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TITLES AND ABSTRACTS, sorted alphabetically by presenter* *Jennifer Blackhurst, Iowa State University Johnny Rungtusanatham, Univ of Minnesota Title: Disruptive Events in Supply Chains Abstract: The task of managing disruptive events in supply chains is an issue is a critical concern for firms competing in today's global market. A single disruption occurring in a supply chain can quickly propagate and intensify in impact with devastating consequences. While the topics of supply chain risk and disruptions are timely, existing decision tools and models do not allow supply chain managers to quickly understand the generation and promulgation of an unexpected disruption as well as the impact across the supply chain. In this paper, we develop, present and validate a supply chain disruption decision support tool (SCDDST): a Petri Net model that can be used to visualize and understand the propagation path and operation impacts of a supply chain disruption. We propose use of SCDDST can help supply chain managers understand the immediate impact of the disruption as well as the propagation path within the supply chain. With this understanding, effective mitigation strategies may be developed and executed to reduce or even avoid the impact of the disruption.
Page 1: Presentation Abstracts

TITLES AND ABSTRACTS, sorted alphabetically by presenter*

*Jennifer Blackhurst, Iowa State UniversityJohnny Rungtusanatham, Univ of Minnesota

Title: Disruptive Events in Supply Chains

Abstract: The task of managing disruptive events in supply chains is an issue is a critical concern for firms competing in today's global market. A single disruption occurring in a supply chain can quickly propagate and intensify in impact with devastating consequences. While the topics of supply chain risk and disruptions are timely, existing decision tools and models do not allow supply chain managers to quickly understand the generation and promulgation of an unexpected disruption as well as the impact across the supply chain. In this paper, we develop, present and validate a supply chain disruption decision support tool (SCDDST): a Petri Net model that can be used to visualize and understand the propagation path and operation impacts of a supply chain disruption. We propose use of SCDDST can help supply chain managers understand the immediate impact of the disruption as well as the propagation path within the supply chain. With this understanding, effective mitigation strategies may be developed and executed to reduce or even avoid the impact of the disruption.

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*Cecil Bozarth, North Carolina State UniversityJohn McCreery, North Carolina State UniversityRob Handfield, North Carolina State University

Title: Design for Order Fulfillment: A Comparison of Literature and Field Observations

Abstract: Prior research has identified the importance of product complexity as a driver of order fulfillment delays and problems. In this study, we define product complexity as any aspect of a product that increases the time, cost, and effort to manage the physical, informational, and relational flows in the resulting supply chain. Appropriate complexity is determined relative to industry competitors and market share. Inappropriate complexity drives no additional market benefit. The time-cost effort to manage complexity must be exceeded by the net revenue increases in the marketplace over the lifecycle of the product.

Based on a thorough review of the operations management and new product development literature, coupled with in-depth field interviews, we sought to insights into the following six research questions:

When making project portfolio and NPD process decisions, what mechanisms are in place to consider the effects of new offerings on supply chain order fulfillment?

How do companies weigh the benefits of additional product variety against the costs of producing and delivering that additional variety?

How does the supply chain organization participate in the new product development process, and how could this participation become more effective?

What are the product design characteristics that increase complexity and degrade performance in the supply chain?

How do companies measure the impact of this complexity?

What approaches and tools are companies using to manage or reduce the impact of this complexity?

In summary, we sought to understand how decisions made in project portfolio management and the early stages of a product development effort, as well as the specific product configuration decisions made downstream in the product development process, would impact the resulting order fulfillment performance of a product.

The results of the interviews were recorded were recorded, coded, and summarized as mechanisms, measures, or actions that were most typically employed at different stages in the product development process shown below.

The research suggests that a number of dynamics are at work that impacts the relative order fulfillment capability of the supply chain. Factors that may impact order fulfillment include the nature of the individuals selected to work on the team, the extent of their involvement, the thoroughness of the design requirements, the tools and templates and data available to establish the business case, the familiarity of the team with relevant checklists, documentation of playbooks to guide the team, development of appropriate metrics, alignment with cross-functional and business goals, and leadership support of team decisions. These elements will be described in more detail in the research report and presentation.

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*Kyle D. Cattani, Indiana UniversityVincent A. Mabert, Indiana University

Title: “Supply Chain Design Research in the 21st Century,”

Abstract: We provide an overview of current supply chain design research, which is of interest to academics and managers who seek increased understanding of the dynamics between supply chain design and performance in the 21st century.

