EASTERN ACADEMIC FORUM

The Individual Test of Robustness of Supply Chain FU Jianhong Changzhou Institute of Light Industry Technology, Jiangsu, P.R. China, 213164 [email protected] Abstract: This paper combs the robustness evaluation theory, and summarizes the research achievements of robustness of supply chain. The paper presents that the evaluation of long-term robustness of supply chain should consider the adaptation, and mainly based on qualitative measures. Quantity measures are more suitable for the short-term robustness of supply chain. At the same time, thoroughly analyzed the mechanisms of various disturbance factors influence on supply chain and its reaction, determined the level of robustness of supply chain by individual test. Keywords: Supply chain, Robustness, Disturbance factors, Individual test

1 Introduction Robustness is a statistics terminology used in evaluating the possibility that experiment model can still maintain correct conclusion when there is certain deviation between actual conditions and assumptions. This concept is currently being used in system control, application engineering, ecology and computer software, etc. A supply chain is a dynamic system consists of many enterprises and aspects. Its internal structure is complex and the external environment is variable. Whether the supply chain can maintain the original function in the changing realistic conditions is an important aspect of performance evaluation of supply chains. There is still not a common concept of robustness of supply chains. This paper holds that the robustness of supply chains is the possibility that supply chains can still provide products or services to customers under the influence of internal and external disturbance factors.

2 Review At present, the research of robustness of supply chain are few, most of them involves two aspects, performance evaluation of supply chains and the supply chain. Now the popular evaluating methods about performance evaluation of supply chains are Key Performance Indicators (KPI), Supply Chain Operational Reference, (SCOR), Balanced Scorecard, (BSC), and so on. Moreover, some scholars try to use mathematic or statistics tools in mathematical modeling of performance evaluation of supply chains, like Analytical Hierarchy Process (AHP), Fuzzy Comprehensive Evaluation, Markov Chain Theory, Rough Set Theory, Artificial Neural Networks (ANNs), Data Envelopment Analysis (DEA), etc. There are a lot of qualitative researches about risk identification and risk management, while few quantitative researches on risk evaluation and monitoring in relevant researches. At the same time, the weakness of supply chains had been noted by some scholars, they discussed the concept, origin, evaluation and warning of supply chain. However, most researches based on qualitative analysis, quantitative analysis method needed to be deepened to study the formation mechanism, evaluation and warning of the weakness of supply chains. Dong Ming and Peng Yin did some more systematic studies about robustness of supply chain. They used queuing theory model, which based on Bernoulli server, for robustness of lean supply chain modeling and performance evaluation. Du Guozhu and Wang Botao discussed robustness of enterprise commercial ecosystem, but lack of systematic theory framework in quantification analysis. The research of supply chain risk and performance evaluation established a theoretical foundation for the analysis of robustness of supply chain, but compared with risk analysis, the analysis of robustness of

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EASTERN ACADEMIC FORUM supply chain tends to evaluate the function of supply chain from the overall, integral and quantitative perspective. It is an important part in performance evaluation of supply chains.

3 Evaluating Methods of Robustness of Supply Chains The complexity of a supply chain and the social system it live with determines that the evaluation of robustness of supply chain is also complicated. Supply chain system is a Complex Adaptive System (CAS). It means that the system has ability to adapt to circumstance by monitoring and adjusting itself automatically under the changing environment. Because CAS is self-organized, emerging, interacted and co-evolutionary, it is hard to measure parameters of relevant disturbance factors parameters and interactive relationship in robustness evaluation modeling. As a result, there is lack of a recognized analysis model with value of application, although some scholars have explored quantitative analysis and assessment. Considering this, I suppose we should adhere to the principle of application in evaluating robustness of supply chain, and use different methods of evaluation according to different situations. 3.1 Time span of robustness evaluation Long-term robustness evaluation involves many factors and complicated interacted relationship. Because the CAS has an ability to self-restore and there is a lot of uncertainty in the long-term development, it is difficult to ensuring the variable parameters reasonably by the comprehensive quantitative analysis model, so that’s not operational. Medium and long-term robustness evaluation is more suitable for qualitative judgment with expert experience based on performance evaluation tools like indicator analysis, Balanced Score Card and Supply Chain Operations Reference Model. As time span becomes smaller, environmental change have less influence on supply chain, so the quantitative analysis models are more suitable for short and medium term robustness evaluation. 3.2 The width of robustness evaluation The evaluation of robustness of supply chain involves many internal and external disturbance factors, each factor affect supply chain in different way, it is just like the human body system shows different resistance against different environment. Thus, it’s better to divide the complex and comprehensive issues in evaluation of robustness of supply chain. Organize individual test and analysis the major disturbance factors is important. It’s helpful to dissect the disturbance mechanism of environmental factors around supply chain more specifically. Therefore, the quantitative model becomes more precise.

