The Role of Modeling and Simulation in Supply Chain Management1
Caroline Thierry, Gérard Bel; André Thomas
1. Supply Chain Management
This article focuses on the role of modeling
and simulation in studying various issues in
Supply Chain Management (SCM) [1]. We begin
by briefly reviewing these issues but with
particular emphasis on clarifying the
fundamental nature of a supply chain. We note
first that two points of view can be considered:
(a) The system under study is the supply
chain of a given enterprise. Here we can
consider:
**The internal supply chain of an enterprise
which focuses on functional activities and
processes and on material and information flows
within the enterprise. In this case supply chain
management may be viewed as the integration of
previously separate operations within a business
enterprise.
**The external supply chain of the enterprise
which includes the enterprise, the suppliers of
the company and the suppliers’ suppliers, the
customers of the company and the customers’
customers. In this case, supply chain
management mainly focuses on integration of
operation and cooperation between the enterprise
and the other actors of the supply chain.
(b) The supply chain under study is a network
of enterprises (without a focus on any particular
enterprise within the supply chain). Here a
supply chain is a “network of organisations that
are involved, through upstream and downstream
linkages, in the different processes and activities
that produce value in the form of products and
services in the hands of the ultimate consumer”
[3]. In this perspective, the focus is on the virtual
and global nature of business relationships
SCS M&S Magazine – 2010 / n4 (Oct)
between enterprises. Consequently supply chain
management mainly focuses on cooperation
between the supply chain actors.
The Supply Chain Operations Reference
model (SCOR [4]) provides a process point of
view of supply chain management. SCOR is a
cross-industry standard for supply chain
management and has been developed and
endorsed by the Supply-Chain Council (SCC). It
focuses on a particular company and is based on
five distinct management processes: Plan,
Source, Make, Deliver, and Return.
Supply chain management addresses
different types of problems according to the
decision horizon of interest. Long range
(strategic) decisions are concerned with supply
chain configuration: number and location of
suppliers, production facilities, distribution
centres, warehouses and customers, etc. Medium
and short range decisions (tactical and
operational) are concerned with material
management, inventory management, planning
processes, forecasting processes, etc.
It should be emphasized that information
management is also a key aspect of supply chain
management; e.g., integrating systems and
processes throughout the supply chain so that
they share valuable information, including
demand signals, forecasts, inventory and
transportation etc.
Figure 1. which is adapted from the SSCP-
Matrix [5], shows the different supply chain
decision processes.
Thierry/Bel/Thomas – Page 1 of 8
 Source Make Deliver Sale
Long Supply Production Distribution
term

Sales forecasting and demand

network network network
design design design
Suppliers selection Plant location Distribution structure

Supply Sales & Master

network Operation distribution
planning Planning planning

CUSTOMERS
Capacity
SUPPLIERS

Purchasing Capacity

planning
booking
Medium quantities
Inventory level
Inventory level
booking
Inventory level
term
Material Master Distribution
requirement scheduling Planning
Lot size Lot size Transportation
quantities and
modes
Purchase Production Transport
scheduling scheduling scheduling Demand
Start and finish
fulfillment
Short Start and finish
dates for each
Start and finish
and ATP
delivery dates transportation
term operation dates

Ordering Shop floor Warehouse

materials control replenishment

Figure 1. Different supply chain decision processes (one organisational unit)

processes within the supply chain becomes the

Supply chain management deals with the main challenge for the supply chain managers.
integration of organizational units. Thus the
different supply chain processes will be more or
less distributed according to the level of 2. The Role of Simulation in SCM
integration of the different processes.
A fundamental problem in SMC is
There is a process which organises the performance evaluation. Three approaches can
decisions at different levels in the supply chain be identified:
management system. This system (virtual world) • analytical methods, such as queuing theory,
is connected to the production system (real • physical experimentations, such as lab
world) in order to compose a “closed loop” platforms or industrial pilot implementations
dynamic system. • Monte-Carlo methods, such as simulation or
emulation.
Let’s now consider (Figure 2.) at least two
independent organizational units (i.e., legal The use of analytical methods is generally
entities). In this collaborative supply chain, as far impractical because mathematical models for
as a supplier-buyer partnership is concerned, realistic cases are usually too complex to be
several problems arise: solved. Obviously physical experimentation
suffers from technical- and cost-related
** how to exchange/share information? limitations. In fact, a modeling and simulation
** how to solve problems of mutual interest? approach is the only practical recourse for
** how to set up global supply chain indicators exploring performance of the large-scale
situations that exist in reality. Furthermore, the
Thus the problem of centralisation or modeling and simulation approach facilitates the
distribution of the information and decision design of the supply chain and, as well, the

