operations. The causal loop diagram in Fig. 4.1 illustrates the generic supply chain system embellished with a dynamic loop that expresses a capacity planning decision-making mechanism. Specically, I assume that an operation may be performed using owned and leased (if needed) capacity units. This control mechanism is modeled as a negative feedback loop. More specically, Capacity Needed is determined by a variable of the SC model. Capacity needed is compared with the Actual Production Capacity. In case there is a capacity shortage, Capacity is then leased to achieve the Desired Service Level. Capacity Expansion Rate determines the rate of change of capacity towards the desired value. Capacity Expansion Rate is modeled by pulse functions, the pulse magnitude is proportional to the Smoothed Capacity Shortage (obtained from Capacity Shortage using rst order exponential smoothing to avoid unnecessary oscillations) multiplied by a control variable. Actual Capacity has a useful lifetime (Capacity Life-Time), which regulates the Capacity Disposal Rate. A decision-maker and/or regulator could further employ the developed model to capture the impact of various policies using various levels of the above parameters; in other words, the model can be used for the conduct of various what-ifanalyses. For example, the impact of dierent leading strategies on the new or unexpected demand satisfaction and the capacity utilization subject to a given capacity review period can be evaluated. On the other side, a decision maker could investigate the impact of dierent values of capacity review periods for a given capacity expansion policy. More advanced what-ifanalyses may be further conducted to develop a long-term capacity planning strategy.

41

4.2.2

Stocks and Flows Analysis

The step that followed in building the SD model was converting the causal loop diagrams into stocks and ows diagrams and dening the mathematical formulation. The basic SD model in this thesis follows the generic models of Sterman (2000) [104]. Figure 4.2 shows the general structure of a system dynamics model used in dynamic analysis of the information system. The model consists of three interacting sectors: factory, Distribution and Sales below are the interactions:

Figure 4.2: Stock and Flow Diagram

42

The model is composed of the three connected stocks and ows Sectors that are described below. 1. The Factory Sector This company runs a push-pull manufacturing process: a push process from the preinserting processes to the inserting process and a pull process from the inserting process to the packaging. Main state variables in the Model are the Factory production and Inventories. 2. The Distribution Sector This consists of the Inventory, Transportation Capacity and Sales. The Distribution Sector mainly represents the causal relationship involving Inventory, orders lled and Transportation Capacity. The inventory, distribution sub model represents the links of inventories and distribution orders lled from the nished goods inventory to consumers. 3. The Market Sector This consists of the market sub model and the inventory. The market sub-model mainly represents the causal relationship involving demand and customer orders .

4.3

Data Analysis

Raw data was collected, edited and analysed using Excel and SPSS 12.0, with the analysis the following was carried out to give a clear understanding and complexity of the supply chain; Newspaper and Time of the year Univariate Analysis of Variance (Tests of between eects, parameter Estimates, Estimated Marginal means, pair wise comparisons, Univariate tests) were carried out and below are the results.

The table in Figure 4.3 shows dependent variable measures of the dierent variables thats; the newspaper, months, intercepts, corrected total, newspapers multiplied by months, Total and corrected Total.

43

Figure 4.3: Tests of Between-Subjects Eects Figure 4.4 is a table that represents the parameter estimates at a particular time of the year thats from January up to June. The dependent variable is measure representing three variables that average supply, average sales and average returns.

Figure 4.4: Parameter Estimates

The table in Figure 4.5 below is based on time of the year which is from January to June and the data has a dependent variable measure where by measure is equal to average sales, 44

average supply and average returns. In this table data is displayed across six-month duration, indicating mean, Standard errors and the condence interval for the dierent months.

