Proceedings,16th

Information ControlIFAC Symposium

Problems on
in Manufacturing
Proceedings,16th
Information Control
Bergamo, Italy, IFAC
June Symposium
Problems
11-13, on
in Manufacturing
2018
Proceedings,16th
Information ControlIFAC Symposium on
Bergamo, Italy, JuneProblems in Manufacturing
11-13, 2018 Available online at www.sciencedirect.com
Information Control
Proceedings,16th
Bergamo, Italy, JuneProblems
IFAC in Manufacturing
Symposium
11-13, 2018 on
Bergamo, Italy,
Information JuneProblems
Control 11-13, 2018
in Manufacturing
Bergamo, Italy, June 11-13, 2018 ScienceDirect
Simulation-based analysis of inventory
IFAC PapersOnLine strategies in lean supply chains
51-11 (2018) 1453–1458
Simulation-based analysis of inventory strategies in lean supply chains
Simulation-based analysis of inventory strategies in lean supply chains
Simulation-based analysis
Satie Ledoux Takeda Berger*.ofGuilherme
inventory strategies Enzo
Luz Tortorella**. in lean supply
Morosini chains
Frazzon***
Simulation-based analysis
Satie Ledoux Takeda Berger*.ofGuilherme
inventory Luz strategies
 Tortorella**. in lean
Enzo supply
Morosini chains
Frazzon***
Satie Ledoux Takeda Berger*. Guilherme Luz Tortorella**. Enzo Morosini Frazzon***

