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A METHODOLOGY TO STABILIZE THE SUPPLY CHAIN

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Date Issued:
2010
Abstract/Description:
In todayÂÂ's world, supply chains are facing market dynamics dominated by strong global competition, high labor costs, shorter product life cycles, and environmental regulations. Supply chains have evolved to keep pace with the rapid growth in these business dynamics, becoming longer and more complex. As a result, supply chains are systems with a great number of network connections among their multiple components. The interactions of the network components with respect to each other and the environment cause these systems to behave in a highly nonlinear dynamic manner. Ripple effects that have a huge, negative impact on the behavior of the supply chain (SC) are called instabilities. They can produce oscillations in demand forecasts, inventory levels, and employment rates and, cause unpredictability in revenues and profits. Instabilities amplify risk, raise the cost of capital, and lower profits. To reduce these negative impacts, modern enterprise managers must be able to change policies and plans quickly when those consequences can be detrimental. This research proposes the development of a methodology that, based on the concepts of asymptotic stability and accumulated deviations from equilibrium (ADE) convergence, can be used to stabilize a great variety of supply chains at the aggregate levels of decision making that correspond to strategic and tactical decision levels. The general applicability and simplicity of this method make it an effective tool for practitioners specializing in the stability analysis of systems with complex dynamics, especially those with oscillatory behavior. This methodology captures the dynamics of the supply chain by using system dynamics (SD) modeling. SD was the chosen technique because it can capture the complex relationships, feedback processes, and multiple time delays that are typical of systems in which oscillations are present. If the behavior of the supply chain shows instability patterns, such as ripple effects, the methodology solves an optimization problem to find a stabilization policy to remove instability or minimize its impact. The policy optimization problem relies upon a theorem which states that ADE convergence of a particular state variable of the system, such as inventory, implies asymptotic stability for that variable. The stabilization based on the ADE requires neither linearization of the system nor direct knowledge of the internal structure of the model. Moreover, the ADE concept can be incorporated easily in any SD modeling language. The optimization algorithm combines the advantage of particle swarm optimization (PSO) to determine good regions of the search space with the advantage of local optimization to quickly find the optimal point within those regions. The local search uses a Powell hill-climbing (PHC) algorithm as an improved procedure to the solution obtained from the PSO algorithm, which assures a fast convergence of the ADE. The experiments showed that solutions generated by this hybrid optimization algorithm were robust. A framework built on the premises of this methodology can contribute to the analysis of planning strategies to design robust supply chains. These improved supply chains can then effectively cope with significant changes and disturbances, providing companies with the corresponding cost savings.
Title: A METHODOLOGY TO STABILIZE THE SUPPLY CHAIN.
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Name(s): Sarmiento, Alfonso, Author
Rabelo, Luis, Committee Chair
University of Central Florida, Degree Grantor
Type of Resource: text
Date Issued: 2010
Publisher: University of Central Florida
Language(s): English
Abstract/Description: In todayÂÂ's world, supply chains are facing market dynamics dominated by strong global competition, high labor costs, shorter product life cycles, and environmental regulations. Supply chains have evolved to keep pace with the rapid growth in these business dynamics, becoming longer and more complex. As a result, supply chains are systems with a great number of network connections among their multiple components. The interactions of the network components with respect to each other and the environment cause these systems to behave in a highly nonlinear dynamic manner. Ripple effects that have a huge, negative impact on the behavior of the supply chain (SC) are called instabilities. They can produce oscillations in demand forecasts, inventory levels, and employment rates and, cause unpredictability in revenues and profits. Instabilities amplify risk, raise the cost of capital, and lower profits. To reduce these negative impacts, modern enterprise managers must be able to change policies and plans quickly when those consequences can be detrimental. This research proposes the development of a methodology that, based on the concepts of asymptotic stability and accumulated deviations from equilibrium (ADE) convergence, can be used to stabilize a great variety of supply chains at the aggregate levels of decision making that correspond to strategic and tactical decision levels. The general applicability and simplicity of this method make it an effective tool for practitioners specializing in the stability analysis of systems with complex dynamics, especially those with oscillatory behavior. This methodology captures the dynamics of the supply chain by using system dynamics (SD) modeling. SD was the chosen technique because it can capture the complex relationships, feedback processes, and multiple time delays that are typical of systems in which oscillations are present. If the behavior of the supply chain shows instability patterns, such as ripple effects, the methodology solves an optimization problem to find a stabilization policy to remove instability or minimize its impact. The policy optimization problem relies upon a theorem which states that ADE convergence of a particular state variable of the system, such as inventory, implies asymptotic stability for that variable. The stabilization based on the ADE requires neither linearization of the system nor direct knowledge of the internal structure of the model. Moreover, the ADE concept can be incorporated easily in any SD modeling language. The optimization algorithm combines the advantage of particle swarm optimization (PSO) to determine good regions of the search space with the advantage of local optimization to quickly find the optimal point within those regions. The local search uses a Powell hill-climbing (PHC) algorithm as an improved procedure to the solution obtained from the PSO algorithm, which assures a fast convergence of the ADE. The experiments showed that solutions generated by this hybrid optimization algorithm were robust. A framework built on the premises of this methodology can contribute to the analysis of planning strategies to design robust supply chains. These improved supply chains can then effectively cope with significant changes and disturbances, providing companies with the corresponding cost savings.
Identifier: CFE0002986 (IID), ucf:47977 (fedora)
Note(s): 2010-05-01
Ph.D.
Engineering and Computer Science, Department of Industrial Engineering and Management Systems
Doctorate
This record was generated from author submitted information.
Subject(s): Supply Chain
System Dynamics
Simulation
Stability
Policy Optimization
Particle Swarm Optimization
Persistent Link to This Record: http://purl.flvc.org/ucf/fd/CFE0002986
Restrictions on Access: public
Host Institution: UCF

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