This is a report on the ChainSIM game simulation that simulates supply chain and operations management to demonstrate, in a simulation environment, how expenses and operations impact the efficiency in the supply chain and manufacturing sectors. In this simulation exercise, the basic frame and key issues of supply chain and production planning will be considered, including supply chain process effectiveness and cost analysis. This report will analyze the supply chain process effectiveness of the simulation conducted by the student, analyze the costs involved, and provide recommendations for improvement.
The first stage that must be analyzed in the case of any supply chain is that of supply chain effectiveness. As Foerstl et al. explain, supply chain effectiveness is a multi-dimensional process that requires the management of many different inputs. Simply put, as Heckmann et al. define it, supply chain effectiveness is defined as a means that enables the achievement of a predefined goal, despite adverse conditions, along with minimal spending of resources to achieve this goal. In the context of the ChainSIM game simulation, the question that must be asked is if the components needed to complete the finished product (a cellular phone, in this case) could be purchased and assembled in a timely manner to the customers
(Figure 1 omitted for preview. Available via download)
Based on Figure 1 illustrating the inventory report, the supply chain was less efficient than it could have been, given that a large number of components were left over after the finished products were delivered to the customers. According to the feedback provided in the Actions section of the simulation, this does not appear to be due to component shipping limitations. As noted in Figure 1, there were 200 of component A left after the products were delivered, however, in the Actions report illustrated in Figure 2, component A could be ordered in 50-unit increments. This suggests that too many of component A was ordered initially, which meant that resources were being spent on components in excess of the amount needed to actually produce the product. This is a supply chain inefficiency.
(Figure 2 omitted for preview. Available via download)
As Heckmann et al. noted, one of the key aspects of managing a supply chain in an efficient way is to make sure that efficiency-based figures such as costs, profit, and inventory are properly managed. The financial record, as illustrated in Figure 3 produced in ChainSIM, reveals that only one finished product was left in stock, which is a positive reflection on supply chain activity, however the fact that there were 200 excess stock of Component A and 440 excess stock of Component B reveals that the purchasing efficiency of the supply chain process was not as efficient as it could have been.
(Figure 3 omitted for preview. Available via download)
If fewer orders of batches of 50 units had been placed, this could have resulted in no units of Component A, and only 40 units of Component B being left over at the end of the simulation. The money saved by not having to spend money on components that were not needed could have increased the profitability of the supply chain process in this simulation.
As was noted at the outset, the ChainSIM process provided an opportunity to simulate the effectiveness in a setting to evaluate the benefits and processes needed to make a more efficient supply chain. As this supply chain demonstrated, in order to achieve a truly efficient supply chain, in order to fully maximize the efficiency of the supply chain, it is critical to make sure that not only are needed finished products produced, but also that valuable resources are not tied up in components that do not add value to the finished product and can cut into profitability.
ChainSIM. n.d. “Supply Chain and Operations Management Educational Simulation." http://www.chainsim.com/.
Foerstl, Kai, Martin C. Schleper, and Michael Henke. “Purchasing and Supply Management: From Efficiency to Effectiveness in an Integrated Supply Chain.” Journal of Purchasing and Supply Management 23, no. 4 : 223–228.
Heckmann, Iris, Tina Comes, and Stefan Nickel. “A Critical Review on Supply Chain Risk - Definition, Measure and Modeling.” Omega (United Kingdom) 52 : 119–132. https://doi.org/10.1016/j.omega.2014.10.004.