Satie Ledoux Takeda Berger*. Guilherme Luz  Tortorella**. Enzo Morosini Frazzon***
*Department ofSatie Production
Ledouxand Systems
Takeda Engineering,
Berger*. GuilhermeFederal  University
Luz Tortorella**. of SantaEnzo Catarina
Morosini (UFSC), Florianopolis, Brazil
Frazzon***
*Department of Production and Systems Engineering, (e-mail: Federal University of Santa Catarina (UFSC), Florianopolis, Brazil
satie.takeda@posgrad.ufsc.br)
*Department of Production and Systems Engineering, Federal University of Santa Catarina (UFSC), Florianopolis, Brazil
(e-mail: satie.takeda@posgrad.ufsc.br)
**Department
*Department of ofProduction
Productionand andSystems
SystemsEngineering,
Engineering,
(e-mail: FederalUniversity
Federal Universityof
satie.takeda@posgrad.ufsc.br) ofSanta
SantaCatarina
Catarina(UFSC), (UFSC),Florianopolis,
Florianopolis, BrazilBrazil
**Department
*Department of ofProduction
Productionand andSystems
SystemsEngineering,
Engineering,
(e-mail:(e-mail: FederalUniversity
Federal Universityof
g.tortorella@ufsc.br)
satie.takeda@posgrad.ufsc.br) ofSanta
SantaCatarina
Catarina(UFSC), (UFSC),Florianopolis,
Florianopolis, BrazilBrazil
**Department of Production and Systems Engineering, (e-mail: Federal University of Santa Catarina (UFSC), Florianopolis, Brazil
g.tortorella@ufsc.br)
***Department
**Department of ofProduction
Productionand andSystems (e-mail:
SystemsEngineering,
Engineering, satie.takeda@posgrad.ufsc.br)
Federal
Federal University
University of
of Santa
Santa Catarina
Catarina (UFSC),
(UFSC), Florianopolis,
Florianopolis, Brazil
Brazil
***Department ofProduction
Productionand andSystems
SystemsEngineering, (e-mail: g.tortorella@ufsc.br)
Engineering, FederalUniversity
Universityof ofSanta
SantaCatarina
Catarina(UFSC), (UFSC),Florianopolis,
Florianopolis,Brazil Brazil
**Department of Federal
(e-mail:enzo.frazzon@ufsc.br)
(e-mail: g.tortorella@ufsc.br)
***Department of Production and Systems Engineering, Federal University of Santa Catarina (UFSC), Florianopolis, Brazil
(e-mail:enzo.frazzon@ufsc.br)
***Department of Production and Systems Engineering, (e-mail: g.tortorella@ufsc.br)
Federal University of Santa Catarina (UFSC), Florianopolis, Brazil
(e-mail:enzo.frazzon@ufsc.br)
***Department of Production and Systems Engineering, Federal University of Santa Catarina (UFSC), Florianopolis, Brazil
(e-mail:enzo.frazzon@ufsc.br)
Abstract: This work aims to analyze(e-mail:enzo.frazzon@ufsc.br)
different strategies of inventory management for finished products
Abstract: This work aims
in a supplier-customer to analyze different
relationship strategies of inventory management for finished products
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Keywords:
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The supply
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Keywords: products
lean by promoting success throughout the supply chain.
supply chain management; discrete event simulation; inventory management; lean
strategy;
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Keywords: pull
finished productssystems. by promoting success throughout
discrete the supply chain. inventory management; lean
strategy; pulllean
Keywords:
supply
systems. chain management; event simulation;
strategy; pulllean supply chain management; discrete event simulation; inventory management; lean
systems. 
strategy; pulllean
Keywords: supply chain management; discrete
systems. event simulation; inventory management; lean
 computational modeling has become a very useful tool to
strategy; pull systems.
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Copyright
process involving the adoption of LSCM, the use of14852.1 Lean supply chain management
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The supply chain covers all activities related to the flow and possibly joining queues while waiting for an available
transformation of products starting from the raw material to resource (Frazzon et al., 2014). Within the context of the
the end user, contemplating the flow of materials and LSCM, modeling and simulation aims to help decision
information, both downstream and upstream in the supply makers to better understand the behavior and performance of
chain (Ballou, 2009). According to Ugochukwu et al. (2012) the supply chain, and then a simulation model can be used to
the appropriate Supply Chain Management (SCM) is a key focus the vast amount of detail, allowing the decision-maker
factor for companies and influences the performance of to focus on the biggest interferences and draw conclusions
manufacturing activities with widely recognized benefits from the outputs of the simulation.
such as low inventory, customer satisfaction, optimized
3. CONCEPTUAL MODEL
efficiency, high quality, cost reduction and improvement in
lead time and quantity and quality specifications and high Inventory is the most common method used to store value
flexibility. Alves Filho et al. (2004) emphasize the increasing streams. Companies undertaking lean implementation
amount of research that analyzes the situations and practices commonly approach finished goods management by adopting
implemented for the management of supply chains, with pull system (Kerber and Dreckshage, 2011). Dennis (2016)
diversified approaches covering both material and discusses three basic types of pull system that are approached
information flows. Within this scenario, due to the benefits as strategic to organizations that wish to implement lean
provided to manufacturing environments, the incorporation of principles and practices: (i) replenishment pull system, (ii)
the lean principles and practices in the SCM has culminated sequential pull system, and (iii) mixed pull system. The first
in differentiated results along the supply chain, surpassing type is the most basic and the most widespread, where a
those already reached individually by the organizations (Arif- strategic level of inventory is maintained in the form of
Uz-Zaman and Ahsan, 2014). Vitasek et al. (2005) define supermarkets located at selected points in the production
LSCM as a set of organizations directly linked by upstream process. When a downstream customer takes items from this
and downstream flows of products, services, finances and supermarket, a card or kanban is flagged for replenishment.
information that work collaboratively to reduce costs and The second type is considered leaner because it works with
waste, effectively demonstrating what is necessary for little or no inventory. The products are produced according to
customer's individual needs. the demand. Finally, in the latter type of system, aspects of
For Anand and Kodali (2008) several modifications must be both – sequential and replenishment pull – are used together.
made to adapt lean principles and practices to LSCM. Generally high frequency orders are placed through the first
Whereas manufacturing predominantly involves the flow of type of system and the low frequency orders are placed
materials along with a reduced amount of information within through the second type of system.
the boundaries of the organization; the supply chain In this study, the effect of process variability on the strategies
comprises the flow of materials, information, and resources of finished goods will be analyzed considering the conceptual
beyond the boundaries of the organization. Thus, both the cycle of the customer-supplier relationship. Specifically, we
benefits and the barriers faced for LSCM implementation will consider three conceptual scenarios based on the strategy
may differ from those already known in manufacturing of the replenishment pull system and a conceptual scenario
(Manzouri et al., 2013). based on the sequential pull system. In the three scenarios
based on the theory of the replenishment pull system, the
2.2 Simulation approaches different positions of the supermarket of finished goods will
be analyzed, with the supermarket located in the supplier, in
Simulation has been widely used in supply chain the customer, or in both supplier and customer facilities. In
management since its application provides many the strategy of the sequential pull system, the customer-
opportunities to support SCM. Such opportunities are: supplier relationship is not based on the supermarket, but on
establishing the desired inventory levels at different stages of direct orders, made through a single purchase order based on
the supply chain; definition of service level goals to achieve a pre-estimated lead time.
objectives based on uncertainties; supply of valuable support
In the first scenario, as the customer pull materials from his
during the operational phase of the chain, assisting in the
line stock, withdrawal kanbans are generated. The kanbans
planning, programming and execution of the supply chain
are collected by the suppliers truck and sent to the supplier's
(Banks et al., 2002). Simulation models are able to explicitly
delivery area, where the supermarket of finished goods is
represent the variability, interconnectivity and complexity of
located, pulling the materials for the next transport truck
a system. As a result, it is possible with a simulation to
route. After loading with the requested quantity, the materials
predict system performance, compare alternative systems
are transported and delivered to the customer's production
models, and determine the effect of alternative policies on
line in the form of a FIFO queue, thereby allowing a
system performance (Robinson, 2004).
minimum amount of material for internal supply during the
The discrete-event simulation model is a simplified route of the transport truck and also avoiding the need for
representation of a system, developed to understand its intermediate handling of materials in the customer's
performance over time and to identifying potential means of production area. While this dynamic takes place, a production
improvement (Tako and Robinson; 2010). In this model, the kanban is sent to the supplier’s production line in order to
state variables change only at those discrete points in time at produce the pulled materials and replenish the finished goods
which events occur. Events occur as consequence of activity supermarket.
times and delays. Entities may compete for system resources,

