LOGISTICS CHAIN RE-ENGINEERING USING DYNAMIC MODELING

Abstract

Logistics activities are being looked upon as a promising area for change because of the major potential available in improving the customer satisfaction and simultaneously reducing the logistics related costs. The analysis of dynamic behavior of complex logistics chains resulting from a re-engineering effort is a difficult task because of the interaction among the various components of the system, many of which are non-linear and time-delayed. System dynamics modeling is a technique to understand the dynamic behavior of such complex systems. The present work aims to re-engineer the outbound logistics chain of a Public Sector Undertaking (PSU) in India using dynamic modeling. A detailed study of the outbound logistics chain of the PSU under study was conducted. After the study, a system dynamics model of the same was developed and modeled using Stella software. The model was validated by subjecting it to structural and behavior validation tests. The valid model of the outbound logistics chain was analyzed. It was observed that the available demand data was not used for any decision making process. Also inventory control systems were absent in the outbound logistics chain. Alternative configurations taking advantage of these opportunities were developed. These alternative configurations were validated using structural validation tests. After validation, these configurations were modeled and simulated using Stella software to find out their impact on the performance of the logistics chain. The performance of the present and alternative configurations was computed using a Performance Indicator incorporating cost and service level. Further the impact of unexpected step and impulse rise in demand on the performance of the alternative configurations were evaluated. The alternative configurations resulted in significantly better performance compared to the present configuration. They also performed satisfactorily during the unexpected demand conditions.