Case Study: Stress Testing Supply Chains
Stress tests are an acknowledged method to test systems under extreme conditions. The method is not only used in engineering (eg. Great picture of a Boing wing stress test (Guardian Eyewitness)), but also in business, most notably and in the banking industry. But can this method also be used to test supply chain designs?
Method / Case Study
There is limited literature on using simulation to evaluate supply chains under stress. The authors took the following approach:
- Determining the scope by setting the level of detail and defining the basic elements of the supply chain
- Gather data, to improve the reliability the authors worked together with a company which provided the input data for the model. These included the bill of materials, network configuration, etc.
- Next the model was implemented. Validity was ensured, by integrating different opinions and thoughts on the model
The company was a supplier for the ministry of defense the major objective therefore was to, make sure that demand can be met during three different scenarios:
- Normal operation, with defined volume level
- Surge operation, with twice the volume level of normal operation
- Mobilization operation, with four times the volume level of normal operation
The simulation showed that all stress scenarios could be finished successfully (each with some weeks of ramp up, of course). Furthermore some configuration changes helped the company to improve performance even more.
In this case stress testing helped the company: to gain a better understanding of their supply chain and to improve supply chain operations. It also helped the customer to gain confidence in the capabilities of its supplier.
I find it an interesting thought, that proven reliability, in this case based on a transparent simulation model, can support a company to gain new customers. But also other companies, which have a strong emphasis on supply chain risk management, are using stress testing for their supply chains, one example would be Dow Chemical.
The complete article can be downloaded here free of charge.
Jain, Sanjay, & Leong, Swee (2005). Stress Testing a Supply Chain Using Simulation Proceedings of the 2005 Winter Simulation Conference, 1650-1657