right_division Green SCM Distribution
Bookmark us
SCDigest Logo

Focus: Distribution/Materials Handling

Feature Article from Our Distribution and Materials Handling Subject Area - See All

From SCDigest's On-Target E-Magazine

Nov. 16, 2011

Supply Chain News: Managing Future Logistics Operations Will Require The Ability To Navigate Through Uncharted Waters - and Simulation will be Key

Going Forward Companies Will Need To Adopt Tools Specifically Designed To Better Manage Marketplace Fluctuations in Distribution


Cliff Holste, Materials Handling Editor

With an environment of volatility and unpredictability likely to last for years, should logistics and distribution management look to greater adoption of simulation and emulation tools to cope with these dynamics?

While the current down economy drags on, the one thing we know for sure is that business conditions will improve at some point in the future as they always do. But that doesn’t necessary mean that business will return to normal, i.e., a robust job creating economy. In fact many economists say that a job growth rate that is barely enough to keep up with population growth is the “new normal”. The U.S. economy is creating jobs, but it’s doing it so slowly that, at the current pace of hiring, the unemployment rate will stay stuck at about 9% for at least five more years.

SCDigest Says:

It's a very good bet that in order to survive in the "new normal" world of constantly changing consumer dynamics, companies will need flexible and adaptable tools that allow them to test the capabilities of their operations against forecasted flow patterns and make required adjustment ahead of the actual event.
What Do You Say?
Click Here to Send Us Your Comments
Click Here to See Reader Feedback

This, then, is the new normal: an economy that grows only fast enough to keep unemployment from rising, but not strong enough to create the jobs needed to bring unemployment down to the full employment level of about 6%.

As it relates to the business of supply chain logistics, Dr. Jim Tompkins of Tompkins Associates says that at one level, it’s hard to talk about a new normal because of the speed of supply chain change we have been seeing for some time.

“The new norm for the supply chain is that there is no new norm. Or, stated differently, the new norm is that the pace of change is so rapid that the new norm is that everything is changing and will continue to change,” Tompkins says. Given the high degree of uncertainty, previous forecasting models are of little value. According to Tompkins “This leads to the requirement that supply chain success will only be achieved when logistics systems have substantial flexibility and modularity.”

Another way to look at it is that companies must adapt to a permanent level of increased volatility and change. There's a widespread sense that there will be no going back - that the landscape of business has been forever altered. Business must now expect to routinely deal with issues such as constant currency fluctuations, cautious customers, and rapid swings in the price and availability of key commodities.

For distribution operations, there are several concerns. Key among them are: what will the order fulfillment landscape look like on the recovery side, and what affect will caution and uncertainty have on buying patterns? While no one knows what all of the issues will be for sure, manufacturers & distributors can begin to speculate and get ready.

To some degree, what businesses are experiencing right now may be the best indication of what the future has in store. Many market analysts believe that consumers have changed arguing for example that many will demand a “return to simplicity.” They say that unlike consumers in previous recessions, who greeted the return of financial stability with a buying spree, current consumers entered the recession feeling bloated. As they regain their ability to spend, they'll continue to buy simpler offerings with the greatest value – a pattern we are currently seeing. These same analysts also believe that for the first time in many years, consumers will choose to live below their means, or what they call “discretionary thrift.”

Though there already has been a strong trend toward risk mitigation in the general business community, logistics businesses specifically are being forced to conduct regular audits of their operations to better manage risk and resiliency of what are in effect uncharted waters.


(Distribution/Materials Handling Story Continues Below )


Download Longbow Advantage

Business Briefs



The Keys to WMS Success,

Maximizing JDA WMS

Performance and More






Testing The Water Before Jumping In with Simulation

Today, new simulation and emulation tools can evaluate alternative scenarios automatically and determine the best options. These tools provide objective, fact-based guidance to making effective manage decisions about a complex range of operational configurations, and can eliminate “subjective debates”. The following are three benefits most often cited:

Gain understanding of complex multiple variables and their impact on operations, starting simply and adding complexity as the model builds.
The ability to perform time-phased analysis, seeing, for example, a trend towards gradual but significant increases in inventory levels.
The ability to easily perform multiple “what-if” analyses and understand the impact of different operational scenarios.

With a simulation tool, a virtual model of the operation is built (whether it’s a conveyor system in a DC or a supply chain network). Rules are created that describe how the system should work. The key advantage to simulation is that demand is dynamic. It can be estimated at a daily level or it could be on a minute-by-minute basis. It is also possible to have demand or other variables populated more or less randomly over some period.

Running the simulation of a proposed operation, or an emulation of a current operation, then allows the analyst and/or logistics manager to “test” the behavior of the operation over time, as these inputs change. It may allow bottlenecks or other glitches to be identified that may otherwise be missed. The result is better ability to understand the impact of change and volatility on proposed or current operations, what the real bottlenecks and system constraints are, and the advantages or disadvantages of applying various risk mitigation strategies.

Because logistics managers will in many cases be operating in uncharted waters, emulation tools will better enable them to do several real-time analyses:

Get a better handle on what is really happening with order volumes by type, customer, seasonality, etc.
Understand what the cost and processing times are for different picking scenarios under current and alternative practices.
Improve those practices based on analyzing the data output provided
Simulate what the effect of changes in picking practices and policies would be before actual implementation
Give planners better real-time tools/data to understand how orders and materials flow through the DC and to better balance the workload for optimal results.

Today’s simulation graphics are impressive as many of the visual and functional modeling properties in the last few years have come from leveraging advances in computer gaming technology. As a result there has been dramatic improvement in the realistic behavior of material handling elements within the model. According to Matt Hobson-Rohrer, a Demo3D representative, a simulation model can be quickly developed from AutoCAD layouts for most DC material handling systems making it integral and affordable for most companies.

Another important advance in simulation technology is that data can be imported from various sources like the ERP, WMS, WCS, Item Master, and many other independent data banks. This is possible through standard interface protocols and greatly speeds-up the data entry process while eliminate manual entry errors.

Final Thoughts

It’s a very good bet that in order to survive in the “new normal” world of constantly changing consumer dynamics, companies will need flexible and adaptable tools that allow them to test the capabilities of their operations against forecasted flow patterns and make required adjustment ahead of the actual event.

Today’s simulation and emulation tools allow companies to test the performance of alternatives in a virtual environment and “see” what affect they have on system performance, yield, and cost. Going forward, simulation of logistics networks and systems may become the quintessential manage tool running in the background and automatically reporting potential trouble and suggested remedies.

What is your reaction to the simulation and emulation tools story? Let us know your thoughts in the Feedback section below.


Recent Feedback


No Feedback on this article yet