9th September 2010 16:55
|
Simulation Tool to model ECR scenarios for SMEs in Food Supply Chains
|
|
  |
|
Problem Statement
Major retailers and manufacturing companies have adopted new business models in the food supply chain: ECR, VMI, CPFR. SMEs are not benefitting from the potential 40 billion EURO savings. SMEs needed a simulation tool to understand new business practices. |
Improvement Approach
A software simulation tool was designed and developed to model different supply chain configurations for ECR, to support the participation of Small and Medium Sized Enterprises (SMEs) in virtual enterprise environments within the food supply chain. |
Benefits
SMEs are expected to share in the potential 40 billion Euro savings by reduced costs across the supply chain and increased market growth & market share.The training tool will speed uptake of new processes by enhancing understanding prior to implementation |
|
|
Company Contact Information
CIMRU, National University of Ireland Galway
Nun's Island , Galway, Ireland
Tel.
+353 91 750414, Fax. +353 91 562894
E-mail
maria.smyth@nuigalway.ie
http://cimru.nuigalway.ie
|
|
|
Analysed "As-Is" Food Supply Chain Model. Reengineered processes to design "To-Be" Model.
|
|
|
The last three years have brought to Europe very significant changes in the way business is undertaken in the food supply chain: ECR, (Efficient Consumer Response) VMI, (Vendor Management Inventory) CFAR, (Collaborative Forecasting And Replenishment) are today becoming well established business practices which have been adopted by some of the major retail and manufacturing companies. They are already benefitting from reduced costs across the supply chain and increased market growth and market share. However, the SMEs are not benefitting from the potential 40 billion ECUs savings estimated for the European market. In order to demonstrate to SMEs the benefits they can gain from these new business practices and how they can implement them, it was critical to have a deep understanding of the business processes involved and the business changes required to provide effective IT solutions, together with the organisation and the management environment. Irish food manufacturers and distributors are to a large extent dominated by the wishes of their major customers,large Irish & UK retailers. |
This pattern is true or becoming true throughout the EU. The trading relationship between the major retailers and their suppliers is in a constant state of flux, driven by the requirement to drive down costs in the face of constant erosion of margin. The Irish end users in the LOGSME project, Green Isle Foods, Pleroma Distribution and Pallas Foods, will use the knowledge gained within the project to improve their ability to manage this relationship.
Specifically, this will include:
·Using the LOGSME toolkit as it stands at the conclusion of the project, as an educational tool for their managers and operational personnel, so that they can better understand the implication of issues being driven by the retailers, such as Vendor Managed Inventory and Efficient Consumer Response.
·Using relationships developed with consultants to improve their existing business processes.
·The process improvement activity has already started in Green Isle, where consultants are working to re-design the demand planning process, in the face of demands from Tesco. |
|
The Supply Chain (LOGSME) simulator provides a simulation environment for the whole logistics chain. It models the generic inbound and outbound logistics chain based on the functions of the food industry. The simulation model is developed so that data can be collected from each of the functions chosen for simulation and used to integrate the information flow of the logistics chain. SMEs in the food sector will increasingly have to adopt those advanced supply chain systems, such as Continuous Product Replenishment (CPR) systems, and Electronic Point of Sale (Epos) terminals, etc. These systems usually involve a mix of information systems approaches and technologies, the majority of which are new to SMEs such as bar coding systems, automated warehousing, Distribution Requirements Planning (DRP), EDI, Epos, etc. The objective of the LOGSME simulator is to help SMEs in food industry understand the potential of these technologies and to support them in their attempts to successfully migrate towards the use of such approaches and to continuously improve their business processes. |
This computer model was designed and built in a modular fashion so as to allow an SME to "test" a CPR process with live data from his own plant and his customers. It allows the SME to "see" an effective integrated pipeline; to analyse various forecasting approaches; to understand integration of multi site and multi enterprise distribution and manufacturing systems including electronic stock control and ordering systems, MRP and DRP style systems; and finally to evaluate their impact on his business. The development environment chosen for this simulation was an Arena simulation platform, MS Visual Basic, MS Access, and MS Excel in a single PC environment. A logistics chain-building wizard was developed for three major supply chain scenarios. Supply chain partner module templates were developed for detailed supply chain logistics configurations. The simulator was developed as a demonstration and training tool for academic users and SMEs. In addition a simulated environment was developed to support role-playing of chain partners online, such as on-line ordering and inventory retrieving. |
Technically CIMRU was responsible for a major piece of work related to the development of the simulation tool that allows end users, consultants, academics and students to model different supply chain configurations. The design and programming of this tool was undertaken by CIMRU, followed by subsequent training of certain consortium members in the use of the tool.
The LOGSME prototype software demonstrating Efficient Consumer Response was tested on end users Green Isle Foods, Pleroma Distribution and Pallas Foods for three scenarios: Vendor managed inventory, cross-docking and collaborative forecasting.
Scenario 1: The test demonstrated the operation of VMI between SMEs and a major customer using low cost business management systems. For the retailer benefits included reduced management time because replenishment planning was handled by the supplier, reduced administration costs because paper taken out of the system and because price files are automatically synchronised every week. Ultimately reduced warehouse space as inventory levels dropped.
Benefits for the manufacturer were: |
Less variability in demand because of greater supply chain visibility. More stable planning of manufacturing resulting in greater efficiencies, reduced inventory in the supply chain & reduced administration costs.
Scenario 2: Cross docking. The tool demonstrated the benefits of crossdocking for retailers and manufacturers. The manufacturer benefits from lower storage costs as no interim storage is necessary at distributor sites. The retailer benefits from increased service levels and reduced transit times from the manufacturing to the store and fresher products.
Scenario 3: Collaborative forecasting wholesale model.Using a combination of sales history data which is as recent as possible and retailer's forecasts of sales
and their own sales history data, manufacturers should be able to generate more accurate forecasts resulting in reduced inventory in supply chain, optimisation of stock levels to meet agreed service levels, higher manufacturing efficiencies because of reduced disruption caused by non-planned activities.The tool demonstrated to users the benefits of scenarios tests |
|