Supply chain structures and information flows that were not conceivable even a couple of decades ago have become forefront in industry practice. In many cases, supply chains have become more global and complex, with vast challenges in the coordination of material, information, and finances. Firms face difficult decisions on what processes and products to keep in house, and what to outsource; what should be produced domestically, and what should be moved offshore; what should be triggered with pull systems, and what should be pushed through the supply chain. These decisions are intertwined with product portfolio and product structure decisions as well as order processing systems and the amount of choice offered to customers in product configuration and delivery.

In other cases, supply chains have become more streamlined, with fewer players and much shorter lead times. Orders can quickly be transmitted the length of the supply chain and products can ship directly from the factory to the consumer or end customer. The Internet, in particular, has facilitated opportunities to restructure and streamline supply chain designs by allowing firms to receive orders directly from their customers, and by providing avenues to share order and delivery information that has become more readily available from information systems (such as ERP) that gather and track information flows.

Supply chain design research reflects and supports these trends, and can provide insights to managers as they configure and manage their supply chains and product offerings. Supply chain design research can act as a catalyst for even greater changes. We are delighted to have in this conference 16 invited and contributed talks on supply chain design addressing many of the issues described above. We have grouped the talks into sessions on Sourcing and Fulfillment, Product Design and Supply Chain Design, Supply Chain Design and Information Flows, Bi-directional Flows in Supply Chains, and Supply Chain Disruptions and Volatility.

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*Geraldo Ferrer, Naval Postgraduate SchoolJayashankar M. Swaminathan, The University of North Carolina at Chapel Hill

Title: Managing New and Differentiated Remanufactured Products

Abstract: We study a firm that makes new products in the first period and uses returned cores to make remanufactured products along with new products in future periods. The remanufactured product is differentiated from the new product so the firm needs to choose differentiated prices. We analyze the monopoly environment in many planning horizons, and characterize the optimal remanufacturing strategy for the firm. In the process we identify remanufacturing savings thresholds that determine the production and pricing strategy for the firm.

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*S. Gavirneni, Cornell UniversityP. R. Panchalavarapu, Schneider National, Green Bay, WI R. Rachamadugu, University of Toledo,

Title: Impact of Product Value Density on Distribution System Design in Supply Chains

Abstract: Our talk focuses on the impact of product value density on the design of distribution networks in supply chains. Most conventional approaches favor sequential approach to the design - strategic network design followed by operational decisions regarding inventories to satisfy service level requirements. However, recent studies showed that integrative modeling approaches, which simultaneously consider costs associated with network design and inventories to satisfy customer service level requirements, can lead to significant cost savings over sequential approaches. In this study, we explore the effects of product value densities on using integrative approaches to the network design. Using practical data on large distribution networks we show the benefits of integrative modeling approaches for three value density categories – electronic goods (high value density), consumer products (medium value density), and automotive components (low value density). Our studies suggest that benefits of using integrative network design tools over sequential approaches are positively related to the product value densities – higher the product value density, greater is the benefit. We will provide insights, and practical implications of this phenomenon, and also highlight the impact of customer demand variations on the benefits of using integrative modeling approaches vis-à-vis conventional approaches.

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*Thomas J. Goldsby, Ph.D. , Associate Prof. of Supply Chain Mgmt,University of Kentucky Stanley E. Griffis, Ph.D. Assistant Prof. of Logistics Air Force Institute of TechnologyDaniel E. Mattioda,Doctoral Candidate, The University of OklahomaAnthony S. Roath, Associate Professor Marketing, The University of Oklahoma

Title: To Be Lean, Agile, or Both? Supply Chain Strategies under Demand Volatility

Abstract: Three distinct strategies that have appeared in the Logistics, Operations, and Supply Chain Management literature in recent years are Lean, Agile, and so-called Leagile supply chains. Lean is the management method popularized by Womack and Jones (1996) that seeks to eliminate waste in its various forms. Toyota is often regarded as the epitome of Lean with its much heralded Toyota Production System, employing make-to-stock replenishment of automobiles based on forecasted demand of dealer orders. Agile supply chains are those that seek effective, flexible accommodation of unique customer demands (Christopher 2000), usually through make-to-order manufacturing operations. Dell’s customer-direct business model is a commonly cited example of an agile supply chain. Finally, Leagile supply chains use a combination of lean supply of near-final assemblies with agile customization to meet customers’ unique wants without the speculation of lean systems or the long lead times of agile systems (where raw materials must be processed fully for sale). This postponement strategy is often referred to as “mass customization,” and is employed by Toyota’s splinter division Scion that builds generic vehicles in Japan and customizes them upon arrival in the U.S. to fill customer orders here.

