Supply Chain Disruptions

Supply
SupplyChain
ChainDisruptions
Disruptions
This
Thismodel
modelillustrates
illustrateshow
howdisruptions
disruptionsatatsuppliers,
suppliers,such
suchasasweather,
weather,strikes,
strikes,ororothers,
others,can
canaffect
affectaasupply
supplychain,
chain,and
andhow
how
can
can be mitigated. The model assumes that there are two suppliers, S1 and S2, and two manufacturers, M1 and M2.Norm
be mitigated. The model assumes that there are two suppliers, S1 and S2, and two manufacturers, M1 and M2. Nor
only
onlyM1
M1and andS2 S2supplies
suppliesonly
onlyM2.
M2.The
Thelead
leadtimes
timesfor
fororders
ordersfrom
fromthese
these"primary"
"primary"suppliers
suppliersare
are22weeks
weekseach.
each.However,
However,t
disruptions
disruptions at the suppliers, and each disruption can last a random number of weeks. If an order is placed duringaadisrup
at the suppliers, and each disruption can last a random number of weeks. If an order is placed during disru
order
orderisisignored
ignoredby bythe
thesupplier,
supplier,resulting
resultingininan
anincreased
increasedchance
chanceof ofstockouts
stockoutsatatthe
themanufacturer.
manufacturer.To Tomitigate
mitigatethis,
this,the
thess
"share"
"share" suppliers, so that, for example, if M1 places an order with S1 and S1 is experiencing a disruption, the order canbb
suppliers, so that, for example, if M1 places an order with S1 and S1 is experiencing a disruption, the order can
unless
unlessS2S2isisalso
alsoexperiencing
experiencingaadisruption.
disruption.TheThemodel
modelassumes
assumesample
amplecapacity
capacityatatthe
thesuppliers,
suppliers,but
butthe
thelead
leadtimes
timesare
arelolo
shared suppliers.
shared suppliers.
The
Themodel
modelassumes
assumesPert
Pertdistributed
distributedweekly
weeklydemands
demandsat atthe
themanufacturers
manufacturersand andgeometrically
geometricallydistributed
distributedtime
time
disruptions
disruptions at the suppliers, where each disruption lasts for a discrete distributed number of weeks.Each
at the suppliers, where each disruption lasts for a discrete distributed number of weeks. Eachman
man
order
orderpolicy
policycharacterized
characterizedbybyaatrigger
triggerand
andananorder
orderquantity.
quantity.Specifically,
Specifically,ififthe
themanufacturer's
manufacturer'sinventory
inventorypositi
positi
inventory
inventory minus stockouts plus items in the delivery pipeline) is less than or equal to the trigger,an
minus stockouts plus items in the delivery pipeline) is less than or equal to the trigger, anorder
orderfor
forth
t
quantity
quantity is placed. The triggers and order quantities used were found with RISKOptimizer by minimizing thesum
is placed. The triggers and order quantities used were found with RISKOptimizer by minimizing the su
average
averageonhand
onhandinventory
inventory and
andtotal
totalstockouts
stockoutsforforaamodel
modelwith
withno nodisruptions,
disruptions,but
butother
othertriggers
triggersand
andorder
orderqu
q
tested.
tested. (You can check the RISKOptimizer Model Definition, but it was used only with the tiny disruptionproba
(You can check the RISKOptimizer Model Definition, but it was used only with the tiny disruption proba
and
andC6.)
C6.)
The
Themodel
modeluses
usesaaRiskSimtable
RiskSimtablefunction
functiontotorun
run55simulations
simulationsfor
foraa5-year
5-year(260-week)
(260-week)period.
period.The
Thefirst
firstmakes
makesthth
disruptions
disruptions virtually 0. The second and third use "low" and "moderate" disruption frequencies, but nosupplier
virtually 0. The second and third use "low" and "moderate" disruption frequencies, but no supplie
allowed.
allowed.The
Thelast
lasttwo
twosimulations
simulationshave
havethe
thesame
samelow
lowand
andmoderate
moderatedisruption
disruptionfrequencies,
frequencies,but
butthey
theyallow
allowsup
sup
When you run these simulations, you can examine any of the red output cells, but you should find in
When you run these simulations, you can examine any of the red output cells, but you should find in particula particular
manufacturers