SCS M&S Magazine – 2010 / n4 (Oct) Thierry/Bel/Thomas – Page 2 of 8

evaluation of its management prior to With respect to supply chain control policies,
implementation. The ability to carry out “what- the following decisions need consideration:
if“ analysis that lead to a “best” configuration ** Control policies (inventory management,
further strengthens the case for the approach. control policies, planning processes)
** Collaboration policies (VMI, CPFR,
With respect to supply chain design information sharing)
decisions, the following issues need to be
considered: Moreover it is important to stress that
** Localisation (location of facilities, supply and simulation focuses primarily on the dynamics of
distribution channel configuration, location of the physical and decision processes in the supply
stocks) chain.
** Selection (Suppliers, Partners)
** Size (capacity booking, stock level…)

Source Make Deliver Sale Source Make Deliver Sale

Long Supply Production Distribution Supply Production Distribution

Sales forecasting and demand

term
Sales forecasting and demand

network network network network network network

design design design design design design

Suppliers selection Plant location Distribution structure Suppliers selection Plant location Distribution structure

Supply Sales & Master Supply Sales & Master

network Operation distribution network Operation distribution

CUSTOMERS
planning Planning planning planning Planning planning
Capacity Capacity
Purchasing Capacity
SUPPLIERS

Purchasing Capacity

planning
booking
planning

booking quantities booking

Medium quantities
Inventory level
Inventory level
booking
Inventory level Inventory level
Inventory level
Inventory level
term
Material Master Distribution Material Master Distribution
requirement scheduling Planning requirement scheduling Planning
Lot size Transportation Lot size Lot size Transportation
Lot size
quantities and quantities and
modes modes
Purchase Production Transport Purchase Production Transport Demand
scheduling scheduling scheduling Demand scheduling scheduling scheduling fulfillment
fulfillment and ATP
Start and finish Start and finish Start and finish Start and finish
Short Start and finish
dates for each
Start and finish
and ATP delivery dates dates for each transportation
delivery dates transportation
operation
term operation dates dates

Ordering Shop floor Warehouse Ordering Shop floor Warehouse

materials control replenishment materials control replenishment

Figure 2. Different supply chain decision processes (two independent units))

3. Application of Modeling and Simulation in – the distribution level of the system (centralized
SCM or distributed)
A centralised SCM system consists of a
The manner in which simulation is used in single information and decision system for all
SCM depends very much on type of problem entities of the supply chain under study. On the
that needs to be solved. Furthermore the other hand, in a distributed SCM system the
underlying model is likewise developed decision system is distributed over the different
according the SCM function we wish to entities of the supply chain.
evaluate.
Two particular problem features that have an In fact, the execution of the simulation can
important impact on the nature of the final likewise be performed in a centralised way on a
simulation model are: single computer or in a decentralised way on a
– the degree of systemic decomposition of the multiprocessor computing platform (parallel
SCM system (decision system, information simulation) or on geographically distributed
system, physical system) computers interconnected via a network, local or
wide area (distributed simulation).