Figure 4.5: Time of the year Estimates

Figure 4.6 below shows pairwise comparisons have measure as a dependent variable with two dierent newspapers thats Bukedde represented by two (2) and NewVision represented by one (1). Based on the estimated marginal means the mean dierence is signicant at the 0.05 level and there is adjustment for multiple comparisons: Least signicant dierence (equivalent to no adjustment)

Figure 4.6: Newspaper Pairwise Comparisons

45

The Table below in Figure 4.7 represent data at the Time of the year (from January up to June 2006) Univariate Tests. The F tests the eect of the Time of the year. This test is based on the linearly independent pairwise comparisons among the estimated marginal means.

Figure 4.7: Time of the year Univeriate Tests

The data below in gure 4.8 represent newspaper estimates indicating the dierent mean standard error and a 95% condence Interval. In this media company dierent newspapers are produced in this case two papers were used thats 1 representing NewVision and 2 representing Bukedde through out the seven days of the week.

Figure 4.8: Newspaper Estimates

46

Figure 4.9 represents newspaper univariate tests indicating the error and contrast. The F tests the eect of the newspapers; this test is based on the linearly independent pairwise comparisons among the estimated marginal means.

Figure 4.9: Newspaper Univeriate Tests

Figure 4.10 represents data across the dierent six months in the two newspapers. The dependent variable is measure; the mean, standard error and a 95% Condence interval are clearly displayed in the table.

Figure 4.10: Time of the year * Newspapers

47

Figure 4.11 are pairwise comparisons of two dierent variables thats time of the year it gives the dierence in means, standard errors, signicance and a 95% condence interval for the dierence. This is based on the estimated marginal means and there is adjustment for multiple comparisons: Least signicant dierence is equivalent to adjustments.

Figure 4.11: Pairwise Comparisons between Newspapers and Time of the year

48

Figure 4.12 represents prole plots of estimated marginal means of measure of dierent Newspapers thats 1 for NewVision and 2 for Bukedde. With this graph February had the least sales this is due to a number of reasons: 1. This month has fewer days as compared to other months. 2. The political season also aected sales as most people opted for the competitor newspapers arguing that since The NewVision is a government paper it was believed to be biased.

Figure 4.12: Estimated marginal means of measure

49

4.4

Modeling Decisions

In order to achieve the proposed objectives STELLA as a computer simulation program was used to provide a framework and an easy-to-understand graphical interface for observing the quantitative interaction of variables within the system. The graphical interface obtained can be used to describe and analyze complex physical and social systems. During this simulation a number of simulations were run until satisfactory results were obtained.

4.5

The interface Structure

Below is a general interface of the system which enables easy access to the model The interface comprises of dierent buttons for quick and easy interactions with the model. It also shows the general ow of information from the factory to the market.

Figure 4.13: User Interface

50

Figure 4.13 exhibits a high level structure model comprising of the Factory, distribution center and market. This shows the ow of information and goods from the factory to the nal consumer, the blue arrow indicates the ow of both goods and information from the factory to the distribution center and nally to the market and a feed back is indicated by the red arrow. There is a direct arrow from the market to the factory this is only used in case of emergency where an orders needs to be obtained immediately this is common in the newspapers supply chain as News is instant. There are numeric displays that show the Factory orders, Factory production, Orders and Sales. This enables the users make decisive decisions on how to manage the supply chain.

4.6

Simulation Output One

Figure 4.14: Simulation Output: Sales, Orders, Disposal rate and Production rate

51

In Figure 4.14 variables that were used are orders [1], Sales [2], Disposal rate [3] and Production rate [4]. This was done in order to compare the trend of the variables at dierent times. The simulation results show that sales and Disposal rate initially fall to 0 in year one and then rise steadily to ease o in year four. As illustrated the production rate is constant from year one until the twelfth year but the orders are volatile.

4.7

Simulation Output Two

Figure 4.15: Simulation Output: Orders, Processed orders, Factory Orders and Inventory

52

Figure 4.15; shows that the inventory [4] is initially high at two hundred then reduces steadily in the third year and its constant until the twelfth year. This means that with time there will be minimum inventory, or whats produced is all sold as per graph. The processed orders [2] are initially at zero in the rst two years from there they oscillates until the twelfth year where it is highest at seven hundred. This means that there is an increase in the number of processed orders as time goes by due to internal and external factors. The Factory orders [3] take the same route as the processed orders though the oscillations are higher than the processed orders. Finally the orders [1] initialize at forty and then increase to about fty four they oscillate having the highest at about fty ve and the lowest at twenty. In the rst ve years there is a lot of instability but after the ve years the system starts gaining its stability.

