AN OPERATIONS MODEL TO SUPPORT
MANUFACTURING LOGISTICS PROCESSES IN
THE SUPPLY CHAIN
Jan Ola Strandhagen, Heidi Dreyer
Department of Production and Quality Engineering, Norwegian University of Science and
Technology, Norway.E-mail: [Link]@[Link]
Abstract: This paper presents an Operations Model, including a Control Model,
developed to support reengineering of manufacturing logistic processes. The
reengineering process is supported by a methodology. The Operations Model
concept was first designed to support the enterprise perspective, and this paper
explains the expansion of the model and methodology to supply chains. The
methodology has been developed through several case studies and supports the
realisation of Supply Chain Control dashboards and studio.
Key words: Manufacturing Logistics, Operations Model, Control Model, Reengineering
1. INTRODUCTION AND METHODOLOGY
In today's global economy operational excellence is required for
manufacturing companies. Competitiveness can only be obtained and
maintained if operations management is developed in order to support
market requirements and customer needs. It becomes essential to develop
innovative demand oriented business models which is adapted to the
products and manufacturing processes in the company, and to provide for a
holistic supply chain orientation towards suppliers and customers. ICT is an
enabler leading to increased competition between companies, and at the
same time being an instrument which supports companies in gaining
competitive advantages. The ICT-based operational processes must be
constantly reviewed and changed paving the way for new control concepts to
Please use the foil owing format when citing this chapter:
Ola Strandhagen, Jan, Dreyer, Heidi, 2006, in Intemational Federation for Mbrmation
Processing (IFIP), Volume 207, Knowledge Enterprise: Intelligent Strategies In Product
Design, Manufacturing, and Management, eds. K. Wang, Kovacs G., Wozny M., Fang
M., (Boston: Springer), pp. 393-398.
394 Jan Ola Strandhagen, Heidi Dreyer
be applied. Implementation of new control concepts are best supported by a
set of enterprise models that represent the operations processes and resources
involved. These models should be unified along the supply chain, allowing a
process view rather that a functional view of the operation. The model
supporting the reengineering process and the Operations Model itself must
be neutral and hence generic to the actual control principles both in the as-is
and to-be state of the operation. Also the models applied in the reengineering
process should support the actual operation itself, allowing online decisions
support functionality.
The aim of this paper is to describe the Operations Model and its
applicability for supply chains. The research issues addressed is what the key
characteristics of a supply chain Operations Model are, and what the main
elements of a model supporting the reengineering process are.
The research strategy followed is a combination of a theoretical
discussion, exploratory research and empirical data use. The empirical data
is collected from a number of cases. The case study approach is preferred
due to the need for a deep and extensive study about thoughts and reflections
of operations models in supply chains [11][6]. The data sets are analyzed
through traditional quantitative and qualitative approaches as statistical
processing and textual interpretations of field notes.
2. OPERATION MANAGEMENT
A traditional definition of operations management is "the design,
operation, and improvement of the systems that create and deliver the firm's
primary products and services" [4]. In this paper we adopt this definition but
broaden it to focus on and include the supply chain system.
2.1 Extended enterprise - supply chain
Today one of the most significant competitive enablers is innovative
supply chain systems based on collaborative models between companies
which see the needs of coordinating the supply, production and delivery
processes. Supply chain management, which is "a set of approaches utilised
to efficiently integrate suppliers, manufacturers, warehouses, and stores, so
that merchandise is produces and distributed at the right quantities, to the
right locations, and the right time, in order to minimize system wide cost
while satisfying service level requirements", is both a management
philosophy and a strategy for active operation and integration of the
company's market and supply relations [10]. Here active operation means
An Operations Model to Support Manufacturing Logistics Processes 395
in
the Supply Chain
that the company together with suppHers and customers forms holistic
operation supply chain system between them.
Collaboration in the supply chain has a wide range of forms with one
common goal: to gain information and to create a transparent, visible
demand pattern that paces the entire supply chain [8]. Information and
visibility is considered as "The Holy Grail" leading to higher predictability
and insight into the demand situation which is an essential element in an
Operations Model. Several studies have identified the problems caused by a
lack of information and to what extent competitive advantages can be gained
from a seamless supply chain [7] [9] [5].
2.2 Modelling and operations model
Enterprise models are used for a range of purposes and can differ from
some coarse sketches to detailed numerical models. This paper focuses on
the conceptual type of models, which usually are developed to make sense of
aspects of an enterprise and communicate with other actors. Such models are
normally descriptive, visual, and built on high level modelling entities.
