A Methodology for Simulation Conceptual Modelling that Embeds the SCOR Process

Reference Model

Dr. Miles Weaver,School of Management, Edinburgh Napier University

m.weaver@napier.ac.uk @DrMilesWeaver

#SimCM

Dr. Pavel Albores,Aston Business School

Dr. Doug Love,Aston Business School

Outline• Importance of conceptual

modelling and need for a SCM2

• Requirements (Specification) - (what do we need the conceptual model to do)

• Outline design - (what procedure is needed to arrive at this conceptual model)

• Illustration of the SCM2 and the incorporated key concepts

– General guidelines for building an ‘effective’ conceptual modelling

– Embedding the utility of a process reference model (e.g. SCOR) 

What is a simulation conceptual model?A simulation conceptual model (SimCM):

• Documents and details the explicit statement of assumptions and relationships to be included in the simulation model in accordance with the problem statement (Manuj et al., 2009)

• A non-software specific description of the simulation model that is to be developed, describing the objectives, inputs, outputs, content, assumptions and simplification of the model (Robinson, 2004; 2008)

Uniqueness for simulation purposes:

• ‘process’ to be followed – at the heart of this is setting the model boundary & level of detail (model content)

• ‘output’ – the description of the computer model to be built is as ‘simple as possible’ (by drawing assumptions & simplifications) and is both credible & valid

Simulation conceptual modelling for SCM applications

• Evaluating supply chain problems is important (Stewart, 1997); difficulty is that they are inherently complex and dynamic systems (e.g. Davies, 1993; Levy, 1994; Beamon, 1998)

• Simulation is an approach that is often used for evaluating SC problems; extent of research is great (Weaver, 2010)

• Creating a conceptual model is often regarded as the most important stage of a simulation project (Law, 1991); but little is written on the subject (Robinson, 2004b).

• SimCM is a ripe area for research (Robinson, 2006, 2010). Even in the SCM domain, Manuj et al., (2009) noted that further development in this area can improve the rigour of simulation studies

• No methodologies exist that could guide a user through the creation of a conceptual model (Weaver, 2010).

The ‘idea’ behind the SCM2

+=

Domain-specificSimCM procedure for

SCM applications

Incorporate existingSimCM guidance from

the literature

Embed domain-knowledge in the form of a process reference model

Provide inputs to the process of SimCM (i.e. setting the

model boundary & detail) and standard descriptions?

Incorporate a general process, general principles,

methods for validation, advice on simplification?

Relationship between the requirements and outline design for SCM2

  

Outline design(what procedure is needed to arrive at

this conceptual model)

Requirements (Specification)(what do we need the conceptual model to do)

Requirements for building an ‘effective’

conceptual model

Requirements for conceptual modelling for SCM application (domain-specific requirement)

Validity &Credibility

Model simplicity

SC complexity SC detail SC

objectivesSupply setting

General guidelines for building an ‘effective’ conceptual modelling

General process for conceptual modelling

Incorporating existing guidance to build a ‘valid’ and ‘credible’ model

         

Incorporating existing guidance to keep the model as ‘simple’ as possible

         

Embedding the utility of a process reference model (e.g. SCOR) 

Using SCOR to describe supply chain improvements      

Using SCOR to describe supply chain objectives

       

Using SCOR to determine the interconnections with the supply setting

     

Phase 1:

Describe the supply problem

Output: Description of the improvement(s) to be evaluated, for a given

objective(s) within its supply setting

Phase 3:

Determine how each improvement

is to be represented

Output: Description of the processes that represent

each improvement

Phase 2:

Determine how each objective is to

be measured

Output: Description of the processes that provide data

used to calculate each objective

Phase 4:

Determine how the inputs and their

sources interconnect within the model and with

its immediate supply setting

Output: List of inputs and candidate processes for possible inclusion in the

model boundary

Phase 5:

Formulate the model boundary

Output: List of processes and inputs included in the model

Phase 7:

Document and validate the conceptual model

Output: A valid description of the computer model to be developed

Phase 6:

Design the level of detail necessary to

implement the modelOutput: Description of the

model components and interconnections that represent the actual

practices included in the model

Point of entry

A formal problem formulation and structuring methodology or unstructured problem from client

Build a prototype and use sensitivity analysis to extend

the model boundary and level of detail

Output: Refinement of the model boundary and level of

detail

Iterate for each PROMOTED process decided in phase five

Experimental situation:CoffeePot Case

Q: Where and how to cost effectively manufacture products in a global and complex supply setting?

