Simulating supply chain flows & the enhanced benefits of logistics system performance

By Cao Ngoc Thanh|02/10/2023 11:10

Supply chain simulation (also referred to as process transportation simulation) plays a crucial role in the field of logistics worldwide and in Vietnam. It is a computer-based technical tool utilized to simulate detailed cargo transportation activities from origin to destination.

The role of supply chain simulation is to assist businesses and organizations in gaining a deeper understanding of the cargo transportation process and seeking improvements and process optimizations. By simulating supply chain flows, users can preview the cargo transportation process and identify potential issues or unwanted barriers. This helps them make informed decisions to enhance performance and minimize risks in logistics operations.


Benefits and steps of supply chain

Simulation Supply chain simulation is a vital tool for optimizing logistics operations, reducing errors, costs, and ensuring smooth and efficient flow of goods. Supply chain simulation is the process of analyzing and replicating the movement of goods in the logistics field. The supply chain simulation process includes the following stages:

»  Goal Identification: Firstly, it's necessary to determine the objectives of supply chain simulation. Objectives can include optimizing transportation routes, efficient warehouse arrangement, predicting transportation times, or evaluating the performance of the logistics system.

»  Data Collection: Next, gather data relevant to the logistics process. Information such as the quantity of goods, distances, times, transportation costs, legal constraints, and operational rules need to be collected to input into the model.

» Model Building: Once sufficient data is collected, proceed to construct a model for the logistics process. The model can be created using simulation software or appropriate programming languages. The model must include essential elements like origin and destination points, transportation processes, warehouses, and other relevant constraints.

» Model Parameterization: After building the model, necessary parameters for supply chain simulation are usually set. These parameters might include information about transportation resources, processing times, priority rules, and other specific conditions.

»  Simulation Run: Next, run the supply chain simulation by inputting data into the model and executing the movement and activities within the logistics process. Throughout the simulation run, data about performance, time, and other relevant metrics are collected.

»  Results Evaluation: Following the simulation process, the obtained results can be evaluated. This involves comparing the results with the initially set objectives and analyzing performance, efficiency, and other key indicators. 

» Optimization and Testing: Based on the evaluation results, optimization of the supply chain simulation can be carried out by modifying parameters, adjusting processes, or applying optimization algorithms. Subsequently, retesting is performed to determine whether the changes have improved performance.

» Analysis and Reporting: Lastly, the results obtained from the supply chain simulation are analyzed, and a report is generated to present analyses, evaluations, and recommendations. The supply chain simulation report provides detailed insights into the performance of the logistics process and recommendations for enhancing operations and optimizing performance.

Challenges in supply chain simulation


In addition, supply chain simulation can also be used to test various scenarios and evaluate the impact of changing factors. For instance, we can simulate changes in the transportation system, workflow processes, or shifts in customer demands to understand how these factors would affect performance and logistics operations. In summary, supply chain simulation is a vital tool in the logistics field for evaluating, optimizing, and enhancing the movement of goods. By creating a virtual simulation, we can gather information, make informed decisions, and develop more effective transportation and warehouse management strategies. Despite bringing numerous benefits and opportunities for logistics management, supply chain simulation also faces several challenges and difficulties:

»  Accurate Data: Supply chain simulation requires accurate and reliable data. To create an accurate model, information about the quantity of goods, distances, times, transportation costs, and legal constraints needs to be collected thoroughly and precisely from reliable sources. Inaccurate or incomplete data can lead to an inaccurate model and unreliable results.

»  Complexity and Elaboration: The process of simulating supply chain flows can be highly complex and intricate. Many factors need to be considered, such as origin and destination points, transportation routes, warehouse arrangements, legal constraints, and operational rules. This demands in- depth knowledge of the logistics industry and complex analytical skill

»  Process Modeling: Constructing a model for logistics processes can be a challenging task. Incorporating elements like warehouses, transportation vehicles, origin and destination points, loading points, and time constraints requires expertise in modeling and programming skills.

»  Data Collection from Diverse Sources: Gathering data from various sources within the logistics process can be complex. Information might need to be collected from inventory management systems, transportation management systems, carriers, and other relevant parties. This requires the ability to interact with diverse data sources and ensure data consistency.

»  Computational Power and Time: Supply chain simulation demands significant computational power, and the runtime of the model can consume substantial computational resources. The computation process can be time-consuming, especially for large-scale models or those with a high number of variables. This might lower efficiency and increase simulation costs.

»  Reliability and Validation: Another challenge is ensuring the reliability and validation of the supply chain simulation. The model must be rigorously tested to ensure it accurately reflects reality and is reliable. This involves thorough testing and evaluation to ensure your model is set up correctly, parameters are chosen appropriately, and simulation results match real-world data.

»  Not Accounting for Variability and Uncertainty: An important aspect of supply chain simulation is accounting for variability and uncertainty in logistics processes. This involves considering variations in factors like weather, traffic conditions, fluctuations in customer demands, and other uncertain variables. 

In conclusion, the application of simulation technology helps businesses identify optimal transportation processes and mitigate potential risks. Additionally, simulation aids businesses in predicting and responding to challenging situations, such as enhancing responsiveness during peak seasons or managing emergency situations. Although supply chain simulation requires effort and investment, it yields substantial benefits in understanding and optimizing logistics processes. By addressing these inherent challenges effectively, supply chain simulation can become a valuable tool for making informed decisions and enhancing operational efficiency in logistics systems.

(*) Socio - Economic Simulation and Forecast Center of Ho Chi Minh City (HIDS)

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Simulating supply chain flows & the enhanced benefits of logistics system performance