53

Chapter 5 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter examines how the objectives of the research were achieved using System Dynamics, modeling and simulation as well as validation using previous studies. The methodology to detect changes in the SC behavior due to external and/or internal factors, recomendations, outcomes and contribution of the research are also discussed in this charpter.

5.2

Discussion

The aim and objectives of this study were achieved using a number of techniques which included a critical review of the literature, identifying of the issues and factors that affect supply chain management. Critical variables of supply chain management in resource costrained settings were identied for inclusion in a simulation-based tool. The problem statement stage of the Systems Dynamics Methodology was accomplished by constructing a dynamic hypothesis that helps to realise the interelationships of the critical variables. Causal loop diagrams were constructed from the dynamic hypothesis depicting the various variables that gave rise to the critical variables, plus the interelationships between them. The literature review discussed a number of areas evolving around the supply chain and system dynamics; how its managed, steps involved, background and various denitions (views) 54

as per various authors. This thesis introduces a methodology for detecting and predicting SC behavior changes based on the dynamics of the supply chain in resource constrained setting. This methodology has three phases: (1) capture the dynamics of the SC, (2) detect changes and predict the behavior based on them, (3) make modications to avoid the unwanted behavior in performance. System dynamics is a good methodology to model the SC system and the impact of changes in the business environment.

5.2.1

The supply chain market

The Newspaper market is dynamic in nature and due to internal and external changes for example; change in management, Political Seasons, Weather and change is consumer taste and preferences which are key components of many of todays Newspaper leading companies in resource constrained settings. Companies that look for new and better methods survive. Process re-engineering is still a vital part of managements daily struggle to maintain market share. Increasingly, the ability of companies to operate at lower costs while delivering goods and services to customers on time has become the focus of strategic planning meetings. One of the most costly and dicult parts of a resource constrained business is to manage the supply chain. The supply chain consists of a companys network of suppliers, production processes, warehousing and distribution methods, and customers. The goal is to manage all aspects of the supply chain to meet customer demand without driving up costs or inventory.

5.3

The Simulation Tool

There are dierent variables in the Simulation tool . When the model is run it shows a forecast into the future of how the sales, orders and disposal rate interact at various stages in time. This helps decision makers come up with eective ways of how to handel the supply chain at a point in time. In the rst experiment a graph showing Sales, Orders, Disposal rate and Production rate is executed where the sales increase over time the disposal rate reduces and the production rate is kept constant. The is amplication in the Orders this is true because the placed orders

55

vary from time to time In the second experiment which comprises of Orders, Processed orders, Disposal rate and Production rate mainly gives a comparison among dierent variables. The orders and Processed orders are both amplied but the graph shows that orders are greater than processed orders and they are both unstable thats they keep changing over a period of time while others are kept constant.

5.4

Validation

Validation is the process of ensuring that the model is suciently accurate for the purpose at hand Stewart (1997) [108]. The two key concepts in validation are; the ideas of sucient accuracy and models that are built for a specic purpose. There is no model that is 100% accurate, indeed, a model is not meant to be completely accurate, but a simplied means for understanding and exploring reality Pidd (2003). One of the most dicult problems facing a simulation analyst is that of trying to determine whether a simulation model is an accurate representation of the actual system being studied, for the particular objectives. In this case, the following were done to validate the model: 1. A walk-thru using the loop diagram generated from the dynamic hypothesis was carried out and showed that the logic was correct. 2. The stock and ow diagram generated no errors when run over a period of Time. 3. The tool was compared to the case study data that was collected and the model was taken to the New Vision Circulation Manager at the head oce to check whether the system developed was valid depending on the procedures, processes and information ow the company has in place. It was conrmed that the developed model derived good results hence; the model is suciently accurate for a newspaper supply chain management.