Building upon the work of Goldsby, Griffis, and Roath (2006), the current research subjects the three supply chain strategies to varying demand conditions. The research uses an actual case setting as the basis for operationalizing simulation models of the three strategies. Goldsby, Griffis, and Roath found that the Lean model prevailed in terms of total cost and service performance (i.e., order-to-ship time) under case conditions. Sensitivity analyses showed that agility prevailed at higher levels of unit value and inventory carrying costs, where the penalties of holding inventories were substantial. The current research examines the models when varying degrees of demand volatility are added to the analysis. It is expected that the advantages of the Lean model will shift in favor of the Agile and Leagile models at higher degrees of volatility. The research will contribute to the academic and management communities by improving our understanding of these thresholds.

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*Manu Goyal, University of MarylandKrishnan S. Anand , University of Pennsylvania

Title: Strategic Information Management under Leakage in a Supply Chain

Abstract: The extant supply chain literature has largely focused on optimizing material flows to best match supply and demand. We demonstrate that to maximize profits, it is equally important for a competitive firm to actively manage and control information flows within the supply chain. Further, the operational imperative to optimize one’s material flows and the informational imperative to control information flows in the supply chain are intertwined and often in conflict, necessitating their joint management. In our setting with two competing firms and a common upstream supplier, information is disseminated through material flows (order quantities) and through information leakage. Information leakage refers to how information reaches unintended recipients in a competitive environment, and can be unintentional or deliberate. We prove formally that the supplier always leaks any demand information he receives to his downstream customers. We show that demand information may be acquired in spite of leakage (driven by the operational imperative) and, once acquired, is disseminated in the supply chain through leakage (by the informational imperative). This result is in stark contrast to the extant literature which argues that demand information will not be shared in similar settings. We find that the relative magnitudes of the informational and operational imperatives are driven by both the mean and the variance of demand. Quantities play the same role in our supply chain as do prices in a market economy (Hayek (1945)) in terms of disseminating knowledge. Thus, the tug-of-war between operational and informational imperatives is resolved by the incumbent matching supply with demand for all demand realizations under high demand variance, i.e., ordering “optimally” from an operational perspective, and ordering sub-optimally under low demand variance. When the informational imperative dominates the operational imperative, the value of information can be negative. In such cases, information acquisition is not preferred even when it is costless and enables better matching of supply and demand. We also find that the supplier can strategically set the wholesale price to influence not just material flows, but also information flows. Our results underscore the importance of strategic information management within supply chains.

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*Qian-nong Gu, University of HoustonThomas C. Chen, University of HoustonBasheer M. Khumawala, University of Houston

Title: The Impact of Real-time Supply Information on Retailer’s Inventory Replenishment Decision

Abstract: Application of Radio Frequency Identification (RFID) technology in supply chain is currentlyone of the most discussed research topics in production and operations management. RFIDimproves the visibility of real time inventory and lead time information among supply chainpartners. Although the various benefits due to this increased visibility have been broadlydiscussed by practitioners, how to integrate this technical advancement into business decisionmaking process and how much benefit can be expected have not been specifically addressed inthe literature. Our study conducts a quantitative analysis of the impact of upstream supplyinformation (available quantity, lead time status of open orders) on downstream retailer’sinventory replenishment decision. A dynamic program model is proposed for the retailer tomake an inventory replenishment decision under capacitated supply and uncertain lead time withthe availability of timely supply information. A numerical illustration is provided to explain thebenefits for the retailer under different scenarios. We plan to extend this approach to explore thebenefits for other supply chain partners (distribution center, manufacturers) when RFID isadopted in the supply chain.

