A Supply Chain Simulation Model With Customer's Satisfaction

A Supply Chain Simulation Model with Customers Satisfaction
Jianfeng Li, Yan Lin, Feng Jin

Management Science and Engineering , Dalian Maritime University
Dalian city, PR. China
E-mail lijianfeng_vvv@yahoo.com.cn
Abstract
According to the customers satisfaction, this paper establishes a two level supply chain simulation
model through system dynamics (SD) approach, and then, Simulink tool is adopted for that model.
Through the simulation, its shown that improvement of supply chain processs promptness can bring
out the more customers satisfaction, and then, the sale amount is increased. The indirect profit is
gained by means of improving operations efficiency in supply chain. In this way, the simulation about
customer satisfaction is reflected clearly, and that system dynamics simulation model can be helpful for
the supply chain management project.
Keywords: Supply Chain Management, Supply Chain Simulation, System Dynamics

1. Introduction
With the development of economic globalization, supply chain management (SCM) becomes an
important management conception for enterprises in the current vehement environment [1,2]. As what
Wood has stated, since the supply chain represents 60 to 80% of a typical companys cost structure, a
10% reduction can yield a 40 to 50% improvement in pre-tax profits [3]. For SCM, on account of
avoiding large expense for the failure of SCM projects, simulation is a widely and useful method, many
scholars have worked over the supply chain in order to achieve some value things:
Kang Bokyoung applied an new social network analysis method to simulate supply chain integrating
agent-based modeling[4]. Minegishi and Thiel made a system dynamics simulation for a food supply
chain system, that work sheds lighted on the complex nature of this specific type of supply chain and in
particular on the coordination of variables controlling the food production[5]. Adhitya, Arief integrated
dynamic simulation and LCA indicators to bring forward some decision support for green supply chain
operation[6]. Gavirneni, from the viewpoint of information distortion, simulated an overall supply chain
model, that emphasizes the value of information and extended existing inventory theory[7]. Towill from
system dynamics perspective also demonstrated that supply chain integration with exchange of
information was as beneficial as lead time reduction throughout the supply chain via JIT [8].
Dejonckheere examined the beneficial impact of information sharing in multi-tier supply chains and
discovered that information sharing helped to reduce the bullwhip effect in the chains with different
inventory policies [9]. Kumar used six sigma simulation and designed experiment to quantify supply
chain trade-offs and developed a flexible distribution networks[10].
In current simulation literature for SCM, the research on the reflection of customers satisfaction in
the supply chain is very little, in this way, this paper establishes a two level supply chain simulation
model with customers satisfaction through system dynamics, and showing some little improvement of
operations efficiency in supply chain can bring out the change of main customers satisfaction, which
also lead to alternation of other factors, such as sale amount.
The rest of the paper is organized as follows. In section 2, two level supply chain simulation model
using SD method is established. In section 3, Simulink tool is adopted for the above simulation model,
and then, the results expected from the simulation are described. In section4, the Simulation analysis on
customers satisfaction is given out. In section 5, the conclusions are presented finally.
International Journal of Advancements in Computing Technology(IJACT)

Volume4,Number10,June2012
doi:10.4156/ijact.vol4.issue10.15
125

2. Supply chain system dynamics model

Through the SD approach, a simple two-stage supply chain model is established, which is shown in
Fig.1. There are four basic roles in supply chain: customer, retailer, manufacturer and supplier. The
retailer orders the goods from the manufacturer and then sales them to customer. The manufacturer
orders relative materials from the supplier. The activities such as ordering, transporting, producing,
stocking and selling are included in that procedure basically.
Manufacturer
Supplier
GMT
CMT
OnM
PM
ComeM
GoM
Retailer
CRT
OnR
InventM
ProdM
CML
GRT
PMT
GoR
ComeR
Sale
PML
CRL
GRV
GMV
GM
FR
Market
Demand
GR
FM
SafM
Customer
InventR
DemRate
SumWeek
SafR
CuRateC or
CuRateG
Figure1. Supply Chain Simulation Model with Customers Satisfaction

The variables in that model are following:
Market: the stochastic total demand in the market.
Demand : the demand of customer in that supply chain.

