Figure 1 – An illustrative aviation logistics network for a reparable item |
The
phrase supply chain is a business
term that has made its way into the popular vernacular—but with many different
connotations. More formally, however, APICS defines a supply chain as:
“The
global network used to deliver products and services from raw materials to end
customers through an engineered flow of information, physical distribution, and
cash.” [i]
Short
but very encompassing.
What are supply chains?
This
post explores the physical structure of supply chains, viewing them as echeloned
support networks. As APICS notes, designing and deploying these support networks
requires understanding the
“sourcing,
manufacturing, and distribution facilities and information flows to meet the
organization’s strategic goals… [and] includes determining the best locations,
numbers, sizes, capacities, capabilities, and ownership models of facilities to
support these goals.” [ii]
Modern
descriptions of supply chains and their associated activities are descended
from the post-World War II concept of logistics:
“those
aspects of military operations which deal with… design and development,
acquisition, storage, movement, distribution, maintenance, evacuation, and
disposition of materiel…” [iii]
Can We View These Supply Chains as Echelons of Support Networks?
Business writers frequently critique the use of the term
“supply chain” because it evokes a very linear system—one without the
complexity of real-world support activities. Figure 2 is a more realistic portrayal
of consumable and reparable asset flows in an aviation supply network by Andrew
Clark, from a 1958 Rand report.[iv]
Figure 2 – Diagram of the Air Force Supply System (Clark, p. 2) |
Clark describes the system’s operation saying:
“Real-world supply
systems are often more complex… since many contain several supply echelons and
regenerate failed parts through repair. In the Air Force… there may be many
operational bases which stock a particular item, and a depot which replenishes
base stocks in accordance with base ordering policies. The depot, in turn, is
resupplied from a factory or from a repair facility that repairs those failed
items it economically can and scraps the rest.
“While [Figure 2]
is representative of the supply structure for many items in the Air Force
inventory, the structure for other items may be much more complex. For example,
some failed items may be repaired at the base itself and turned back into the
serviceable stock. There may also be several depots, each supporting a complex
of bases; more than one depot-level repair facility; and even more than one
factory producing the item. Furthermore, there may be a wide variety of bases
or ‘customers’ with different usage patterns and maintenance capability.
“It is evident that
supply decisions in such complex systems should be closely interrelated… the
main decisions at any given time are how much to ship to each base, how much to
repair, and how much to procure from the factory. The dynamic element in the
problem is accentuated by the various bases phasing into and out of operation
at different times, and experiencing changing failure patterns while in
operation.” [v] [1]
Slightly
over four decades later, David Simchi-Levi, Philip Kaminsky and Edith
Simchi-Levi echoed Clark’s comments with these observations about the
complexity of supply chain management:
“First, supply
chain management takes into consideration every facility that has an impact on
cost and plays a role in making the product conform to customer requirements;
from supplier and manufacturing facilities through warehouses and distribution
centers to retailers and stores…
“Second, the
objective of supply chain management is to be efficient and cost-effective
across the entire system; total systemwide costs, from transportation and
distribution to inventories of raw materials, work in process, and finished
goods…
“Finally, because
supply chain management revolves around efficient integration of suppliers,
manufacturers, warehouses, and stores, it encompasses the firm’s activities at
many levels, from the strategic level through the tactical to the operational
level.” [vi]
So,
it does seem that viewing supply chains as echeloned support networks may allow
a better portrayal of modern support network complexity.
However,
lest you think that understanding echeloned support networks is only relevant
for aviation support system managers, let’s consider the Washington Metro – the
rapid transit system servicing the Washington DC metropolitan area (Figure 3). Metro inventory managers are faced with a
very complex supply chain. As of November 2016, Metro was operating a fleet of
over 1200 railcars composed of six major design series[vii]
from five different major manufacturers [viii].
Although externally similar in appearance, the different railcar series share
varying degrees of component commonality. Metro stores and maintains their
railcar fleet at nine rail yards located throughout the system,[ix]
and component overhauls are performed either by Metro-internal overhaul shops
or by outside vendors.[x]
Metro’s Office of Procurement and Materials “manages an inventory of tens of
thousands of items at the {Rail] Car Maintenance operating locations as well as the [central]
Metro Supply Facility.”[xi]
Clearly, Metro’s support structure (and challenges) fits very well with the
echeloned support network paradigm in Figure 2!
Figure 3 – One of Washington
Metro’s 6000-series railcars (photo by author, November 2015)
|
So, what does all this complexity mean for reparable item sparing?
Although
business analytical tools and capabilities have significantly progressed since
the 1950’s, the challenges of managing complex support activities still remain
and warrant careful consideration by inventory managers.
What
your support network looks like; the organizations and activities included; and
decisions on where to keep supplies, the levels and location of maintenance,
and types of distribution activities all significantly influence the amount of
systemwide inventory requirements. To the inventory practitioner, what this
means is that reparable spares inventories must be sufficient to cover the
number of spares contained within, and moving back and forth between echelons
of the supply network. As Slyman and Culosi note:
“Within the
computation of [inventory] levels, the term "single echelon" refers
to an approach that considers the supply activity as a single, autonomous level
of supply… [C]ustomers place demands on the activity, the activity fills as
many of the demands as possible with issues from its stock and establishes
backorders for the rest to be issued when stocks are replenished. The activity
replenishes its stocks with orders placed on its sources of supply.
