Excerpt from: China Supply Chain and Logistics Strategy
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| October 21, 2005 | | Optimizing China Sourcing and Logistics Networks | The effective configuration of the supply chain is a key determinant of competitiveness and success for today’s global manufacturers. The most pressing challenge for manufacturers is to gain a full understanding of the supply chain’s characteristics, performance, and trade-offs involved. These problems are difficult to analyze globally without the use of computer modeling. Computer modeling can help find the least-cost configuration and flows of a distribution system based on conditions that are established by the user. Modeling can help you:
Make strategic sourcing decisions
- Should we source from China?
- Test various supplier policies and their effects on production, transportation, and inventory costs
Supply chain planning
- Prepare distribution budgets
Improve transportation policies
- Make strategic decisions regarding choice of transportation lanes
- Calculate average unit costs for new lanes, service parameters and warehouse location
Evaluate alternative inventory strategies and approaches
- Determine most cost saving inventory policy under a given demand pattern
- Assess trade-offs between delivery performance and inventory cost
The China Challenge
Computer modeling of a supply chain requires that companies gather information from suppliers, freight forwarders, carriers, third party logistics companies, retail outlets, etc. The main obstacle is getting usable information about your suppliers and downstream customers. This is particularly difficult in China where there is a scarcity of accurate supply chain and logistics information. In addition, quantitative computer models must be adapted to the China environment and blended with qualitative analysis which considers some of the following dynamic constraints:
- Multi-modal Transportation Constraints
- Rail Transportation Constraints
- Inland Waterway Transportation Constraints
- Ocean Transportation Constraints
- Ground Transportation Constraints
- China Sourcing and Procurement Constraints
Modeling Limitations
Computer modeling provides quick discovery of the dynamics involved in a complex supply chain. However, models can never be perfect representations of the real world. All models contain simplifications which limit their accuracy. This is especially true in China where numerous constraints limit the reliance on pure modeling. Thus, a major issue for modelers involves validation: establishing confidence that the model is able to represent adequately the real world. The real world supply chain is distinguished from the conceptual model. The computer model is constructed as a further simplification of the conceptual model. A good modeler is alert to the simplifications built into the modeling tool and is aware that these simplifications constrain its applications. It is vital that validation work is performed to establish correspondence with the real world. Validation requires checking the model behavior in light of real world behavior, not against the conceptual model. | | |
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