manufacturers experience
experiencemany
manymore
morestockouts
stockoutswith
withdisruptions
disruptionsthan
thanwithout
withoutthem,
them,with
withor
orwithout
withoutsupplier
supplie
sharing mitigates the stockout risk to a large extent.
sharing mitigates the stockout risk to a large extent.
ffect aasupply
affect supplychain,
chain,and
andhow
howsuchsuchdisruptions
disruptions
nufacturers, M1 and M2. Normally,S1
ufacturers, M1 and M2. Normally, S1supplies
supplies
are
are22weeks
weekseach.
each.However,
However,there
thereare areoccasional
occasional
order
orderisisplaced
placedduring
duringaadisruption
disruptionperiod,
period,this
this
cturer. To
acturer. Tomitigate
mitigatethis,
this,the
thesupply
supplychainchaincan
can
gaadisruption,
disruption,thetheorder
ordercan
canbebefilled
filledbybyS2,
S2,
ers,
iers,but
butthe
thelead
leadtimes
timesare
arelonger
longerfromfromthe
the
metrically distributed
ometrically distributedtimes
timesbetween
between
umber
umber of weeks. Each manufactureruses
of weeks. Each manufacturer usesanan
ufacturer's inventory position (onhand
nufacturer's inventory position (onhand
oothe
thetrigger,
trigger,an
anorder
orderfor
forthe
thespecified
specified
mizer
mizer by minimizing the sumof
by minimizing the sum ofmean
mean
other
othertriggers
triggersand
andorder
orderquantities
quantitiescould
couldbebe
hhthe
the tiny disruption probabilities incells
tiny disruption probabilities in cellsC5
C5
)period.
period.The
Thefirst
firstmakes
makesthe
thechance
chanceof of
requencies, but no supplier sharingisis
equencies, but no supplier sharing
encies, but
uencies, butthey
theyallow
allowsupplier
suppliersharing.
sharing.
you should find in particularthat
ou should find in particular that(1)
(1)the
the
m,
m, with or without supplier sharing,but
with or without supplier sharing, but(2)
(2)
Inputs
Combinations to try
Simulation index 1 2 3 4 5
Disruption probability S1 1E-05 0.01 0.025 0.01 0.025
Disruption probability S2 1E-05 0.025 0.05 0.025 0.05
Share suppliers? No No No Yes Yes
Simulation index #NAME?
Disruption parameters
S1 S2
Disruption probability #NAME? #NAME?
Disruption length
Weeks Probability Weeks Probability
1 0.2 1 0.2
2 0.3 2 0.3
3 0.3 3 0.3
4 0.2 4 0.2
Share suppliers? #NAME?
Outputs
M1 M2 Orders not filled due to disruptions
Avg inventory #NAME? #NAME? M1
Total stockouts #NAME? #NAME? S1 #NAME?
Supplier 1 orders #NAME? #NAME? S2 #NAME?
Supplier 2 orders #NAME? #NAME?
S1 S2
Weeks disrupted #NAME? #NAME?
Simulation of disruptions
Supplier 1 Supplier 2
Disruption Start week End week Start week End week
0 0 0 0
1 #NAME? #NAME? #NAME? #NAME?
Demand distribution (Pert rounded to integer) Order up-to policies
M1 M2 M1 M2
Minimum 100 200 Trigger 380 760
Most likely 150 300 Quantity 210 420
Maximum 250 500
Order lead times (weeks)

From\To M1 M2
S1 2 4
S2 3 2
due to disruptions Objective for RISKOptimizer

M2 #NAME?
0
0
Simulation of inventories
Disruptions Manufacturer 1
Week Supplier 1 Supplier 2 Pipeline 1 Pipeline 2 Delivery 1 Delivery 2 Demand
1 No No 0 0 0 0 #NAME?
2 No No 210 #NAME? 0 0 #NAME?
3 No No #NAME? #NAME? 210 0 #NAME?
4 No No #NAME? #NAME? #NAME? #NAME? #NAME?
Manufacturer 1 Ma
Onhand Stockout Inv Position Order Order 1 Order 2 Pipeline 1 Pipeline 2 Delivery 1
300 0 300
#NAME? #NAME? 0 210 210 #NAME? 0 0 0
#NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? 420 0
#NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? 0
#NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? 0
#NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?
Manufacturer 2
Delivery 2 Demand Onhand Stockout Inv Position Order Order 1 Order 2
600 0 600
0 #NAME? #NAME? #NAME? 0 420 #NAME? 420
0 #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?
420 #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?
#NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?

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Simulation index #NAME?

Share suppliers? #NAME?

Order lead times (weeks)

due to disruptions Objective for RISKOptimizer

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