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James Hershauer (Jim), Arizona State University

Title: Supply Loop Design Modeling

Abstract: What role do operations managers have in leading supply chain design into environmentally responsible strategies, tactics, and operations for products, services, and processes? Environment is a global supply chain design issue. Although many concerns about the environmental impact of manufacturing have focused on local and regional impact, the larger issues of resource and energy sustainability, irreversibility of some chemical changes, global climate and ecological system changes, and differential responsibilities and economic realities create the need for a truly global perspective regarding the environment. Issues and supply chain decisions become very complex if long-term impact and cost implications are considered at the global level. With the focus on core competencies and outsourcing in major manufacturing firms, the practice of working closely with suppliers to enhance their environmental performance is becoming as important as working with upstream suppliers to enhance quality performance. Operations managers will also find that working closely with downstream distributors and users may be just as important when products carry potential environmental liabilities with them. Major players in any particular global market may have both ethical and legal responsibilities to share environmental knowledge, technology, and practices with other nations, competitors, and even other industries that encounter similar issues and factors. Benchmarking of best operations regarding environmental issues is a natural outgrowth of this common competitive practice used to improve cycle time and quality in manufacturing operations.

Manufacturing organizations have generally focused efforts on three main concerns about the environment. These are: (1) correcting past mistakes, (2) compliance with current standards, and (3) anticipating future standards. The primary drivers that most operations managers currently consider (through an environmental executive in most cases) are personal fines and criminal charges, corporate fines and denial of contracts, requirements by insurance companies, market pressures, consumer perceptions, scientific capability, and costs. Additional drivers to be considered include requirements by financial institutions, stockholder requirements and demands, consumer demands, gaining competitive advantage, strategic product and process decisions, new technologies, radically new approaches to meeting a consumer need, and consumer acceptance of ideas such as “new” products made mostly with reused or remanufactured components. Supply chain cost analysis for current products must include the fines and costs of correcting past and current mistakes both now and in the future. Supply chain cost analysis for new products and processes must include integrated analyses of all product and process factors for the complete life cycle of all components. Key cost drivers include investment in special plant and equipment, education and training, reengineering and development costs, long-term life cycle costs for use and take-back, evaluation of the side effects of process wastes, evaluation of the side effects of product transformations during use, salvage costs and revenues, side effects of distribution and container materials, energy costs and renewal, and anticipation of future fines and liabilities.

A practical framework for integrated supply design and analyses is proposed. Supply chain design modeling is demonstrated using decision theory models.

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*Xinxin Hu, Indiana University, Kelley School of Business, 1309 E. 10th Street, 570C, Bloomington, IN, 47404, [email protected] Duenyas, University of Michigan, Ross School of Business, 701 Tappan St. Ann Arbor, MI 48109, [email protected] Kapuscinski, University of Michigan, Ross School of Business, 701 Tappan St. Ann Arbor, MI 48109, [email protected]

Title: How Should One Sequence Suppliers Bids

Abstract: We consider a scenario, where two suppliers offer the whole sale price competitively, and one retailer commits the lower bound purchases accordingly. If the market demand is higher than retailer’s expectation, he will order more than his commitments from the suppliers. The two suppliers may be different in either production cost or capacity. We investigate in what sequence the retailer should negotiate the contracts with the suppliers. In what sequence should the retailer go to the two suppliers? Should he go to the lower cost supplier first? Or should he go to the lower capacity supplier first?

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*Sachin Modi, i2 Technologies Inc., Stephen Mahar, University of North Carolina at Wilmington Tobias Schoenherr, Eastern Michigan University

Title: Exploring e-fulfillment structure and firm performance

Abstract: There is no doubt that the advent of internet business-to-consumer (B2C) commerce has made retailing more complicated and more competitive. Today, consumers can use the Internet to sidestep their corner store and patronize shops or manufacturers around the world. One of the first organizations to integrate the internet into its (B2C) transactions was Dell Computer Corporation in 1996. According to chairman and CEO, Michael S. Dell1, "The Internet is the ultimate extension of [Dell’s] direct business model. It is the best vehicle for a variety of transactions with customers and provides functionality that makes it easier to do business with [us]."

Until recently the domain of e-commerce was dominated by organizations selling products exclusively over the internet (e.g., Dell, Amazon). However, in recent years the most significant growth in online retailing has been attributed to traditional offline retailers (e.g., Wal-Mart, Best Buy, etc.) extending their brands online. In 2002 these multi-channel retailers accounted for 72% of all internet sales (Forrester Research, 2003) and 61% of the top 100 retailers by volume sold products online. As a result, today there are more organizations operating within the “bricks” (i.e., operating entirely out of store locations) and “clicks” (i.e., maintaining a completely “virtual” presence) spectrum. Between the two extremes a firm sets its e-fulfillment intensity by choosing the degree to which its retail business is conducted online.

