Saturday, December 31, 2016

Viewing Reparable Supply Chains as Echeloned Support Networks

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]

As the illustrative aviation logistics network in Figure 1 shows, reparable item support networks comprise both a forward movement of serviceable spares as well as a reverse flow of repairable (non-serviceable) spares. Typically, these flows pass through several echelons of supply and maintenance activities.



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)
In reality, these echeloned support networks are used by many different industries to sustain technologically complex, high cost, and mission critical end-items.


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.”

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