DemRate: the rate of total demand for that customer.
CuRateC or CuRateG: the increasing or decreasing change rate of demand on account of
customers satisfaction.
SumWeek: the sum of demands for customer in a week
InventR or InventM: the inventory level for the retailer or manufacturer.
OnR or OnM: the stock of goods on the route for the retailer or manufacturer.
PM: the stock of goods produced by the manufacturer.
GoR or GoM: the goods flow from manufacturer or supplier.
ComeR or ComeM: the goods flow coming to the retailer or manufacturer.
ProdM: the goods flow that manufacturer produces.
GMT, CMT or PMT: the delay of ordering, transporting or producing for manufacturer.
GRT or CRT: the delay of ordering or transporting for retailer.
CML or PML: the limit of transporting or producing for manufacturer.
CRL: the limit of transporting capability for the retailer.
FR or FM: the forecasting value of selling goods for retailer of manufacturer.
SafR or SafM: the safety coefficient for the retailer or manufacturer.
GR or GM: the attending ordering amount for retailer or manufacturer.
Sale: the selling goods flow to the customer.
Here, the demand of customer in the market (Market) is stochastic, and the demand in that supply
chain is some part of the total demand in the market (Market*DemRate). The sale amount fulfilling
customers satisfaction depends on the retailers inventory level, in this way, the sale amount is the
minimum between the demand and the inventor level of retailer(InventR) in a special time t
(fundamental simple time). Supposing when the sale amount can meet the demand of the customer, the
number of customers buying in that supply chain will increase next time (CuRateC), otherwise the
number of customers will decreases (CuRateG).
The retailer makes ordering decision through exponential smoothing method according to the
summation of sale value over some time before, such as a week(SumWeek), Whats more, in order to
126

guarantee the enough inventories to fulfill the customer satisfaction, the retailer multiplies the
forecasting value through exponential smoothing method by a safety coefficient(SafR) and considers
that multiplied value as the forecasting sale amount next period(FR). Then, the retailer subtracts
amount of the goods on the route(OnR) and inventory amount(InventR) from that forecasting sale
amount to order from the manufacturer. If the result is larger than zero, the retailer orders that amount,
else doesnt order. The real ordering goods amount (GoR) is depended on the inventory level (InventM)
of manufacturer. The same is the manufacturer. The variable FM is the forecasting value through
exponential smoothing method, variable SafM is the safety coefficient, and GM is the ordering value
for the manufacturer, in which, goods on the route(OnM), inventory amount(inventM), and the goods
produced by manufacturer(PM) is also needed to subtract. However, the ordering amount from the
supplier is not under the control (GoM). i.e. the supplier can supply any ordering amount that the
manufacturer needs.
When the material goods flows in the supply chain, it will cost some time (CRT, CMT or
PMT), so is the ordering information exchanges (GRT or GMT), whichs more, the amount flow
of transportation (ComeM or ComeR) and production (ProdM) are limited by their ability (CML,
CRL and PML) on account of some reason, such as manufacturer cant produce enough goods
by machine in a fundamental simple time. In this way, the material is flowing over the supply
chain continuously, and a supply chain simulation model with customers satisfaction is
established.
3. Simulation through simulink

Simulink tool is adopted for the above SD simulation model (Fig.2), which is an environment for
multi-domain simulation and model-based design for dynamic and embedded systems.
In
Out
SumWeek
SumWeek
In
-K-
Market
Market
Demand
FR
Sub_Exponential
Smoothing_R SafR
Sub_SignalStatistic
Demand
Out
FRS
Signal
Random
Sale
MarkRateR
GR
FRS
Sub_Customer
Limit
signal
Out
In
Lev el
Sale
Inv entR
Lev el
ComeR
Out
GRT
CRL
Sub_OnR
Sub_InventR
-1
Z
GR
Divide
Sale
Limit
CRL
In
FMS
Limit
In
Out
GoR
Inv entM
Lev el
FMS
Sub_InventM
0
PML
ProdM
Out
Limit
PML
In
Sub_PM
FM
Out
In
Sub_Exponential
Smoothing_M
GM
OnM
PM
Lev el
PM
-KSafM
GM
CML
OnM
ComeM
Lev el
Out
Limit
In
GMT
CML
-1
Z
GMZ
GMZ
Sub_OnM
Figure2. Supply Chain Simulation through Simulink