Unfortunately, there is a lack of research investigating those factors that influence the choice and structure of an organization’s online retail effort. To fill this gap, this paper investigates current industry practices for e-fulfillment and measures the benefits that firms achieve due to their e-fulfillment intensity. Specifically, we consider (1) how internal and external factors influence the degree to which a firm should pursue online fulfillment and (2) how an organization’s e-fulfillment intensity impacts its e-fulfillment structure and the firm’s performance.

A number of internal and external factors influence the level of e-fulfillment intensity that a firm chooses to pursue. This research considers four such factors: (1) the relational embeddedness of a firm within its supply chain, (2) characteristics of the firm’s products, (3) Anticipated access to new markets and (4) Industry pressure. First, firms often face resistance from their supply chain counterparts when they begin selling directly to the customer. As such, initiating an online fulfillment strategy requires increased co-ordination and responsiveness in the supply chain. Organizations can develop these characteristics and enhance their relational embeddedness by taking long term perspectives and building a finite set of close-knit, ongoing and exclusive relationships. Second, ancedotal evidence suggests that product characteristics also play an important role in the e-fulfillment decisions of a firm. Table 1 (compiled by visiting the websites of the 100 top retailers identified by Stores Magazine, 2003) indicates that firms offering different product categories differ in their choice of whether to develop an online sales channel. The table illustrates that retailers that have not established an online sales channel tend to offer products that are not conducive to selling over the internet (e.g., fuel) or that suffer from disproportionately high shipping costs (e.g., discount items, home improvement materials). Third, adopting an online sales channel can also help a firm reach out to a larger customer base and help increase its market share (Magretta, 1998). Finally, firms may be forced to adopt an online sales channel due to competitive pressure from the industry.

1 Source: PR Newswire, July 22nd 1996, “Dell launches internet computer store: New online tools offer customer unmatched convenience”

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Number with Number without % withBoth In-Store and Both In-Store and In-Store and

Category Online Channels Online Channels* Online ChannelsDepartment Stores 11 0 100%Bedroom/Craft/Gift 6 0 100%Electronics 5 0 100%Office Supplies 3 0 100%Auto Parts 3 0 100%Books 2 0 100%Toys 2 0 100%Pets 1 0 100%Apparel 6 1 86%Drug Stores 3 1 75%Jewelery/Eyewear 3 1 75%Home Improvement 3 2 60%Grocery 8 18 31%Discount/Value 5 13 28%Fuel/Convenience Stores 0 3 0%TOTAL 61 39 61%

* Includes companies with television/in-store, catalog/online, in-store (only), or online (only) channelsTable 1: Percent of the Top 100 Retailers (by 2001 Sales Volume) with Online Channels

In addition to analyzing how internal and external factors impact a firm’s chosen e-fulfillment intensity, this research also explores how e-fulfillment intensity impacts the structure (in terms of formalization, centralization and complexity) of a firm’s e-fulfillment effort and the organization’s inventory and business performance.

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Ravi Aron, Univ of Southern California*Praveen Pathak, Univ of FloridaSubhajyoti Bandyopadhyay, Univ of Florida

Title: To outsource or not to outsource in a services supply chain: a revenue distance measure

Abstract: Current supply chain outsourcing best practices include decisions pertaining to not only the physical goods but also services. In this research, we use the concept of revenue distance – the construct of measuring the degree of separation between a process and revenue mechanisms that it supports in a service value chain – and map it to the strategic and operational risk faced by a host organization when they decide to outsource the service. Existing research indicates that the operational risk is a function of the process’s codifiability of knowledge and the strategic risk is a function of the ease of monitoring the provider’s performance, while both these risks depend on the precision of measurement of the quality of the output of that process. We show how revenue distance of a process is impacted by its codifiability and measure process codifiability in terms of four core component tasks. We take advantage of a comprehensive, multi-year, multi-country survey of outsourcing organizations and arrive at a decision criterion based on a process’s revenue distance to decide whether the process is best carried out in-house or should be outsourced.

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Larry Ritzman, Professor Emeritus (Ohio State University & Boston College)

Title: Designing and Managing Supply Chains: Historical Perspectives and Future Possibilities

Abstract: The increase in outsourcing and offshoring brings increasing attention to designing and managing supply chains ¾ an important component of the operations management field. Research on supply chains is not new, going back to the early parts of the last century. Pioneering work by Jay Forrester and the HMMS team, for example, provide lessons for us even today. The presentations given at this conference illustrate that possibilities for future research abound. Research can come from several vantage points, such as supplier relations, use of technology, inventory placement, postponement, rapid-response designs, distribution, coping with disruptions, and providing services. Research need not be limited to manufacturers and physical products. Supply chains of service providers, while a relatively undeveloped topic in the field, are an essential part of the U.S. and world economies.

