Simulating the Supply Chain with LORD

Abstract: Introduction: To remain competitive, industrial organisations are continually faced with the challenges to improve product quality, reduce product development time, reduce production costs and lead-times. Increasingly, these challenges cannot be effectively met by isolated changes to specific organizational units. The Supply Chainis a revolutionary concept embedded in a traditional guise. In brief a Supply Chaincan be said to be the way physical goods and virtual information travels from the supplier to the customer and all the steps there between. Supply ChainManagement changes the demands on the material flow. Managing the Supply Chainhas become one of the most important tasks for managers in the recent years. The use of simulation tools has long been used in manufacturing and assembly operations. As the use of simulations grew in the 1980s and the availability of simulation packages it helped to push the tool into many other application areas and thus exposed new groups of people to simulation. The primary task for a manager is to integrate each stage into a larger system. Individual organisations at each stage still manage resources, set objectives and pursue individual objectives but when the companies within the Supply Chainwork as one the true source of leverage appear. Simulation technology is emerging as a new tool in Supply ChainManagement and its basic strength is in evaluating system variation and interdependencies. This key component allows a decision maker to evaluate changes in part of the Supply Chainand visualize the impact those changes have on the other system components and ultimately the performance of the entire supply chain. Problem Definition: IKEA is expanding in the United Kingdom. Due to this situation a number of problems will arise. How will the transportation costs look like in the future? Is it possible for IKEA to have only one DC in the UK? IKEA is in need of information about the Supply Chain. Is LORD a suitable program for IKEA and how does it work? Objectives: The objectives with the project are: · To simulate the current situation and to build a simulation model which we can use for benchmarking. · To evaluate the program LORD and see if it would fit for IKEA as a simulation tool. · Create up to four different scenarios. · To find a solution that fits the future needs of IKEA. · The desired output is to identify the optimum number and location of DCs for the network. Conclusions : To use a simulation tool that can work with a model without making too many simplifications would be a great asset to IKEA and help them in their decision making since they operate in a complex environment. Lord is program that may be very well suited for a minor company to model problems of limited scope in time and in data. It may also, with more develop, become a suitable tool but the version available today is not one we would recommend. For IKEA's case the best thing would be if it had a working excel- interface and the capability to run advanced simulation at a faster and more reliable rate. Maybe IKEA can switch to one DC, but this action needs a more thorough investigation and simulation with more correct data. The simulations that we have made gives a hunch that the transportation costs can be kept under control and maybe in fact be a bit lower than they are today.