Supply Chain Modeling and Simulation Logic

SCM Globe simulations focus on the interactions between the four supply chain entities: Products; Facilities; Vehicles; and Routes. And we employ a map-based user interface to present essential supply chain activities in an easily understandable visual format. Maps provide an organizing context for displaying detailed performance data generated by the simulations. This makes SCM Globe understandable and usable by a wide business, professional and academic audience.

SCM Globe uses an agent-based model to simulate supply chains by tracking the flow of products through a network of facilities. Flow can be modeled using basic differential equations from fluid dynamics. Flow is influenced by the demand for products at facilities and the storage capacity at facilities. Flow is also influenced by the cargo capacity of vehicles moving products between facilities, plus vehicle speeds and trip frequencies on delivery routes.

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To make SCM Globe accessible to a wide audience, we summarize and simplify certain aspects of supply chain modeling. Other simulation applications track more variables, and have more features, and do more calculations. But that also makes them more complicated, harder to learn, and more expensive.

A Useful Model

There’s a saying in the statistics profession, “All models are wrong, but some are useful.” This saying is attributed to the distinguished British statistician George Box. What he meant is all models must be summaries or approximations of reality, and because they are approximations, they are wrong to some degree. Builders of models must select key variables that capture the essence of a situation because it is not possible to include all the different variables that exist, and address all their possible interactions. In a paper published in the Journal of the American Statistical Association, Box said, “Since all models are wrong the scientist cannot obtain a “correct” one by excessive elaboration. On the contrary, following William of Occam, he should seek an economical description of natural phenomena. Just as the ability to devise simple but evocative models is the signature of the great scientist, so over elaboration and over parameterization is often the mark of mediocrity.” ( Box, G. E. P. (1976), “Science and Statistics” (PDF), Journal of the American Statistical Association, Vol. 71: 791–799)

  An example of this is a famous mathematical model that captures the essence of the relationship between energy and matter in the universe. That model says energy equals mass times the speed of light squared, expressed as: E = mc2. There are many other variables (beyond energy, mass and the speed of light) that could potentially be included in a more elaborate model, but they would only increase the complexity and not significantly improve the model’s accuracy.

A map is another example of a model that summarizes reality. To contain all the detail of the real world a map would have to be as big as the world itself. So maps leave out a lot of detail, yet many are still quite useful.

A Mathematical Model Combined with a Map

SCM Globe combines a useful mathematical model (defined by the four entities) with a useful map (defined by Google Maps). It leaves out some supply chain detail and complexity yet models the essential operations of any supply chain. The resulting simulations create an accurate picture of the performance of whatever supply chain you wish to explore. Listed below are links to pages in this online guide where you can learn more about techniques and best practices for building supply chain models and using simulations to explore options and solve problems:

We continuously make improvements and add new features based on feedback from users and reviewers. See new reporting templates that use downloaded simulation data to create monthly Profit & Loss Reports plus key performance indicators. There is a new beta test version of the reporting template that includes a performance dashboard that shows how to optimize your supply chain design. Find more about this in Analyzing Simulation Data – scroll down to the heading titled “Download Simulation Data to Spreadsheet Reporting Templates”.

simulation-icon-thumb MODELING, SIMULATION AND TRAINING SERVICES

Advanced supply chain modeling, simulation, optimization, and risk assessment services are available through our consulting partners. They can work with you online or in person. Find out more by inquiring at info@scmglobe.com

NOTE: The academic version of SCM Globe supports supply chain models containing up to 15 – 20 products and a similar number of facilities, vehicles and routes. Models exceeding these limits will run slowly and experience other problems. See “Tips for Building Supply Chain Models” for further explanation and ways to work with these limits.

 

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