There are mainly five kinds of subsystem:
(a) Subsystem for signal statistic
The Sub_SignalStatistic module in Fig.3 is this kind of subsystem, which is for calculating the
demands in some time before. In this module, input is the customers stochastic demands and output is
127

the summation of demands in some periods. Supposing the retailer orders the goods from the
manufacturer every week, it must calculate the summation of demands this week, and then consider
that statistic amount as some basis to forecast the probability sale amount next week. A summation
pulse signal every 7 day is produced in this subsystem.
In
1
K Ts
MATLAB
Function
z-1
mod1
Discrete-Time
Integrator
Clock1
Sum
Switch3
== 0
Compare
To Zero
Constant
Zero-Order
Hold
Out
SumWeek
Figure3. Subsystem for Signal Statistic

(b) Subsystem for transportation or production
The modules of Sub_OnR, Sub_OnM and Sub_PM in Fig.2 belong to this kind of subsystem, which
is for describing output and level condition of transportation or production. In those modules, Inputs
are some material inflow and capability limit, and outputs are material outflow and the stocking level,
such as the goods on the route and the goods which is being produced. Here, there are some delays in
transportation and production in supply chain and the FIFO rule is adopted to shown in that procedure,
which is shown in Fig.4.
OnR
In1
Out1
In2
Level
GoR
OnLine1
1
Limit
Out
Subtract3
2
In
Switch2
-1
Z
Subtract2
CMT
[0]
IC2
Memory2
1
1
In1
Out1
Subtract1
2
In2
[0]
IC1
Memory1
Figure4. Subsystem for Transportation or Production

(C) Subsystem for signal statistic
The modules of Sub_ExponentialSmoothing_R and Sub_ExponentialSmoothing_M in Fig.3 belong
to this kind of subsystem, which are made in order to forecast the sale amount next week. Here,
exponential smoothing method is adopted. Here supposing the smoothing factor 0.6 .The
exponential smoothing module is shown in Fig.5, through that, the forecasting sale value is output, and
then, supposing safety coefficient SafR and SafM are both 1.05, the retailer and manufacturer considers
that multiplication as the needed sale amount next week.
128

Yt
1
In
0.6
Subtract
-7
Z
CofR
Clock1
FR
Switch1(7) Zero-OrderInteger Delay(7)

Hold1
St
1
Out
Figure5. Subsystem for Exponential Smoothing

(d) Subsystem for the inventory
The modules of Sub_InventR and Sub_InventM in Fig.2 belong to this kind of subsystem, which is
mainly for showing the change of the inventory level and the selling status to customer or retailer. In
those modules, the inputs are the coming goods and the capability limit, and outputs are inventory level
and sale amount really. Here because there is no time delay for inputting, transmitting and outputting
the goods in the storehouses of the retailer and manufacturer, the blending rule is adopted in those
modules, i.e. any goods are picking up at the equal possibility only if they are inputs into the
storehouse, which is shown in Fig.6.
1
signal
1
2
Limit
ComeR
Out
Subtract3
Switch1
2
In
Subtract2
[0]
IC1
InventR
3
Level
Memory1
Figure6. Subsystem for the inventory

(e) Subsystem for customer
Sub_Customer system is the most important and designed for customers satisfaction. (Fig,7). In
this subsystem, the demand is changed in the percent of CuRateC or CuRateG next time with signal,
which is the difference between inventory and customers demand. when the sale amount can meet the
demand of the customer, the number of customers buying in that supply chain will increase next time
(CuRateC), otherwise the number of customers will decreases (CuRateG). Whats more, the
proportion of sale amount to the demand in supply chain is considered as the symbol of customers
satisfaction in some degree. (SatiR).
-C-
DemRate
Market
Product
Demand
Product1
Market
-C-
-1
Z
-C-
Integer Del ay2
Si gnal
Si gnal
Demand
-CuRate
1+CuRateC
IC1
1-CuRateG
Sati R
3
Sal e
Figure7. Subsystem for the customer
Divide
129

4. Simulation analysis on customers satisfaction

In this simulation system, the simulation start time is 0 and stop time is 70, the solver type is Fixedstep, the solver is adopted in discrete solver, and the fix-step size (fundamental sample time) is 1. The
goods for transportation is stochastic between 0 and 1. Some other variables are determined below:
OnM 0 PM 0 InventM 0 OnR0 InventR0
(1)
PML CML 0.8
(2)
CMT PMT CRT 2
(3)
SafM SafR 1.05
(4)
DemRate 0.5
(5)
CuRateC 0.01
(6)
CuRateG 0.02
(7)
GRT 2
(8)
GMT 2
(9)
In the simulation, the random demand of customer in the market (Market) is shown as follow (Fig.8),
which is between 0 and 0.1 (the sale amount unit is 10 thousand).
Figure8. The random demand of customer in the market