56

5.5

Conclusions

SD has been widely applied to SC applications to address various issues in developed areas, this is unlike in resource-constrained settings where SD and SCM have been neglected and have not been highly applied. One of the serious issues with SCM in resource-constrained settings is the change in the SC behavior due to external market factors and/or internal system and managerial factors. What makes it a signicantly serious problem is that SC behavior is dynamic and controlled by nonlinear interrelationships and interactions among its components. Small variations in demand, for example, can simply cause disproportional major uctuations and oscillating reactions along the SC.

The simulation model was used as a tool to design a generic model for supply chain managemnt in resource constrained settings derived from dierent steps(stages) in a madia company, which was used as a case study. Dierent variables like consumer demand, quantity produced, competitor prodects, Markert Segmentation, Costs, Price, Revenue, Inventory, product design and Sales were identied and used. This delivered interesting results as discussed above.

5.6

Further Research

With the completion of this research there is a lot of research that can be done in this areas thats; Inventory management, Logistic Management, The supply chain bullwhip eect, Capacity management etc. Simulation of various supply chain is also recommended to give a better understanding of dierent supply chains in dierent settings. During this research there was an issue of limited literature on supply chain management in resource constrained setting which strained the researcher and no model in this setting had been developed which required the research develop the model from scratch. Therefore more research in this area is recommended at advanced stages

57

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APPENDICES
Appendix A: Code

Figure 5.1: Distribution code

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Figure 5.2: Factory and market code

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Appendix B:
Appendix B: Interview Questions
Distributor 1. What type of newspapers do you distribute? 2. How many newspapers do you receive from the head oce and how soon are they delivered? 3. Do you distribute all the news supplied to you from the head oce? 4. If not what happens to the remaining newspapers? 5. On average how many newspapers are distributed daily? 6. How many are returned to the Distribution centre on a daily basis? 7. Please take me through the ordering and distribution process. 8. How often do you make/place orders? 9. When you place an order, how long do they take to be fullled? 10. Are all orders fullled? If not why?

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Circulation Manager 1. Please take me through the distribution process? 2. How Many newspapers are printed every day on Average? 3. Do you distribute all the printed newspapers, If not what happens to the newspapers that are not distributed? 4. How many distribution centers do you have? 5. How do you transport the newspapers to various centers and how soon are they received?

a) Are there any delays or emergency cases? 6. How Many Newspapers are supplied to each distribution center everyday? 7. Please take me through the ordering process? 8. Approximately how many orders do you receive from distributors per day? 9. Are all orders placed fullled? 10. If not what happens to orders that are not fullled? 11. According to the data that I received from your company about returns and supplies, the Month of February tremendously has low supplies why? 12. What aects your supplies?

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Questionnaire 1. What newspaper do you read? a) Bukedde b) New Vision 2. How often do you read the selected newspaper above? a) Every day d) 3 days a week b) Once a week e) 4 days a week c) 2 days a week f) 5 days a week g) 6 days a week

3. How do you rate the content in the newspaper selected in (1) above? a) Poor b) Fair c) Good d) Very good e) Excellent

4. What is your favorite Column in the newspaper selected in (1) above? And why? ................................................................................................................... 5. Do you receive Newspapers in your home area every day? a) Yes b) No

6. If yes, how soon do you get the newspaper? a) By 8:00 am b) by 10:00am c) by noon (12:00pm) d) after 12:00pm

7. Other than Bukedde and New Vision which other news paper do you read? and why? ......................................................................................................... 8. How do you rate the newspaper in (7) above? a) Poor b) Fair c) Good d) Very good e) Excellent

9. Why do you choose to read the newspaper in (7) above? ......................................................................................................... ......................................................................................................... 10. Please note down any comments about Bukedde/New Vision newspapers in the space below? ..................................................................................................................... 74