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In the second scenario, the withdrawal kanbans are sent to the The simulation models were implement using the Anylogic
customers supermarket, where the finished goods of the software from Anylogic Company. The three scenarios that
supplier are located, and the customer is responsible for the are based on the strategy of the replenishment pull system,
management of that supermarket. When the customer pulls with the use of supermarkets, were modeled using an
material from the supermarket, a production information is information flow, a flow of material and other three flows
sent to the supplier's production line (via kanban) allowing that define the behavior of the truck. These flows are
the supplier to replenish the supermarket at the customer. In connected and interrelated, making it possible to evaluate the
this scenario, a higher inventory level is expected compared actions in the models.
to scenario 1, since it presents three inventory areas: (i) a The fourth scenario, based on the strategy of the sequential
FIFO lane in the supplier's loading area with a truck load pull system, was modeled using the flow of the truck coupled
value, (ii) in the supermarket at the customer, and (iii) a FIFO to the material flow and a flow for decision of the single
lane immediately next to the customer's production line in purchase order trigger. These two flows are also connected
order to ensure a minimum internal supply from the and interrelated.
supermarket. In the first scenario, the supermarket is located at the supplier
In the third scenario, the model brings together characteristics (with an initial quantity of 20 pieces) and the customer has a
from both of the previous scenarios. The customer sends the small stock next to the line (with an initial quantity of 21
requisition to his own warehouse, where he owns a pieces). These stocks are treated as a regular FIFO queue and
supermarket of finished goods. When the customer pulls the are prohibited from flowing freely through the material flow,
materials from his supermarket, requisition information is since events need to happen in order for this to happen. When
sent through the kanban to the supplier's delivery area, which the model starts to run, the line stock begins to be consumed
also has a finished goods supermarket. After loading with the in the customer's manufacturing process. Each time a part
requested quantity, the materials are transported and leaves the manufacturing process (treated as a delay), another
delivered to replenish the customer's supermarket. While this is requested from the production line to the line stock, which
dynamic takes place, a kanban of production is sent to the unlocks the flow, allowing for another part to be processed in
supplier's production line in order to produce the materials the manufacturing, and so on. At the same time, as the parts
pulled and to replenish the supermarket's finished goods from are withdrawn from the customer line stock, a kanban card is
the supplier. In this scenario, a higher lead time is expected, generated, establishing the flow of information between
compared to scenarios 1 and 2, due to higher inventory customer and supplier. In parallel to this process, a truck that
levels. left the supplier at time 0 is traveling to the customer in order
The fourth scenario uses the strategy of the sequential pull to take those kanban cards being generated. By the time the
system. When the inventory level of the customer reaches a truck arrives at the customer, it takes all the kanban and
minimum level, a single purchase order is made for the returns to the supplier. Upon return, it is verified if the
supplier, with a pre-established order number calculated supplier's supermarket has the requested quantity. If there is,
according to the system times. the truck is loaded and returns to replenish the line stock at
After the suppliers receives the purchase order, it starts the the customer. If there is not, the missing quantity is produced
production of the ordered quantity. Then, the products are and the truck waits until the complete order can be loaded
sent to the customer in a single truck to replenish its and transported. Every time a piece is removed from the
inventory. Two supply chain indicators were used to measure supplier's supermarket, an order is issued for the supermarket
the performance level of each of the four scenarios, delivery to be replenished.
service level and production lead time (Rossini and In the second scenario, the supermarket is located on the
Staudacher, 2016; Jasti and Kodali, 2015). customer with an initial quantity of 16 pieces, the initial line
stock of the customer has an initial quantity of 5 pieces and
4. TEST CASE
the supplier has a final stock with an initial quantity of 10
For the development of the simulation study, the following pieces. The logic of the model is similar. As in the first
five steps were adapted from (Robinson, 2004): scenario, the parts leave the customer line stock one by one to
1) Definition of the problem: understand what problem or be processed in their manufacturing. Withdrawal kanban
situation one wishes to analyze; cards are generated and the parts are pulled from the
customer’s supermarket. As the pieces leave the customer's
2) Description of the conceptual model: a detailed description supermarket for line inventory, production kanban cards are
of the model to be developed. (as described in Section 3); generated, establishing the flow of information between
3) Coding of the model: conversion of the conceptual model customer and supplier. Parallel to this process, as in the
into a computational model; previous scenario, a truck that left the supplier at time 0 is
4) Experimentation: finding the best scenario or developing a traveling to the customer in order to take those kanban cards
better understanding of the analyzed system; being generated. By the time the truck arrives at the
5) Implementation of the simulation model: presenting a customer, it takes all the kanban with the information and
tangible change or providing a better understanding of the returns to the supplier. Upon returning, kanban generates a
studied situation. production order for the vendor. It is analyzed if the supplier
has the necessary quantity in stock, if he does not have it, the
4.1 Test case presentation truck waits for the missing quantity to be produced to carry

