The impact of globalization and worldwide competition has forced firms to modify their strategies towards a real time operation with respect to customer's requirements. This behaviour, together with the communication possibilities offered by the actual Information and Communication Technologies, allows the top management to move towards the concept of extended enterprise in which a collaborative link is established among suppliers, commercial partners and customers. When the information flows involve each actor of the chain, from suppliers to the final distribution centers, the extended enterprise becomes a virtual firm, that can be defined as a set of stand-alone operational units that acts to reconfigure themselves as a value chain in order to adapt to the business opportunities given by the market. The present work is intended to verify through a simulation approach the quantitative advantages that can be obtained by the introduction of the Value Chain concept into the Supply Chain Management (SCM). The paper, after a description of the two most known (SCM) methods - SCOR and VCOR - makes a comparison between them by the customer's point of view. In the second part of the work a simulation model has been developed to verify the advantage that the VCOR is able to obtain, validating it on an industrial case study.
Scientific literature related on Supply Chain Management (SCM) is rich of publications, but the reality is that there is a lag between practice and theory (Balan, et. al, 2006;Simchi-Levi et al, 2000;Neubert et al, 2004). Mass media and Internet have speeded up the diffusion of new products; at the same time, technical innovation and market severe competition promote rapid obsolescence of existing products and technologies. When a company succeeds in developing a new product category, other competitors may soon emerge. The market originator must endure not only the substantial risk of whether the market would materialize or not, but also the difficulty of recovering major costs, such as research and development and advertisements. Increasingly, the supply chain becomes the mechanism for coping with these problems because it is often inefficient for any single company to produce a whole product (Abdullah et al., 2004;Feller et al, 2006).
Hence, modern business is essentially the competition of one supply chain (SC) with another. SC dynamics is the interaction processes of the participants from different departments and companies. A positive aspect of supply chain dynamics is effective collaboration, which may lead to higher performance. A negative aspect is independent decision making, which may create various delays and aggravate forecasting errors (Simatupang and Sridhran, 2002;Abu-Suleiman et al. 2005).
This research stresses the interest on the possible quantitative advantages given by the introduction of the Value Chain concept into the SCM through a simulation approach. Discrete event simulation, continuous time-differential equations, discrete time difference models and operational research techniques are some of the commonly used quantitative modelling techniques to evaluate and design supply chains (Lee et al., 2002;Terzi and Cavalieri, 2004). The correct identification of key variables and their interactions, together with determining how the information can be better managed enables the utility of the entire supply chain.
In this work we use discrete event formalism to model and study the supply chains. Discrete-event simulation is chosen for its capability to represent physical and information flows along with their respective delays, in an information feedback control type of setting. Our main research interest is to clarify the critical factors for minimizing the negative effects of supply chain dynamics and to gain insight on how to effectively manage them. To achieve these objectives we developed a simulation model to implement the VCOR and to verify the possible advantages that it is able to obtain.
A Supply Chain can be defined as a system network that provides raw materials, transforms them into intermediate commodities and/or in finished goods and distributes them to the customers through a delivery system (Christopher et al, 2002). The aim is to produce and distribute the right quantities, to the right locations, at the right time, while reducing costs and maintaining a high level of service. SCM is concerned with smoothness, economically driven operations and maximising value for the end customer through quality delivery. The limitations are however due to the fact that SCM as a concept does not extend far enough to capture customer’s future needs and how these get addressed, and furthermore, it does not encompass the postdelivery, post-evaluation and relationship building aspects (Al-Mudimigh et al, 2004). Another important theory can be defined as strategic in the context of SCM, the concept of value chain management.
The Value Chain was described and popularized by Michael Porter in his best-seller, Competitive Advantage: Creating and Sustaining Superior Performance (Porter, 1985). Porter defined Value as the amount that buyers are willing to pay for what a firm provides, and he conceived the Value Chain as the combination of generic activities operating within a firm, activities that work together to provide value to customers. Porter linked up the value chains between firms to form what he called a Value System. However, in the present era of greater outsourcing and collaboration, the linkage between multiple firms’ value creating processes has more commonly become called as Value Chain. As this name implies, the primary focus in value chains is on the benefits that accrue to customers, the interdependent processes that generate value, and the resulting demand and funds flows that are created. Feller, Shunk, and Callarman (Feller at al. 2006;Jan Olhager et al, 2006) exposed some important considerations about the value concept. First is that value is a subjective experience that is dependent on context. The same product or service has not the same value in different parts of the world or in different situations. Second, value occurs when needs are met through the provision of products, resources, or services. Finally, value is an experience and it flows from the customer. Clem
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