Efficient manufacturing scenario in a low-cost area with either shipments made in:(S1) small (by air)(S2) large quantities (by road and ship).

Further detail on the CoffeePot case: Taylor, G. D., Love, D. M., Weaver, M. W., & Stone, J. (2009). Determining inventory service support levels in multinational companies. International Journal of Production Economics, Vol. 116 No. 1, pp. 1–11.

Phase one:Describe the supply problem

Output: The supply problem is described from the perspective of the client

Statement of supply chain problem

Statement of objective(s) of study

Output from 1.1

A multi-national manufacturing company (MNC) is deciding how to cost effectively manufacture products in a global setting. The aim is to determine how much finished goods stock (reduce supply chain assets) to have on hand to support sales at a 95% desired service level (increase supply chain reliability).

Description of improvements to change the existing system

Output from 1.2

A MNC has an efficient manufacturing facility in a low-income/low-cost location (i.e. Asia or Africa) and a warehouse in a high-cost area where the product is primarily distributed and sold. Shipments are currently made in large quantities, with a cost effective and slow shipping method (road and sea). The MNC wants to consider the impact of a change in the shipping method, by shipping in small quantities, with an expensive and fast shipping method (all air) on the defined objective.

Description of the problem setting

Output from 1.3

The MNC has an efficient manufacturing facility in a low-income/low-cost location (i.e. Asia or Africa) and a warehouse in a high-income/high-cost location where the product is primarily distributed and sold (i.e. North America or Western Europe). The capacity for an efficient production facility is defined as one which has a low cost of capital and shipping in economic quantities. The method for shipments from a low-cost manufacturing location to a warehouse in a high-cost area can be larger, cost effective and slow, or small, expensive and fast. It is assumed that the product selected is a coffee maker (Mr Coffee Expert Model) which is representative of a functional product type.

Statement of how each improvement could achieve the desired impact on the objective(s)

Output from 1.4

An off-shore location offers advantages to reduce cost (e.g. Alguire, Frear and Metcalf, 1994; Fagan, 1991; Monczka and Trent, 1991). The study seeks to examine how much finished goods inventory at hand is needed in the warehouse to satisfy a defined customer service requirement at lowest cost. The shipment size, speed and cost will affect how much finished stock is available at hand. If there is insufficient inventory stock-out will occur leading to the service level not being met, while too much inventory will satisfy the requirement but will incur a cost. Simulation is a good method to evaluate this problem as it will allow a user to adjust the re-order point to obtain a desired service level and review the implications on finished goods inventory costs.

Key Concept 1: Embedding SCOR in a generic procedure for simulation conceptual modelling can aid in the description of a problem from the perspective of the client using standard terminology and domain-specific process detail

Phase two:Determine how each objective is to be measured

Output: The objective is described in terms of how it will be measured

Statement of how each objective will be measured

Perf. Att. Perf.

metric level

Perf. metric Definition of metric calculation Process elements Actor M’ment

span

Output from 2.1 Output from 2.2 Output from 2.3

Assets Level 3 metric

AM3.16: Inventory days of supply (Value of finished goods inventory/(COGS/365))

S1.4 WH Process

D1.8 WH Process

Delivery reliability

Level 2 metric

RL.2.2: Delivery performance to customer commit date

The percentage of orders that are fulfilled on the customer's originally scheduled or committed date = [Total number of orders delivered on the original commitment date] / [Total number of orders delivered] X 100%

D1.3 WH Process D1.12 WH Process D1.13 WH Process

Key concept 2: Embedding SCOR in a generic procedure for simulation conceptual modelling can aid in determining how an objective can be measured using standard descriptions of typical performance attributes and metrics; plus data collection needs from associated business processes at different levels of detail

