Bullwhip Effect and Supply Chain Modeling and Analysis Using CPN Tools

Dragana Makajić-Nikolić, Biljana Panić, Mirko VujoševićLaboratory for Operations Research »Jovan Petric«,

Faculty of Organizational Sciences, University of Belgrade Serbia and Montenegro

gis@fon.bg.ac.yu

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Outline

• Supply Chain

• Bullwhip Effect

• Beer Game

• SC Modeling Using CPN Tools

• Simulation Results

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Supply Chain

• A Supply Chain (SC) includes all the participants and processes involved in the satisfaction of customer demand: transportation, storages, retailers, wholesalers, distributors and manufacturers.

• Supply Chains is a complex system in which coordination is one of the key elements of management.

Product flowDemand flow

Raw MaterialVendors

Tier-IISuppliers

Tier-ISuppliers

Manufacturers

DistributionCenters

Retailers

CustomerZones

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Bullwhip Effect

• Different chain phases have different calculations of demand quantity, thus the longer the chain between the customer and manufacturer the bigger the demand variation.

• Increases the level of inventory

• Prolongs the lead time

• Demands more efficient transportation

• Increases labor costs

• Decreases the level of product availability

• Leads to distrust among participants.

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Beer Game

• Created at the beginning of the sixties in Sloan School of Management, Massachusetts Institute of Technology (MIT).

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Beer Game (2)

• Objective - minimize the expenses of an overall supply chain.

• Rules:

• Four sectors: Retailer, Wholesaler, Distributor and Factory. • Ordering and delivery. • Two time units are the period for which the product is moved

from one phase to the other.• Storage expenses are $0.50 per week, and the expenses

incurred for a week in backorder are $1 per case. • The inventory of 12 beer cases. • Good local information, but not in possession of global

information. • Communication between the participants is not allowed.

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Beer Game (3)

• The students of specialist studies in industrial engineering, organized in cooperation by the Ecole Centrale Paris and the Faculty of Organizational Sciences at the University of Belgrade.

• Two teams.

• Actual demands: 4, 4, 4, 8, 10, 12, 12, 10, 8, 8, 8, 9, 8, 8, 8, 0, 0, 7, 8, 8, 8, 8, 8 cases.

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Beer Game (4)

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1 3 5 7 9 11 13 15 17 19 21 23weeks

demand

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1 3 5 7 9 11 13 15 17 19 21 23weeks

demand customerretailerwholesalerdistributormanufacturer

retailer wholesaler distributor manufacturer SC

inventory costteam 1 141 545.5 1009 1205 2900.5

team 2 212.5 272 246 1168 1766.5

backorder cost team 1 60 203 296 121 680

team 2 115 140 182 162 731

total costteam 1 201 748.5 1278 1326 3580.5

team 2 327.5 412 428 1330 2497.5

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SC Modeling Using CPN Tools

• Objective: To create CPN which can be used in learning about and studying the bullwhip effect.

• Motivation: One participant may simultaneously experiment with the strategies of all SC stages.

• A simplified SC with one participant per each phase – a retailer, wholesaler, distributor and manufacturer.

• The two main activities of each participant are: delivery of purchased products and forming one’s orders according to new orders.

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Net Declarations and Structure

color INT = int;

color INTT = INT timed;

var k, m, n, s: INTT;

fun rest(i,j) =if (i>=j) then i-j else 0;

fun order(i,j) = if j>=i then i else i+i-j;

val a=2;

val b=2;

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Simulation

• Initial marking:

• stock@Supplier (all instances) 1`4

• delivered_from@Supplier (all instances) and final_product@Manufacturer 1`4@+1++1`4@+2

• customer@Top page 1`4@+0 ++ 1`4@+1 ++ 1`4@+2 ++ 1`8@+3 ++ 1`10@+4 ++ 1`12@+5 ++ 1`12@+6 ++ 1`10@+7 ++ 1`8@+8 ++ 1`8@+9 ++ 1`8@+10 ++ 1`9@+11 ++ 1`8@+12 ++ 1`8@+13 ++ 1`8@+14 ++ 1`0@+15 ++ 1`0@+16 ++ 1`7@+17++ 1`8@+18 ++ 1`8@+19 ++ 1`8@+20 ++ 1`8@+21 ++ 1`8@+22

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Simulation Results - Bullwhip Effect

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180

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23weeks

demand

customer

retailer

wholesaler

distributor

manufacturer

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Simulation Results – Inventory and Backorder

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

stock

-60

-50

-40

-30

-20

-10

0 weeks

manufacturer

distributor

wholesalerretailer

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Simulation Results - Costs

retailer wholesaler distributor manufacturer SC

inventory cost

379,5 664 1113 1829 3985,5

backorder cost

44 64 108 124 340

total cost 423,5 728 1221 1953 4325,5

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Simulation Results - variations

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 simulation

stockretailer

wholesaler

distributor

manufacturer

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Concluding Remarks

• Supply Chain can be modeled and analyzed by CPN and CPN Tools.

• CPN model of a Supply Chain which allows easy experimenting with different scenarios, that is different strategies of SC participants.

• The simulations can measure different performances.

• One participant may simultaneously experiment with the strategies of all SC stages.

• Model can be improved by: random time delivery, different decision rules in phases, several participants in each SC stage, cost etc.