“In contrast, the
terms ‘multiple echelon’ and ‘multi-echelon’ refer to an approach in which a
chain of two or more supply activities is considered. [Figure 1] illustrates a
two-echelon system. Customers place demands on the first activity in the chain
and that activity fills as many of the demands as possible and either
backorders or refers the rest to the next activity. The first activity replenishes
its stocks with requisitions placed on the next activity in the chain, and that
activity… fills as many of the requisitions and referrals as possible and
either backorders or refers the rest to the next activity. The last activity in
the chain fills both requisitions and referrals from lower echelons and
replenishes stocks from its sources of supply. An activity in the chain may
choose not to stock an item and refer all requisitions for that item to the
next higher echelon or in the case of the last activity in the chain, the source
of supply.” [xii]
Sounds simple, right? Actually,
efficiently and effectively managing reparable item inventories requires a
thorough understanding your supply chain! Often, this necessitates viewing
the supply chain as an interrelated series of echeloned support networks. As
John Muckstadt notes:
“The underlying
echelon or network resupply structure will have a substantial impact on the
amount of inventory needed. There are clearly many possible structures.
However, for each one, there is usually a well-defined resupply plan…
“There are many
variations on this theme: some systems have many more echelons, some have
fewer. Nonetheless, they are similar in structure.” [xiii]
In future posts,
we’ll expand on this structurally-oriented theme and take a closer look at the asset
and information flows within a reparable supply chain.
End Notes
[i] Pittman, Paul H., PhD and J.
Brian Atwater, PhD, ed. APICS Dictionary, Fifteenth Edition. Chicago, IL, 2016. (p. 183)
[ii] Pittman and Atwater (p. 117)
[iii] McCann, Colonel John A., USAF
(Ret.), ed. Compendium of Authenticated Systems and Logistics Terms,
Definitions, and Acronyms.
AU-AFIT-LS-3-71. School of Systems and Logistics, AFIT, Wright-Patterson
AFB OH, 1981. (p. 401)
[iv] Clark, A. J., A Dynamic,
Single-Item, Multi-Echelon Inventory Model, Rand Memorandum RM-2297, December
8, 1958, downloaded from http://www.rand.org
on 26 December 2016.
[v] Clark (pp. 1-3)
[vi] Simchi-Levi, David, et al. Designing
and Managing the Supply Chain: Concepts, Strategies, and Case Studies.
Boston: Irwin McGraw-Hill, 2000. (p. 2)
[vii] Washington Metropolitan Area
Transit Authority (WMATA) Office of Planning, “10-Year Capital Needs: Inventory
and Prioritization, CY 2017- 2026 Needs,” November 2016, downloaded from https://www.wmata.com/initiatives/plans/upload/CNI-full-report-and-appendices.pdf
on 28 December 2016. (p. 1-15)
[viii] “Washington Metro,” from
Wikipedia, downloaded from https://en.wikipedia.org/wiki/Washington_Metro
on 31 December 2016.
[ix] WMATA Office of Planning (p.
1-19)
[x] WMATA Office of Operations
Planning and Administrative Support, “MetroRail Revenue Vehicle Fleet
Management Plan,” revised May 2007, downloaded from https://www.wmata.com/initiatives/plans/upload/Rail_Fleet_Management_Plan_Revised_20070601.pdf
on 28 December 2016. (p. 60)
[xi] Transportation Resource
Associates, “WMATA Triennial On-Site Safety Review Final Report,” 13 November 2007,
downloaded from http://www.tristateoversight.org/pdf/program/TOC%202007%20Triennial%20Review%20Final%20Report.pdf
on 30 December 2016. (p. 98)
[xii] Slyman and Culosi (p. 5-8)
[xiii] Muckstadt, John A. Analysis
and Algorithms for Service Parts Supply Chains. New York: Springer, 2005.
(p. 4)
Footnote
[1] In
an historically-interesting comment, Clark (p. 1) observes: “The word
‘echelon’ is used rather than ‘level’ to avoid confusion with stock levels, and
rather than ‘stage’… because the term ‘multi-stage problems’ has recently been
used to designate problems in which time is divided into discrete
decision-intervals or stages.”
nice post! I really like and appreciate your work, thank you for sharing such a useful information about supply chain management and logistics strategies, keep updating the information, hear i prefer some more information about jobs for your career hr jobs in hyderabad .
ReplyDeleteThus, cost reduction is the main managerial mantra as once quoted by well-known strategist Michael.E.Porter in his landmark book "Competitive Strategy". supply chain management certification online
ReplyDeleteOne of the regions of business that is probably going to see colossal change in the coming years is supply-chain administration.supply chain certification
ReplyDeleteIts source is considered before hand as a discouragement kind in the consistence of the prepared items cost. More info
ReplyDeleteThanks for sharing this excellent informations about Supply Chain Management ! Keep blogging!!!
ReplyDeleteAccounts Payable Outsourcing
Accounts Receivable Outsourcing
Supply Chain Control Tower
very nice info I have enjoyed reading this blog,I am doing my PGCM Course in supply chain form distance learning center and this info was very useful to me. keep sharing.
ReplyDelete