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 Many reasons can be identified for the
distributed execution of a simulation across
multiple computers [6]:
–reduction of execution simulation time
–emulation of the system’s geographic
distribution
– integration of different simulation models
that already exist (often incorporating
different simulation tools and languages)
–enhancing tolerance to simulation failures
–independent testing of different control
strategies
–progressive deployment of a control system
–preparation for SC control changes
4. Simulation Approaches to SCM
4.1. Simulation of SCM using a continuous
simulation approach
The system dynamics paradigm, introduced
by Forester [2], is a continuous simulation
approach where states vary continuously. The
concepts in its initial area of application (viz,
“industrial dynamics”) map well onto those that
have become common in SCM studies.
Companies are seen as complex systems with
[7]:
** different types of flows (manpower,
technology, money, and market)
** stocks or levels which are integrated over
time according to flow variations
System dynamics is centred on the dynamic
behaviour. It is a flow model where it is not
possible to differentiate individual entities (like
transport resources).
Management control is performed by making
variations on rates (production rates, sale rates).
Control of rates can be viewed as a strong
abstraction of common production management
rules.
4.2. Simulation of supply chain management
using the discrete event approach
In the discrete event approach, we distinguish
between a “time bucket driven approach” and an
“even driven approach”. This differentiation is
SCS M&S Magazine – 2010 / n4 (Oct)
based on the time advance procedure which
characterized these two approaches.
With the time bucket driven approach
(sometimes called “spreadsheet simulation” [7]):
–time is divided in periods of a given length
(time buckets)
–time is incremented step by step within a
given time bucket. At the end of each step a new
state is calculated using the model equations.
The implication is that events (corresponding to
a change of state) occur at the beginning of each
period
–the lead time for an item in a production
resource is considered small compared to the
size of the time bucket
–the main states are the states of the set of
resources. They describe the activities in which
resources are implicated in a given time period.
They are characterised by the quantities of items
processed in this activity in a given time period;
e.g., the number of items of a given type
manufactured, stocked or transported by a given
resource in a given period
–the simulation processor has to determine all
the states of all the resources at each period.
The event driven approach is extensively
used in job shop simulation and its application in
SCM simulation is therefore not unexpected.
However the specific requirements of SCM
simulation can introduce some difficulties. A
primary difficulty arises from the size of a
typical SCM simulation model. The circulation
of each individual part in each production
resource of the different companies of the supply
chain can give rise to a prohibitively large
number of events which can, in turn, undermine
the feasibility of the simulation study. Therefore
the use of model reduction techniques is
typically essential.
In an event driven discrete event model:
–the states are the states of the various items
which typically reflect the resources used by
these items and the time duration of this use
–the simulation processor must determine the
times of all the events (i.e., state changes)
–state changes are characterized by
appropriate logic conditions
Thierry/Bel/Thomas – Page 4 of 8
 –a time advance algorithm that suitably
manages a future events list, is mandatory.
5. Decision systems and simulation models
(simulation vs. emulation)
The inherently distributed nature of a supply
chain is a feature that must be properly captured
in any simulation model. There is furthermore
general agreement that the modularity of the
control (i.e., management) system and the shop-
floor model must be retained. This separation
principle enables to introduce the concept of
emulation.
Let’s first focus on a centralized SCM
system. It has three sub-system components; i.e.,
a physical system, an information system and a
control system. Building a simulation model
requires the development of an appropriate
model of one or more of these three sub-systems
which is implemented on a computer
Let’s now consider various options when this
model can be distributed. Consider, for example,
the case where we want to evaluate the effect of
different control rules on a specific physical
system. An approach could be to build an
emulation system corresponding to this physical
system where this emulation model is controlled
by the real decision system connected to the
actual information system. In other words,
emulation aims at mimicking the behaviour of
the physical system only. This can be viewed as
a virtual shop floor which can be connected to an
external control system. Like simulation,
emulation can be used to model complex cases,
but emulation remove the additional task of
modeling decision processes.
Emulation provides separation between test
cases and the control system to be tested. This
modularity is useful for examining a control
system in various test scenarios, or various
control systems on the same test case. It can also
be useful to validate the real control system
before actually deploying it.
Obviously, the same concept can be use for a
SCM system. Since the supply chain is a
network of (often independent) companies,
simulation models can be built in a centralised
SCS M&S Magazine – 2010 / n4 (Oct)
way or in a distributed way. In a distributed
context, different simulation models can be
implemented on different computers, each one
representing some aspect of the companies’
behaviour.
5.1. Centralized simulation
As outlined in Section 1, the decisions that
are usually taken before implementation of any
SCM can be classified into two categories:
strategic (for long term objectives) and
operational (for short term goals). Simulation
can be used as a tool for supporting the decision
making process for both strategic and
operational decisions. In a centralized approach
one single simulation model reproduces all the
supply chain structures (entities and links) which
is quite distinct from a distributed approach.
5.2. Multi Agents Systems decision simulation
An organizational form where partners must
closely collaborate is intrinsic to the SCM
concept. In fact the producing enterprises operate
as nodes in a partnership network and share
