(518g) Flexibility Analysis of Process Supply Chains

A supply chain is a network within an organization or between multiple organizations that involves the procurement of raw materials, conversion from raw materials to final products, and distribution of final products to the markets (Simchi-Levi et al., 2003). A key feature for business nowadays is that it is the entire supply chain that competes, not individual companies, and the success of supply chains is ultimately determined by the end consumers (Christopher, 2005). Supply chains are subject to various types of uncertainty, which can be categorized as demand, process, supply, and control uncertainty (Geary et al., 2002). One of the key fundamentals for organizations to remain competitive, especially within a global environment, is to manage the production and distribution under various uncertainties in a cost-effective manner.

Operability of a chemical process reflects the ability of a process system to perform satisfactorily under the conditions away from the nominal operating and/or design conditions (Grossmann & Morari, 1984). Flexibility is one attribute of process operability, which refers to the ability of a process to maintain feasible steady-state operation over a range of conditions.  Swaney and Grossmann (1985) presented a systematic framework to analyze flexibility in chemical processes, and introduced the flexibility index, a scalar measure of flexibility, to quantitatively characterize flexibility as the size of parameter region for which feasible steady-state operation can be attained.  The flexibility index can also allow decision makers to evaluate economic versus flexibility trade-offs during process design and analysis.

Analogous to chemical processes, supply chain processes are required to satisfactorily meet customer demand or transition between operating policies rapidly to exploit external opportunities. The concepts of process flexibility are extended to supply chain operations to focus on the ability to hedge against uncertainty. Supply chain flexibility is widely found in the literature within the context of operations research. However, most discussions related to supply chain flexibility have been qualitative rather than quantitative. Beamon (1999) identified flexibility as one of the supply chain performance measures and proposed the evaluation of four types of flexibility (volume, delivery, mix, and new product flexibility). The needs have been established to develop systematic and quantitative flexibility assessment for supply chain networks.

This study presents an optimization-based flexibility analysis framework for the quantitative assessment of supply chain network flexibility.  This framework is extended and utilized for the design of flexible and profitable process supply chain systems. Case studies are developed to illustrate the applicability of the flexibility analysis framework in the following ways: (i) flexibility evaluation and analysis for an existing supply chain process with both internal and external uncertainty, (ii) identification and alleviation of the bottleneck conditions that restrict the flexibility within a process supply chain, and (iii) incorporation the flexibility analysis with supply chain design decisions to investigate the trade-off between economics and flexibility when designing new supply chain networks.

A goal of the current study is to develop a framework that can be used to analyze supply chain flexibility in a quantitative manner.  Preliminary results are presented, and insights to managing the relationship between profitability and flexibility will be discussed. In addition, key challenges and future research directions will be identified.

 References

 Beamon, B. (1999). Measuring supply chain performance. International Journal of Operations and Production Management, 19(3), 275-292.

Christopher, M. (2005). Logistics and Supply Chain Management: Creating Value-Adding Networks. (3rd ed.). Prentice Hall.

Geary, S., Childerhouse, P. and Towill, D. (2002). Uncertainty and the Seamless Supply Chain. Supply Chain Management Review. 6 (4), 52-61.

Grossmann, I., & Morari, M. (1984). Operability, resiliency and flexibility - process design objectives for a changing world. In Proceedings of 2nd International Conference on Foundations of Computer-Aided Process Design (Eds. A.W. Westerberg and H.H. Chien) (pp. 931-1030).

Simchi-Levi, D., Kaminsky, P., and Simchi-Levi, E. (2003). Designing and managing the supply chain: concepts, strategies, and case studies. McGraw-Hill Professional, 2nd edition.

Swaney, R., & Grossmann, I. (1985). An index for operational flexibility in chemical process design. part i: formulation and theory. AIChE Journal, 31, 621-630.