Reengineering an enterprise requires a clear understanding and definition
of customer requirements and the operation's capabilities [1]. To gain this
understanding requires the collection of data from the enterprise's
information systems, interviews with key personnel, examination of
documents etc. This data is then used to create a textual and visual
description of the Operations Model.
1 1 1 1 1
WmMM
iDlfliBi i f l D D
lUiQOl IHl:
Figure 1. The operations model set.
A Control Model is a representation of how operations are organized and
controlled in manufacturing [12][3][2]. A Control Model is normally
developed by the following building blocks: customer order decoupling
point, control principles and methods, main operations processes and the
related information's flows and ICT systems. The Control Model is the key
model in the comprehensive Operations Model. The Operations Model
396 Jan Ola Strandhagen, Heidi Dreyer
proposes six views that should be modeled as shown in Figure 1.
3. THE SUPPLY CHAIN OPERATIONS MODEL
A simplified example of a Control Model for the manufacturing
enterprise H A G is shown in Figure 2. This model is the result of a
reengineering process to improve the logistics performance of the enterprise.
Oi^ra K^-a t ^<Af-msi
Figure 2. Control Model for Manufacturing Enterprise.
The focus in this model is on control of the internal processes of the
enterprise. To expand from an enterprise view to a supply chain view the
supply chain Operations Model has been developed to include the aspects
given in Table 1.
Table 1. The expanded supply chain view
1 B«!iidn<ce» Mirtefijrf 1 \»,\%\VAt<&0\\ 0<()«Wti$^i»H 1 C«itr{ftl ]
i CODP placing
S(^pli«f5 i Oemsad patism ilrrfofmstofi^fiow Roles of diffsren* i (sever «fmVC)
Ofdi-er i bstwssn sdors ifaolweeft actors actors 1 Control
Tran^Offers ipfincipifjs
Oslloffs 1 DJsJfibution I fCT systems of CofJtract 1 Cijnlrol areas
Wh«l»*aier« l^fiftcipfes 1 actors prutopte*
Procurements 1 actors
Cyaomeri jkPImessurein
Wholesater? \ co3torn«/-
coftirol 1 supplier
DATA SET(docum«ii*afiorO
The expanded supply chain view is applied in a reengineering process to
create an Operations Model for a pharmaceutical supply chain. The TO-BE
supply chain Operations Model is based on the concepts of automatic
replenishment and it resulted in the following Operations Model in Figure 3.
Again the reengineering process methodology explained in section 4 was
used. The figure shows a holistic view of the production, distribution and
demand system in the pharmaceutical supply chain. In the AUTOMED
project such a model is developed between a global manufacturer, a
An Operations Model to Support Manufacturing Logistics Processes 397
in
the Supply Chain
Norwegian wholesaler, and a Norwegian pharmacy retail chain in order to
allow automated replenishment of pharmaceuticals based on point-of-sale-
data (POS-data). The essential elements in this model are the continuously
replenishment of the pharmacies based on POS-data, the placing of the
customer order decoupling point (CODP) and that the control process is
integrated and coordinated in and between the companies.
Figure 3. Supply chain operations model for AUTOMED.
THE REENGINEERING PROCESS
Process reengineering requires an in-depth understanding of the
enterprise's current manufacturing logistics processes. The Enterprise
Reengineering Methodology organises the reengineering process in six steps;
see Figure 4. The purpose of the process is to create an Operations Model
that describes the AS-IS and TO-BE logistics processes. The process
purpose and preliminary problem hypothesis are defined in the initial stage.
These guide the choice of methods for the mapping and analysis stages.
Figure 4. Enterprise Reengineering Methodology.
Mapping consists of creating a description of the AS-IS Operations
Model and identifying potential improvement areas. Subsequently a
selection of general and specific analyses is performed on chosen aspects of
398 Jan Ola Strandhagen, Heidi Dreyer
the enterprise's operations. This should identify the key characteristics of the
supply chain, and based on the findings, the TO-BE Operations Model and
solution elements are designed, and implemented in the enterprise.
5. CONCLUSION
This paper has presented an Operations Model, including a Control
Model, developed to support reengineering of manufacturing logistic
processes. The reengineering process is supported by a methodology. The
Model and Methodology has been applied in reengineering of more than
twenty manufacturing enterprises. The Model has now been expanded into a
Supply Chain view, based on the same Reengineering Methodology, and has
been applied to several cases. Further research is focused on developing
concepts and solutions for Supply Chain Dashboards and Supply Chain
Control Studios based on the Operations Model.
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