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Supply Chain Management Supply Chain: Simulation Helps to Avoid Delivery Problems

Author / Editor: Michael Wallraven / MA Alexander Stark

The supply chains of the automotive industry are complex and therefore vulnerable. The software company Llamasoft wants to minimize risks by simulating all components in its supply chain management software.

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Self-driving transporter used in intralogistics.
Self-driving transporter used in intralogistics.
(Source: BMW)

The automotive industry automotive industry is a widely networked sector of industry. The industry's supply chains comprise three to five stages, involving many dealers and suppliers. But the more complex the supply chain of an automotive group is, the more susceptible it is to disruptions. A single factor can result in damage running into millions.

Brexit Disrupts International Supply Chains

All too often, the risks are unpredictable. This is illustrated by the example of Great Britain: Customs and import regulations are no longer subject to EU law, visa requirements are conceivable and currency fluctuations are a probability. So, what should we do if trucks have to stop at the border in the future? Or if higher customs duties make components significantly more expensive? Schaeffler was one of the first automotive suppliers to take appropriate action in view of this uncertainty: The company sells two of its three locations in Great Britain and relies on plants in Germany, China, South Korea and America. This prevents problems caused by new customs regulations and tighter export regulations - an important issue for the group, as only 15 % of the goods manufactured by Schaeffler in Great Britain currently remain in the country. The majority of their products is exported to continental Europe.

Michael Wallraven is the Managing Director of Llamasoft Germany.
Michael Wallraven is the Managing Director of Llamasoft Germany.
(Source: Llamasoft)

Digital Twin Enables Simulation of Various Scenarios

Brexit does not set a precedent in terms of supply chain vulnerability. But it clearly shows which issues companies need to prepare for if they want to secure their supply chain to every situation. Relocating capacity abroad or increasing stocks can be effective measures, but they take a long time.

Llamasoft wants to offer solutions that capture data from different points of contact across different stages of the supply chain. A digital twin created in this way is to enable end-to-end, cloud-based visualization. This makes it possible to compare and run scenarios and plan new variants in the digital model. Companies could thus visualize the weak points in their supply chains and determine the best approach in advance. Not only could they achieve cost savings, they could also reposition their supply chains, adapt them to the new conditions, and optimize them when predicted changes or unplanned events occur.

Determine the Optimal Storage Location for Components

One such example comes from the electronics industry. In this industry, the product spectrum ranges from individual components to semiconductors and sensors to complete assemblies for various vehicle applications. The supply chain platform is designed to help manufacturers to identify components that should be stocked at a certain location and how they can be delivered promptly to the customers. The simulation capability of the platform enables companies to make the right decisions for their supply chain.

The Llamasoft Pilot Project

An electronics manufacturer tested the performance of the platform in a pilot project. The aim was to examine the capacity of the distribution center and to create a scenario for the most cost-effective warehousing solution. To this end, the company used the software to set up warehousing rules for products with fast, medium and slow throughput. At the same time, the company also developed a simulation model at order level to identify and validate parameters and perform a "what if" analysis. The aim was to establish rules for placing orders and allocating products.

It turned out that 18 % of the products have a fast or average turnover, 50 % a slow turnover. Based on this data, the warehouse was optimized, reducing inventory costs by 13 %. The company is now using the platform to determine how many packages are really required per order and how this benchmark can be improved. As a first result, the worklist was increased, while the replacement frequency within the supplier network was reduced. This resulted in an improvement in service, a reduction in the number of packages per order and lower processing costs. According to Llamasoft, the savings amount to 1.5 billion pounds - 500,000 of which are repeatable.

*Michael Wallraven is Managing Director of Llamasoft Germany

This article was first published by Automobil Industrie

Original by Maximiliane Reichhardt / Translation by Alexander Stark

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