Another important vantage point views the supply chain (or “value chain”) as a set of interconnected processes that connect with both suppliers and customers. This presentation advocates why a “bottoms-up” approach, beginning at the process level, can bring new insights on managing supply chains, both for research and teaching purposes. It also aims at service providers, with the research findings coming from a study of financial services.

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*Christian Rosetti, North Carolina State UniversityRob Handfield, North Carolina State UniversityKevin Dooley, Arizona State University

 Title: Forces, Trends, and Decisions in Pharmaceutical Supply Chain Management

Abstract:This research identifies and examines the major forces that are changing the way biopharmaceutical medications are purchased, distributed, and sold throughout the supply chain.  Multiple interviews with key informants at each level of the value chain were combined with manifest text analysis from practitioner articles to derive key insights into the primary change drivers influencing the future of the biopharmaceutical supply chain.  This research examined the pharmaceutical supply chain from multiple perspectives.  A focus group identified a number of forces that they thought would impact their supply chain decisions.  Interviews with key informants from 56 firms in the PSC as well as a large sample of the practitioner press were analyzed using Crawdad, a computerized manifest text analysis that utilizes Centered Resonance Analysis.  The results indicate that the three major forces identified: compensation, alternative channels, and product forces would all be influential.  Our research yielded eight propositions relating the forces to future trends in the PSC.  Based on our analysis of the cases and the literature we believe that product forces, particularly increased product segmentation along two major lines will have the greatest effect on pharmaceutical supply chain manager’s decisions.

Based on this exploratory study, we find that future research into biopharmaceutical supply chain practices will need to explore three primary issues: 1) How will supply chain member compensation influence the power of parties within the network?  2) How will the role of supply chain intermediaries change the landscape of medication delivery to the end customer? and 3) What impact will the role of regulatory constraints on product pedigree and proliferation have on this network?  The relationship between these forces is mediated by operations strategy concerning inventory policy, supply chain visibility, and desired service levels.  We suggest a game theoretic agency approach as a vehicle by which to study the complex interactions that exist in this environment, and provide a framework in which to study the potential outcomes in this dynamic supply chain competitive environment.  

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*Tom Schmitt, University of Washington, Kathryn Stecke and Sanjay Kumar, University of Texas Dallas Fred Glover, University of Colorado Mark Ehlen, Sandia National Laboratories

Title: Managing Disruptions in Supply Chains

Abstract: Many companies are vulnerable to disruptions in their supply chains. While the need to understand the effects, probe for weaknesses, predict outcomes and test policies is undeniable, the scale and complexities involved in most supply chains pose significant problems. As part of the NISAC initiative, Sandia National Laboratories has applied novel methods of data collection, simulating and modeling to synthesize the huge, dynamic mass of information flowing within supply chains of thousands of manufacturing firms. The goal is to contribute to the ability to prepare for possible attacks on critical infrastructure (such as manufacturing, electric power, telecommunications, port facilities, and transportation facilities), and improve the effectiveness and efficiency of responses should such attacks occur.

Several years ago we were contracted by Sandia to support development of their “agent-based” simulation model. Our role in the project was to characterize manufacturing and transportation behavior between high-tech companies in the Pacific Northwest and their sources of supply and demand located elsewhere in the U.S. and overseas.  The project included three case studies of Northwest electronics firms and their supply chains, analysis of economic databases, a review of inventory and supply-chain literature, and development of pilot simulation models.

Drawing from our field research, we developed a pilot Excel model with four stages in its supply chain and three system metrics (customer shortages, total system inventory levels, and expedited orders) as proxies for profitability. These pilot simulation experiments guided some aspects of model development in Sandia’s large-scale agent simulation effort and offered a set of research questions we examine in subsequent research. For example, the pilot results indicated that:

1) Manufactured products are typically complex assemblies of many components which link companies together in supply chains. A disruption in one stage of a supply chain introduces complex bullwhip effects that travel to other stages, and these effects last a long time. Steady state was not achieved in some cases a year after the disruption.