Phase three:Determine how each improvement is to be represented

Output: The improvement is described in terms of how it is to be represented

Statement of how each process is to represent each improvement

Improvement option Level of process detail

Business process Actor

Output from step 1.1.2 Output from step 3.1 Output

from 3.2

A MNC has an efficient manufacturing facility in a low-income/low-cost location (i.e. Asia or Africa) and a warehouse in a high-cost area where the product is primarily distributed and sold. Shipments are currently made in large quantities, with a cost effective and slow shipping method (road and sea). The MNC wants to consider the impact of a change in shipping method by shipping in small quantities, with an expensive and fast shipping method (all air) on the defined objective.

Level 3 D2.10 Fact.

Level 3 D2.11 Fact.

Level 3 D2.12 Fact.

Level 3 D2.13 Fact.

Key Concept 3: Embedding SCOR in a generic procedure for simulation conceptual modelling can aid in determining how each improvement can be represented by business processes to implement each improvement at different levels of detail

Phase four:Determine how the inputs and their sources

interconnect within the model and with its immediate supply setting

Output: Provide a list of model inputs and candidate process elements (NB supplies information only to formulate the model boundary)

Key Concepts 4 and 5: Embedding SCOR in a generic procedure for simulation conceptual modelling can aid in determining the model boundary by providing information on the relationships between business processes (i.e. interconnections between inputs and outputs germane to each process element)

Key concept 4: Identification of core process elements and their inputs generated from a

source process elementDescription of the supply problem

Description of how each objective is to be measured

e.g.S1.4 (WH), D1.8 (WH), D1.3 (WH), D1.12 (WH), D1.13 (WH))

Description of each improvement to be

represented

e.g. D2.10 (F), D2.11 (F), D2.12 (F), D2.13 (F)

Example of SCOR inputs and outputs to a decomposed business processSource: SCOR V.9 (2008)

Phase four:Determine how the inputs and their sources

interconnect within the model and with its immediate supply setting

Output: Provide a list of model inputs and candidate process elements (NB supplies information only to formulate the model boundary)

Key concept 5: Process elements that have yet to be included in the model can be classed as ‘candidates’ for possible inclusion

Does the source process element (that generates each input to be fed) exist as a CORE or PROMOTED process element?

Phase five:Formulate the model boundary

Output: Provide a list of processes and inputs included in the model

Key concept 6: Decision rules can be used to consider which business processes to include within the model boundary from identifying the critical relationships between (core processes) and within the setting (real world) of the processes that are associated with each objective and improvement

Simplify – Promote – Test - Exclude

Rule 1: Will the input to be generated from the candidate process element effect model behaviour by significantly impacting on the objectives of study?

Phase five:Formulate the model boundary

Output: Provide a list of processes and inputs included in the model

Decision rules can be embedded in a generic procedure to simplify inputs to the model and to determine when no further processes should be included in the scope of the model (i.e. model boundary is set)

Simplify – Promote – Test - Exclude

Key Concept 7: Included process elements are considered in turn to identify those that could be simplified

Rule 2: Can the input be generated in a simplified form (i.e. a random distribution or fixed value), so that there are no further inputs to the process?

Embedding SCOR in a generic procedure for SimCM can (not in the scope of presentation):

• Key concepts 1 – 5: Aid in providing clear domain-specific guidelines for extracting information from a pre-defined process reference model and when necessary focus consultation with people who are knowledgeable about the system being represented

• Key concept 8 & 9: Aid in focusing consultation with people who are knowledgeable about the system being represented to determine the detail of the actual practice that needs to be included from the descriptions provided for each process element included in the model boundary and simplified inputs

Example of SCOR inputs and outputs to a decomposed business processSource: SCOR V.9 (2008)

Summary & implications for further work

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Domain-specificSimCM procedure for

SCM applications

Incorporate existingSimCM guidance in the

literature

Embed domain-knowledge in the form of a process reference model

1. Develop a web-based application that can automate a number of the steps2. Further refinement and validation of the SCM2

• Feasibility & utility with a range of process reference models in different industrial contexts