Establishing a Framework for Effective Materials Logistics Management

Abstract

The “Law of Industrial Dynamics” is a well‐known phenomenon which leads to significant swings in demand as orders are passed down along a supply chain. Large fluctuations in demand result for the manufacturer leading to policies which counteract the objectives of materials logistics management which are to reduce inventories while maintaining strategic stocks, improve product quality, minimize the total cost of operations and procurement, ensure service levels to customers and minimize variance in material flow. A number of strategies have been advocated and applied which may be summarized as integrating the supply chain and adopting lean manufacturing techniques. Such strategies encompass three main factors, classified as technological (which may include adopting electronic data interchange), organizational (such as moving towards focused plants) and attitudinal (such as the adoption of Partnership Sourcing as a strategy). This paper provides a framework in which systems dynamics modeling, analysis and simulation aids in the decision making process to establish how best to achieve the materials logistics management objectives. Firstly, during the modeling and analysis phase, the supply chain champion is provided with insight as to the effectiveness of the current supply chain design to damp down order fluctuations. Secondly, on the basis of continuous improvement, simulation then allows him to re‐engineer the supply chain by asking “what if?” questions and assessing the relative benefits of various strategies against the financial and attitudinal costs of implementation.