Some proportion (Market*DemRate) of that total demand in the market is considered as the demand
in the supply chain. Whats more, it can be changed with the need gratification or not. Supposing there
are some methods of SCM for improving information exchange quickness in the supply chain, in
which the GRT and GMT both decrease from 2 to 1 (lineo to line*), the relative changes for two
enterprises are shown as follows:
(a) The Change of Sale
The total sale amount in the supply chain increases a little, which is up from 1.1924 unit to 1.2585
unit in the simulation time (0~70). It means that improvement of information exchange can promote
the cycle in supply chain and facilitate the sale amount (Fig9).
130

Figure9. The sale amount in the supply chain

(b) The Change of Signal
The Signal is the difference between inventory and demand. When the information exchange is
improved in supply chain, its shown clearly that the inventory of retail can be more enough to fulfill
the demand of the customers (Fig10).
Figure10. The signal in the supply chain

(b) The Change of Satisfaction
The satisfaction (SatiR) is simply expressed by the proportion of sale amount (fulfilling demand) to
the demand in supply chain. Its shown clearly that quickness of information exchange can make
enough good sold to promote the customers satisfaction (Fig11).
Figure11. The satisfaction in the supply chain
131

In a word, its shown clearly from the above, that data represented by the line * is better, in
which, the retailer can sell more goods(Sale), the signal reflecting shortage is less(Signal), and
the customers satisfaction is higher(SatiR). That means the improvement of supply chain
processs promptness can bring out the more customers satisfaction, and then, the sale amount
is increased. The indirect profit is gained by means of improving operations efficiency in
supply chain.
5. Conclusion
This paper establishes a supply chain simulation model with customers satisfaction through
the system dynamics approach, and then, Simulink tool is adopted for that model. Through the
simulation, it can be seen clearly that the value of information is emphasized and customers
satisfaction can be increased by improving supply chain processs promptness, and the
information exchanges quickness can bring out large profit indirectly.
6. Acknowledgements
The authors would like to thank peer reviewers for commenting this article. This work is
supported by the National Natural Science Foundation of China (70801007, 71072124), the
Fundamental Research Funds for the Central Universities (2011QN034, 2011JC008 and
2011QN158), DLMU Outstanding scientific and technological innovation team training fund
(2012TD019)
7. References
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Methodology", JDCTA, Vol. 5, No. 1, pp. 285-295, 2011
[2] Xing Zhang, Qiuhong Zhao, Guoping Xia, "Research on Integrated Optimization Problem in a
Multi-product Supply Chain Based on Markov Decision Processes", JCIT, Vol. 7, No. 1, pp. 45 53, 2012.
[3] Amrik S Sohal, Damien J Power, Mile Terziovski, Supply chain management in Australian
manufacturingtwo case studies. Computers & Industrial Engineering, Vol. 43, Issues 1-2, 1
July, pp.97-109, 2002.
[4] Kang Bokyoung, Kim Dongsoo,Kang SukHo, Supply chain simulation integrating agent-based
modeling with social network analysis: A conceptual framework, ICIC Express Letters, v 6, n 4,
pp 1115-1120, April, 2012.
[5] Shotaro Minegishi, Daniel Thiel, System dynamics modeling and simulation of a particular food
supply chain, Simulation Practice and Theory, Vol.8, No 5, pp.321-339, 2000.
[6] Adhitya Arief, Halim Iskandar, Srinivasan Rajagopalan, Decision support for green supply chain
operations by integrating dynamic simulation and LCA indicators: Diaper case study.
Environmental Science and Technology, v 45, n 23, pp 10178-10185, December 1, 2011.
[7] Srinagesh Gavirneni, Roman Kapuscinski, Sridhar Tayur, Value of information in capacitated
supply chains, Management Science. Vol.45, No.1, pp.1624, 1999.
[8] Denis Towill, Mohamed M Naim, Joakim Wikner, Industrial dynamics simulation models in the
design of supply chains, International Journal of Physical Distribution and Logistics
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[9] Jeroen Dejonckheere, Stephen M Disney, Lambrecht Marc, Denis Towill, The impact of
information enrichment on the Bullwhip effect in supply chains: a control theoretic approach,
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A Supply Chain Simulation Model with Customers Satisfaction

Jianfeng Li, Yan Lin, Feng Jin