Quantifying variability impacts upon supply chain performance

Efforts to control variability in segments of the supply chain can bring about counterintuitive results. This illustrates the importance of employing analytics in support of any supply chain process improvement or policy initiative. Modeling and simulation (M&S) helps managers identify improvements that will positively affect the supply chain´s performance. M&S provides a way to evaluate the relative effects of budgetary decisions on cost, performance, and readiness over a variety of timeframes. M&S also provides a structured methodology to quantify process improvements and variability reductions. Analysis of the Department of Defense supply chain identified three recurring sources of variability: 1) procurement lead time, 2) depot repair time, and 3) retrograde. To evaluate the effect of variability, we employed three hierarchically integrated models: a system dynamics model for strategic decisions; 2) an analytical readiness-based sparing model for tactical decisions; and 3) a discrete event simulation model for logistical and operational performance decisions.