activities in order to produce and deliver their
goods. In such a context, integration of the
planning at all the nodes is essential; i.e., the
partners have to be able to distribute and
synchronize their activities.
Multi-Agents Systems (MAS) are well suited
to handling the requirements of such dynamic
environments. Agents representing SC entities,
can take specific roles within the SC structure
and different agents may represent different
objects within the network under investigation.
This idea is not new; Parunak used agents for
manufacturing control or collaborative design
([8] or [9]). These approaches are likewise well
suited to studying SCM systems.
5.3. Simulation for Product Driven Systems
Thus, in this perspective, an SCM system can
be viewed as being composed of planning and
scheduling agents together with agents
Thierry/Bel/Thomas – Page 5 of 8
representing the physical elements that
correspond to products.
This autonomous decision making feature
enables the development of new architectures for
distributed supply chains. The key idea, is to
focus the decision-making processes as near as
possible to the shop-floor (or physical system)
where events actually occur.
Hybrid architectures that combine global
optimisation abilities from centralised control
systems with the responsiveness and robustness
of decentralised ones are an attractive option.
This concept could be realized by using such
technologies as RFID. This technology allows
the possibility of embedding intelligence into the
product and could lead to certain types of
product-driven systems ([10], [11]).
Within a simulation context the above
concept gives rise to a simulation model with
two parts. The first one is an “emulation model”
where the entities represent items without
attributes (no information and decision are
implemented in the model), and the second is a
“control model” in which the entities represent
information flow that is activated by events
occurring in the emulation model.
5.4. Model synchronisation = HLA distributed
simulation
One particular application for distributed
simulation within the SCM context is the case
where a unique control system manages several
physical system simulation models. Another
arises when there is a substantial level of
information exchange required among the
various components of the simulation model. We
note also that two specific issues relating to
distributed simulation are message coordination
between the partners of the supply chain and
synchronization of these partners
The emergence of standards for distributed
simulation; (e.g., HLA) facilitates the
implementation of such simulations. One
particular challenge in any distributed simulation
is respect for causality relations. It is essential, as
well, to properly manage time across the
SCS M&S Magazine – 2010 / n4 (Oct)
distributed computing elements and to ensure
that all events are duly accounted for.
6. Simulation methodology
The evaluation of simulation model quality is
a hard problem. Formal approaches are generally
unfeasible (especially for discrete events
simulation). The primary object is to ensure that
values for system performance measures
obtained from the simulation model are genuine
reflections of the behaviour of the system being
modelled. The main difficulty arises from the
fact that the model always contains
approximations due to necessary simplifications.
Both model structure and model behaviour
need to be considered. Generally there is some
theoretical support for evaluating the impact of
structure. Behaviour aspects, on the other hand,
can only be evaluated through simulation runs.
Within a simulation model of a SCM system,
the number of “objects” and the number of
events can become very large. As a result, the
duration of a simulation experiment can become
unacceptably long. Steps therefore have to be
taken to either restrict the size of the supply
chain being studied or reduce model size.
Various approaches exist for reducing the
size of a supply chain model:
–Abstraction, which is a “method for
reducing the complexity of a simulation model
while maintaining the validity of the simulation
results with respect to the question that the
simulation is being used to address” [13]
–Aggregation which is a “form of abstraction
by which a set of data or variables with common
characteristics can replaced by an aggregated
data or variable” [14]
–Reduction of the number of events which
consists of replacing “part of a discrete event
model by a variable or a formula” [15]
7. Conclusions
In this article we have provided an overview
of the main concepts that relate to simulation
Thierry/Bel/Thomas – Page 6 of 8
studies of supply chain management systems.
Some of the modeling/simulation challenges
have been highlighted together with possible
solutions.
Simulation is most certainly a very powerful
approach for gaining insight into Supply Chain
Management systems. Nevertheless much
investigation still remains to be carried out in
respect to dealing with the inherently distributed
nature of SCM systems. Further work with the
application of model reduction techniques is also
needed to deal with the complexity of these
systems
Acknowledgement
This article is an overview of the material
presented in Chapter one of the book:
"Simulation for Supply Chain Management",
Edited by C. Thierry A. Thomas et G. Bel,
Wiley, ISTE, 2008.
References
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Jacobs FR (2005) Manufacturing planning and
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[9] Parunak, H.V.D. (1998) ‘What Can Agents
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[12] A. M. Law and W. D. Kelton, (1991),
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[13] Frantz F.K. “A Taxonomy of Model.
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[14] C. Mercé, “Cohérence des décisions en
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Author Bibliographies
Caroline Thierry is a professor at the University
of Toulouse, France. Her research at ONERA
then at IRIT focuses on decision systems in
supply chain management. She can be reached
at: thierry@univ-tlse2.fr.
Gérard Bel has been a professor and a researcher
at the French Aerospace Lab (ONERA). He
participated in more than 100 research projects
in industry (system design and management). He
can be reached at:
bel.gerard@gmail.com.
André Thomas is a professor at ENSTIB-CRAN-
CNRS- Nancy University France. He works with
companies producing manufactured goods for
Thierry/Bel/Thomas – Page 7 of 8
research projects on supply chain control
methods. He can be reached at
andre.thomas@enstib.uhp-nancy.fr

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