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out the transportation and to replenish the customer's account, increasing the total LT. In scenario 4 the greater lead
supermarket. time can be explained by the fact that the customer makes a
In the third scenario, both customer and supplier have large request to replenish his stock, instead of diluting the
supermarket. Initially, the client owns a supermarket with 16 orders as in the previous cases. As expected, scenario 1
pieces and stock of line with 5 pieces and the supplier owns a presented the worst lead time due to the existence of two
supermarket with 20 pieces. The dynamics of this scenario supermarkets, that is, higher inventory levels.
are also similar to the two previous scenarios. When the In the other three production configurations, the supplier and
model starts to run, the line stock begins to be consumed in customer production rates were defined according to a
the customer's manufacturing process. The part that is taken triangular distribution whose variance amplitude was set at
from the line stock generates an order that is sent to the 10%, 15% and 20%. This variability of production can
customer's supermarket. As the pieces leave the customer's represent a diversity of problems that can occur in real-life
supermarket for line inventory, kanban cards are generated, situations, such as machine maintenance problems,
establishing the flow of information between customer and fluctuation of demand, absenteeism, overtime, quality issues,
supplier. In parallel to this process, a truck that left the among others. With the 10% variation, scenarios 1, 2 and 3
vendor at time 0 is traveling to the customer in order to take maintained a DSL of 100%, while scenario 4 presented DSL
those kanban cards being generated. By the time the truck failures. This lower reliability was expected in scenario 4,
arrives at the customer, it takes all the kanban and returns to since the replenishment request is pre-calculated and is not
the supplier. Upon return, it is verified if the supplier's changed to absorb changes in the production rate. Therefore,
supermarket has the requested quantity. If there is, the truck if the production rate increases, the order may not be
is loaded and returns to replenish the supermarket at the sufficient to replenish the stock in time. LTs presented small
customer. If there is not, the missing quantity is produced and variations, keeping the rank of the previous configuration,
the truck waits until the complete order can be loaded and where scenario 2 presented a lower LT while scenario 1
transported. Every time a piece is removed from the showed the highest.
supplier's supermarket, an order is issued for it to replenish With the variation of 15%, scenarios 1 and 3 maintained a
his supermarket. DSL of 100%, while scenario 2 and 4 presented flaws. The
The fourth scenario is based on a different logic from failure in scenario 2 is expected as the customer's production
previous scenarios, since it does not use kanban. In this variance increases, since the distance between the
scenario, the customer has an initial line stock of 30 pieces. supermarket and the supplier leads to a longer replenishing
When the model starts to run, the line stock begins to be time. Once again, LTs did not show significant variations.
consumed in the customer's manufacturing process. When For the variation of 20%, the results obtained were similar to
this line stock reaches a minimum value of 26 pieces those of the previous configuration. Figures 1, 2, 3 and 4
(assuming a 5-part safety margin), a single order of 21 pieces presents the LTs throughout the 30 days simulation period for
(pre-calculated) is sent to the supplier. This flow of the 20% variation configuration. The small variability in LTs
information from the order to the supplier was modeled with between different configurations may be a result of the long
a time of 1 minute, emulating the requisition process. When simulated time period. Since the changes in the rate of
the order arrives at the supplier, it starts the production of the production used in the software are calculated product by
quantity requested, and, after it is completed, the truck is product, rather than daily or weekly variations, the average
loaded and transports the lot to the customer. value in a long period of time tends to omit these oscillations.