4 Basic Steps of Individual Test of Robustness of Supply Chain Step 1: Make sure every possible internal or external disturbance event in short and medium term based on the environmental analysis of supply chain. There are lots of disturbance factors, so we should screen the major ones based on the environmental analysis of supply chain. For example, valuate how the fluctuation of factor market impact on supply chain by the macroeconomic analysis, valuate the influence on supply chain while the amount of orders changes by forecasting consumer market. Step 2: Evaluate probability and strength of the disturbance issues happening in prediction period. The robustness of supply chain is a relative concept in certain disturbance strength. Robustness of supply chain is not the higher the better. Performance optimization is valued at the fields of economy, so the robustness is appropriate as long as supply chain is resistant to normal disturbance. Step 3: Analyze disruption mechanism of individual event to supply chain. Disruption mechanism is the foundation of robustness of supply chain research in individual event, the disruption mechanism of each one can be totally different. Step 4: Build measurable research model of robustness of supply chain research in the individual event.

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EASTERN ACADEMIC FORUM Because the disruption mechanism of each individual event is different, the models can be different. Step 5: Evaluate individual robustness of supply chain base on the model.

5 Example of Individual Test Disturbance factors of supply chain are various. This paper explains how to evaluate robustness of supply chain research in the individual event, by a simplified supply chain and simple event. Disturbance factors: Determine the trend that demand is growing based on environment analysis and short-term prediction of market. (Short-term growth is due to sales promotion, and sustained growth is due to disturbance of other events.) Mechanism analysis: You can see the simplified supply chain shown in Figure 1. In the supply chain, there is only one domestic manufacturer, and three kinds of upstream materials suppliers. Supplier A is the only supplier of Materials A, Supplier B1 and B2 supply material B, Supplier C is the only supplier of Materials C, but there are a lot of potential suppliers and adequate production capacity. The supply chain has three independent distribution channels. The robustness of supply chain is determined by supplier capability of material, manufacturing capability, transport capacity, client-maintenance skills and efficiency of information transfer at a particular time. Products deliver to the clients will thought three connected stages. They are materials supply, produce and distribute, if there is any disruption or arrearage in any stage, it will affect the whole delivery capacity of this supply chain. We suppose that there is unlimited capacity in logistics. Otherwise, when the logistics capability can not meet the logistics increment caused by orders, we need make deep analysis on logistics providers in supply chain networks, and correct the parameters of the logistic time.

A

S1

B1 B

Manufacturer

S2

Additional orders

B2 C

S3

Figure 1 The structure of simplified supply chain

In the event of demand growth, the Robustness of Supply Chain mainly in the supply chain of the forecast period to respond to customers’ satisfaction, that is, the delivery rate which is in line with customers’ requirements, such as product quality and service level. Sales growth in the forecast time of disturbance energy can be expressed as: (1) E  Q  t Q is sales growth triggered by the amount per unit time. t is duration of the sales growth. The phenomenon not meeting the robustness includes that delivery quality does not meet customers’ requirements, declined quality of customer service as a result of increased orders. Based on the above mechanism analysis, we determined the short-term demand growth disturbance events, and the robustness of the supply chain should be evaluated in sections. 5.1 To determine the robustness of the suppliers and manufacturers (R1) Step 1: Determine the robustness of the various suppliers (nodes). Based on the predicted increase in sales and BOM list, identify the amount of supplies which the various materials suppliers should