2) Inventory methods applied globally across the supply chain channels performed better than the widely-used local approaches applied independently at different supply chain stages. Performance differences were especially large during and after a disruption at a stage.

3) Expediting, a practice so common in manufacturing and transportation sectors, exacerbated the bullwhip and led to poor performance.

4) The complex interaction of material and information between supply-chain partners can make it difficult to derive the good ordering policies. The objective functions are not well-behaved. Analytical approaches as well as unimodal search methods, such as Fibonacci search, may not be particularly good in finding order-up-to inventory levels at the various stages in terms of global effectiveness and computationally efficiency.

These pilot findings led us to examine supply chain behavior in a much more controlled simulation environment as part of a Ph.D. dissertation by Sanjay Kumar at the University of Texas, Dallas. We recognize, as did Sandia in their agent model, that individual drivers of profit must somehow be consolidated into one metric, profit. We do this by examining an assortment of weights on shortages, inventory and expediting. Each scenario consists of a combination of weights that represent a

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particular operating environment. The experiments also cover a wide range of lead times, expediting behavior, and forms of disruptive effects.

As in the pilot experiments, we have found that complexities in this problem environment limit the ability of analytical techniques to find optimal policies within multi-stage supply chains. We consider three types of “metaheuristics” to search globally for order-up-to reorder points: Fibonacci search, genetic search, and tabu search. The experiments demonstrate the computational efficiency and performance effectiveness of Tabu approach over Fibonacci and genetic search.

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*Gilvan "Gil" C. Souza, University of Maryland Mark Ferguson, Georgia Tech V. Daniel Guide, Jr., Penn State Eylem Koca, University of Maryland

Title: Remanufacturing Planning with Different Quality Levels for Product Returns

Abstract: In this paper we consider a tactical production planning problem for remanufacturing when returned products have different quality levels due to different conditions of the returns. The remanufacturing cost increases as the quality level decreases, and any unused returns may be salvaged at a fixed salvage value per unit. Decision variables include the amount to remanufacture each period for each return quality level and the amount of inventory to carry over for future periods for both returns (unremanufactured), and finished remanufactured products.  Our model is grounded with data collected at Pitney Bowes from their mailing systems remanufacturing operations.  The problem may be formulated as a linear program, given demand forecasts over a planning horizon, and it has a network-like structure.  We derive some analytic properties for the optimal solution. We find that, given some conditions on holding costs, the firm always remanufactures the exact demand in each period. We also study the value of a nominal quality grading system in planning production. Based on data obtained from Pitney Bowes and other large remanufacturers, we analyze, via a numerical study, the increase in costs observed by the firm if it does not maintain separate inventory levels for each quality grade.  The results show that a grading system decreases cost by 11% over a wide range of parameter values commonly found in the remanufacturing industry.  We also numerically explore the case where there are capacity constraints and find the average improvement of a grading system remains around 11%.  Finally, we test a simple heuristic policy where a grading system is utilized but no inventory may be carried for demand in future periods.  Our numerical tests show a cost increase of only 3% over the cost of the optimal policy.  

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Professor Morgan Swink, Ph.d., Michigan State University

Title:  At the Interface of Product Design and Supply Chain Design:  Direct and Interacting Effects of Complexity

Abstract: Operations and supply chain managers often comment on the daunting complexities they face, yet “complexity” is not well defined in an operational context, and the true effects of complexity have not been clarified.  This presentation offers conceptual frameworks that delineate dimensions of both product architectural complexity and supply chain complexity.  We identify potentially important direct and interaction effects of these complexity factors on supply chain operational performance.  In order to test these propositions, we analyze data from two product portfolio studies.  The discussion of the results of the study will focus on the implications of the findings for future research. 

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*Wendy Tate, University of TennesseeEd Feitzinger, Executive Vice President, Golden Gate LogisticsJon Kirchoff, University of Tennessee

Title: Supply Chain Design in the Furniture Industry Abstract: The last few decades have seen a plethora of changes to the organization of firms and supply chains. Of particular interest to this research is the tendency for industries to vertically disaggregate, creating a rise of networks involving independent but collaborating companies (Kleinaltenkamp & Ehret, 2006). This disaggregation has been seen in the automotive, apparel, telecommunications, and furniture industries. The disaggregation has increased the number of suppliers for the total value added (Dyer & Hatch, 2004) and many of these suppliers are located in lower labor cost regions of the world. Disaggregation has significantly increased the number of business to business transactions and altered the way that business is done between companies.