4.2 Results and analysis

Regarding the simulation results, our analysis comprised

thirty days of simulation for each scenario in four different
production configurations in relation to demand variability
(see Table 1). In all scenarios the same production times were
considered at the supplier, 3 minutes; at the client, 4 minutes;
and transportation route, 20 minutes, both for the going and
for the return. The initial inventory levels were set to
guarantee a balance between the scenarios, therefore allowing Figure 1. Scenario 1 - LT (30 days) – 20% variance.
for a better comparison.
The first configuration considered the supplier and customer
production line as deterministic variables, neglecting any
variability in the supplier or customer's production rate. In the
simulation results, all four scenarios presented a Delivery
Service Level (DSL) of 100%. Scenario 2 presented lower
Lead Time (LT), followed by scenarios 3, 4 and 1
respectively. The result was as expected, since in scenario 2
the supermarket is close to the customer, so the parts spend
less time in the shelf. In scenario 3, since the parts are close
to the supplier, there is still the route time to be taken into Figure 2. Scenario 2 - LT (30 days) – 20% variance.

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5. CONCLUSIONS
In this paper we have studied inventory strategies for finished
goods in a supplier-customer relationship in a lean supply
chain environment. Four different conceptual scenarios were
analyzed and compared by testing four different
configurations. In order to measure the results of each
scenario, the production time and service level indicators
were simulated over a period of thirty days. Once the model
coding and experimentation stages were carried out, the
simulation models were theoretically implemented to provide
Figure 3. Scenario 3 - LT (30 days) – 20% variance. a better understanding of the analyzed situation. Therefore, it
can be concluded that the result of the conceptual model
provides a theoretical basis for obtaining relevant information
in order to provide support to the decision-making process
related to lean strategies for finished goods. In addition, since
variability inputs were considered in the production rate of
the customer and the supplier, it is possible to analyze the
influence that the supplier has on inventory scaling in each
scenario. Another conclusion obtained is that the study was
developed from a broader perspective, providing the
identification of the value stream of the supply chain without
Figure 4. Scenario 4 - LT (30 days) – 20% variance. entering specific details of each layer. Therefore, it becomes
possible to investigate the relationship between the strategy
of finished goods and the stability of the process. One of the
Table 1 presents the full set of results obtained in each most idealized points of the model is the transport process.
simulation. Scenarios 1 and 3 presented a DSL of 100% in all Thus, a model that takes into account the variability in
configurations, but the LT of scenario 3 is lower, so within transportation time, loading and unloading times and truck
the framework of a lean supply chain, scenario 3 is the best capacity could reflect reality more closely. In addition,
between the two strategies. Scenario 4 presented a high LT another point that could be explored is the influence of the
and DSL failures, being therefore the worst among the four model on the costs involved, quantifying the impact of lead
strategies. Among the four scenarios analyzed, scenario 2 time and the level of service. Such approaches can be carried
presented the best performance regarding LT, being the best out in future research, obtaining new results and expanding
strategy when the variability is low. However, scenario 2 the range of knowledge regarding the implementation of lean
presented DSL failures for the higher variability supply chain management.
configurations. This problem could be mitigated by using
higher inventory levels in the supply chain, which will lead to
higher LT and higher costs. Thus, for large variabilities,
scenario 3 becomes a more attractive strategy, since it
maintains its DSL at 100% and presents reasonably low LT.

Table 1. 30-day simulation results for each scenario

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