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EASTERN ACADEMIC FORUM increase; determine the robustness of the supplier indicators according to the supplier's production capacity indicators and the share that the manufacturers may get from the supplier. The supplier capacity reflects the robustness of the nodes. The capacity share of the manufacturer depends on the partnership of suppliers and manufacturers. In this case, use ra, rb, rc on behalf of the robustness of the Class A, Class B, Class C suppliers. Step 2: Determine the substitutability of suppliers and the proportion of supply. In this case, there are two B-class suppliers, we can evaluate the supplier capacity of B 1 and B2, since they provide the same material, even if the capacity robustness of one supplier is poor, there is still another supplier to replace its commitment to material supply function, and does not affect the overall robustness of the supply chain. Now, there is only one C-class supplier, but if the market can find a large number of alternative suppliers, the same will not affect the robustness of the material supply chain. Step 3: Determine the robustness of the suppliers and manufacturers. Manufacturers based on the basis of all the materials, any material shortage will lead to the interruption of production, so the robustness between the suppliers and manufacturers should take the minimum value of the robustness of various materials suppliers. Namely: R1=MIN (ra, rb, rc) (2) 5.2 To determine the robustness of the manufacturers (R2) Step 1: Determine the production time of the manufacturers. The production time of manufacturers= total delivery time - the transmission of information - all aspects of transit time -the necessary production downtime (3) Step 2: Determine the throughput of the manufacturers. the production time (4) The throughput of manufactures  unit production time

Step 3: Determine the robustness level of the manufacturers. The robustness level of the manufacturers can be determined by the manufacturers’ delivery satisfaction. Namely: production capacity  manufacturing inventory (5) R  Dilivery Satisfaction  2

total orders

5.3 To determine the robustness of the manufacturers and distributors (R3) Step 1: Determine the robustness of various distributors (nodes). As sales growth, distributors often become lack of the ability to maintain the customers. So through evaluating the number of its marketing staff, the level of training, professionalism and other aspects of assessment, predict the degree of customer satisfaction, which may be considered a robustness level of various distributors. Step 2: Determine the robustness of the manufacturers and distributors. We should use the weighted sales volume or weighed sales to determine the robustness of the manufacturers and distributors, because various distributors have different sales volume. Namely: n

R3   ri fi i 1

(6)

5.4 To determine the overall robustness of the level of supply chain (R) The supply chain is a typical process operations, the robustness of the overall level is the geometric mean of the robustness of the level of suppliers, manufacturers, distributors in the respective stages of the build. Namely: (7) R  m R1  R2  Rm In this case, as the needs of the analysis, we simplified the supply chain appropriately. When analyzing the practical problems, we can decompose the supply chain by stage to evaluate the robustness level. Through the above analysis, we come to the conclusion, if the length of the supply chain is increased, the width of the supply chain is increased in the same subparagraph, then the robustness of the level will 32

EASTERN ACADEMIC FORUM be reduced for the vulnerability of some local links.

6 Conclusion Taking into account the possibility of data acquisition, the methods used by the robustness evaluation of the supply chain is mainly based on financial analysis and statistical analysis, which is characterized by simple measurement methods, the index to calculate the data is easy to obtain, the defect is that the simplicity of the measurement determines the relative lack of accuracy of its measurement. As the supply chain is disturbed by the variability of internal and external environment, its robustness level is constantly changing, there does not exist absolute precise measurement methods of supply chain robustness objectively. For the purpose of the robustness evaluation is to alert, to find the weak point of the supply chain, and to take effective measures to improve the resilience of the supply chain, in order to achieve the purpose of maintaining the robustness of the supply chain in a longer period.

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