As supply chains become increasingly more global, the complexity in designing and managing the supply chain is also increasing. The globalization and complexity generates considerable challenges in the coordination of material, information, and financial flows. Some industries have adapted to this changing environment by becoming more streamlined and efficient. These industries have recognized the value of collaborative relationships with their supply chain partners, and therefore increased the overall performance of the supply chain. However, in other industries the increased globalization and complexity has decreased supply chain efficiencies. This inefficiency is descriptive of the furniture industry where inventory levels have increased, costs continue to escalate, profits are declining and there is a poor return on assets. To remain competitive in this fluctuating environment, the challenge is to design a supply chain that is right for your product (Fisher, 1997; Lee, 2002). Fine (1998) deemed the ability to effectively design a supply chain as the ultimate core competency of an organization. When designing a supply chain, each organization must consider the capabilities to invest in and develop internally and the capabilities to allocate for development by suppliers (Fine, 1998).

This research looks at supply chain design in the furniture industry. During the past decade, fifty percent of the manufacturing of wood furniture has shifted from US production to offshore production, primarily in China (Credit Suisse, 2006; Schuler & Buehlmann, 2003). Whereas their domestic factories tended to be corporate-owned, many U.S. manufacturers elected to outsource their production when they went offshore. The U.S. furniture industry is currently facing issues that the electronics and car industry faced approximately 15 years ago (Eng, 2004). For example, both Hewlett Packard and Nike faced similar issues as they began outsourcing their products to offshore locations. During their transitions, both of these companies saw problems such as excess safety stock being held at multiple on and off-shore warehouses, excessive handling of products between manufacturer and end-user, and transportation efficiency issues such as frequency of shipments and use of alternative modes (Lee & Billington, 1995). Both organizations were able to change their existing business practices and supply chain design to retain market and industry dominance. In order to remain competitive in the domestic and global wood furniture industry, furniture companies in the U.S. have to follow a path similar to HP and Nike and assess their current strengths, proximity and knowledge of the market, to become providers and distributors of high quality service and brands. The furniture companies will also need to control quality, delivery and price of the imported products.

Supply chain design and management is key to the U.S. furniture industry’s success in its transition from manufacturer to distributor. Effective supply chain design can become a competitive advantage. The purpose of this research is to:

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Better understand the challenges associated with firms in the furniture industry as they make this transition to global outsourcing.

Understand the components of the global furniture supply chain. Determine the performance implications or key success factors of effective global supply

chain design for the furniture industry.

Proposed MethodologyThis research is still in a developmental phase and is both exploratory and explanatory. It is exploratory in the sense that there has been limited research in supply chain design as it specifically relates to vertical disaggregation and there is also limited academic research on the furniture industry. However, it is also explanatory because many of the concepts related to supply chain design have previously been studied including inventory location, postponement strategies, push/pull boundary selection, warehouse and logistics optimization. Because it is both exploratory and explanatory, a mixed-method approach, using a combined survey and case study methodology, is proposed (Creswell, 2003).

During the first week of March 2007 an initial survey will be released to a number of executives in the furniture industry. This survey will be used to assess general industry demographics, supply chain issues, and the level of communication and information sharing in this industry. This initial survey will also be used to generate interest in the project and to find companies willing to participate in case studies. A secondary survey will be developed based on the results of the initial survey and case studies. This survey will look at specific supply chain issues such as warehouse optimization, inventory location and postponement strategies.

ImplicationsThere are implications to effective supply chain design in both supply management and logistics across the furniture industry. Supply management implications include aspects of information sharing, supplier selection, demand forecasting, quality management, and reverse logistics. Logistics implications include warehouse placement, inventory management and inventory balancing, cash flow, data integrity, intellectual property, and changing customer requirements. The logistics processes are far more complicated, longer, and critically important to the success of the organization. The domestic furniture companies no longer have a competitive advantage from being close to sources of raw materials. The new competitive advantage for furniture companies will have to be gained by designing a more efficient and effective supply chain that provides the best value and service to its customers.

Significant opportunity exists for the industry to improve and develop global sourcing initiatives in the furniture industry, thereby lowering the total costs for the global furniture supply chain. These initiatives can be achieved through proper supply chain design and alignment of its products and processes. In order for the industry to grow and regain its competitive edge, there is a need to provide greater value to the customer. To prosper, the furniture company has to provide customer value with the least costs and the least assets overall.